What is a PEO?
What is a PEO?
A Professional Employer Organization (PEO) is a provider that manages your end-to-end employer process. They become the Employer of Record to file and pay for taxes, they are the plan sponsor for Health and Welfare plans, and they take on most of the employer risk since they handle labor relations, Workers Compensation and regulatory compliance.
Who benefits from using a PEO?
Most PEOs work with employers of all sizes, from 2 employees to over 5,000!A PEO is ideal for clients who want to remove the administrative burden of being an employer, those who are undergoing accelerated growth, or those who regularly purchase other companies and need to integrate them quickly to their existing operation.Also, a PEO is much easier administratively than dealing with multiple providers.
Are there advantages to using a PEO?
Absolutely. According to the National Association of PEOs (NAPEO), companies that partner with a PEO experience on average 12% lower employee turnover, a 27% ROI from the cost savings alone, and are also 50% less likely to go out of business. Additionally, employees report higher satisfaction, engagement, and likelihood to stay with their employer.
The main advantage, economically speaking, is that the PEO has a significant number of worksite employees that it can leverage with companies such as medical carriers and retirement plan providers to offer its clients world-class benefits that only large companies have access to.
The main advantage, economically speaking, is that the PEO has a significant number of worksite employees that it can leverage with companies such as medical carriers and retirement plan providers to offer its clients world-class benefits that only large companies have access to.
Is there any risk to using a PEO?
PEOs are legally recognized in every state. There are accreditation entities, professional organizations, and even the IRS even has a certification program for PEOs (CPEO). Some also choose to audit their financials on a yearly basis without being public companies.In addition, most states where a PEO operates require guaranty bonds from the PEO to issue a license. This gives their clients additional peace of mind.
What is Co-Employment?
The PEO becomes the Co-Employer of your employees. This means that they are brought under the PEOs Federal Employer Identification Number, or FEIN. You are still the employer in charge, and you make all hiring and termination decisions. The PEO, however, will provide guidance on certain situations, since they legally carry most of the employment risk.