The PEO Advantage
What is a Professional Employer Organization?
 

A Professional Employer Organization (PEO) is a business also known as "employee leasing" or "staff leasing."  PEO's provide small and mid-sized businesses of all types, with an integrated suite of services including; HR administration, compliance management, safety and risk management, payroll and tax administration, legal adherence and employee benefit solutions. The company operates with its clients as a "co-employer" of the individual workers for the purpose of the HR administration and operations of running a business.

PEO's help clients focus on their core competencies and displace non-revenue HR administration and operations to maintain and grow a clients bottom line. The PEO concept is a combination of the simple outsourced payroll service business and a staffing model. The PEO has the legal, compliance and administrative responsibility for the workers, while the client company has the management and supervisory responsibility.

Because the PEO becomes an employer of record for its client's workers, it can leverage administrative management across a greater number of workers.  More importantly it can aggregate Workers Compensation and Unemployment Insurance across a wide range of job classifications and a significantly greater population compared to that of each individual client.  This aggregation of risk gives the PEO superior purchasing power with the insurance companies and diversifies individual loss risks in a way that reduces overall insurance rates, so that, they can pass along some of these cost savings to their clients. PEO's take an active role with their clients to provide safety consulting and close management of workers compensation and unemployment claims in order to minimize the cost to their clients.

A PEO delivers these services mentioned above by establishing and maintaining a co-employer relationship with the employees at the client's worksite and by contractually assuming certain employer rights, responsibilities and risks, thus strengthening the client company.

The major trend driving more companies to use PEO services is the compliance burden of increasing government regulations. Successful PEO's become adept at managing these requirements and removing the administrative burden from the client while providing the client assurance that, they will not be in violation of an unknown regulation. Keeping in compliance with the burden of governmental regulations and laws has increased the need for the PEO industry and its structure. PEO's take the compliance burden off the business and keep the business in adherence guidelines with all governmental laws and regulations.

Businesses today need assistance in managing the increasingly complex matters such as EEOC, Department of Labor, OSHA, Health Benefits, Workers' Compensation claims, payroll tax compliance and Unemployment Insurance claims, just to name a few. Harnessing the synergy of a PEO enables companies to share these responsibilities and provide expertise in those HR management functions.

F.A.Q. (Frequently Asked Questions about PEO's)

1.   Why Use a PEO?

To make a company more productive, efficient, effective and profitable.  It is difficult to maximize the "business of running the business" if valuable time is spent on non-productive, time-consuming tasks that do not add to the productivity, operational efficiency and profitability of a company.

Most business owners do not have the knowledge, skill, or time to devote to human resource and risk management training, develop accounting skills, obtain and maintain current knowledge of regulatory compliance, or to learn and understand the complexity of commercial insurance and employee benefit programs.

A PEO brings a one-stop, total turn-key, comprehensive solutions to these and other compliance issues facing a business owner.

Benefits of a PEO Arrangement for your Business

For the business owner:

1. Controls costs and helps free up more cash flow through an HR expense model reduction and pay-as-you-go workers' compensation plans
2. Saves time and paperwork hassles (displaces non-revenue HR operations and administrative tasks, so that, your client can focus on running the businesses top and bottom line)
3. Liability shifts for some of the HR functions from the client onto the PEO structure
4. Reduces turnover and attracts better employees
5. Provides quality, affordable, employee benefit packages
6. Provides professional human resource services (employee handbooks, forms, policies, procedures, etc.)
7. Provides professional safety and risk management services
8. Reduces accounting costs
9. Provides payroll administration
10. Provides professional compliance with State, Federal and governmental regulations and laws
11. Tracks work-related injuries and provides claims management for workers compensation and unemployment insurance
12. Enhances the business profile for potential asset liquidation

For the Employee(s):

1. Comprehensive benefit packages previously unavailable, now accessible
2. Better employer/employee communications
3. Payroll on-time and accurate
4. Professional assistance with employment-related problems
5. Professional employee handbooks
6. Extends statutory protection to more employees
7. Up-to-date information on labor regulations and workers’ rights with worksite safety
8. Efficient, responsive and professional claims processing
9. Portable benefits (employees can move from one PEO client to another without the loss of eligibility for benefits)

For the governmental view:

1. More professional preparation and reporting
2. Accelerated collection of taxes
3. Extends medical benefits to more workers
4. Expands the communication of government requirements and changes to small businesses and ensures compliance
5. Resolves many problems before they reach court
6. Allows governmental agencies to reach businesses through a single-employer entity
   
    

2.   What is The Role of PEO's in Today's Workplace?

PEO's –A Great Response to a Market Demand For Change

American businesses are undergoing fundamental changes in human resource management and the PEO industry is a great response to those market demands. There are several factors driving the growth of this industry. First, over the last two decades, this nation has seen a significant increase in employment-related federal, state, and local laws and regulations. Second, the expertise required to manage a small to mid-sized business has outgrown the experience and training of many entrepreneurs who started these businesses.  Third, working Americans demand quality, low cost health care, retirement savings plans and other employee benefits for themselves and their families. In response to these demands, the PEO industry evolved from the need to divide the business of business into manageable parts and the need for small business to achieve economies of scale.

Helping Entrepreneurs With The "Business of Employment"

PEO's offer to their clients and worksite employees the services and expertise of a personnel department within a large corporation at their company.  Few, if any, small businesses can afford a full-time staff consisting of an accountant, human resource professional, lawyer, risk manager, benefits manager and a manager of information services.  Professional employer organizations offer this expertise and more to their clients.

By providing these services, professional employer organizations enable their clients to concentrate on their business without the challenges and distractions associated with the "business of employment." As a result, PEO's enhance the profitability of their client companies by reducing the costs related to monitoring of and compliance with, employment laws, with all of this being said, significant costs for failure to comply with such laws and regulations are not incurred, therefore reducing a client's HR Model Expenses more than what savings appears on paper.

3.   What does "Co-Employment" mean?

The PEO relationship involves a contractual allocation and sharing of employer responsibilities between the PEO and the client, this shared employment relationship is called "co-employment". When evaluating the employer role of either the PEO or the client, the facts and circumstances of each employer obligation should be examined separately.  Since neither party alone is responsible for performing all of the obligations of employment, each party will be solely responsible for certain obligations of employment, while both parties will share responsibility for other obligations. When the facts and circumstances of a PEO arrangement are examined appropriately, both the PEO and the client will be found to be an employer for some purposes, but neither party will be found to be the employer for all purposes.

Both the PEO and the client company establish common law employment relationships with worksite employees. Each entity has a right to direct and control worksite employees- the PEO directs and controls worksite employees in matters involving human resource management and compliance with employment laws. The client company directs and controls worksite employees in the manufacturing, production and delivery of its products and services.

The client company provides worksite employees with the tools, instrumentalities and place of work. The PEO ensures that worksite employees are provided with a workplace that is safe, conducive to productivity and operated in compliance with employment laws and regulations.  In addition, the PEO provides worksite employees with workers' compensation insurance, unemployment insurance and a broad range of employee benefits programs.

4.   Can you show me "co-employment" and how my company looks before and after a PEO?