What is a Professional Employer Organization?

Professional employer organizations (PEOs) have been one of the fastest growing business services in the United States. The responsibilities of being an employer are increasingly complex and business owners need help. PEOs provide businesses with cost-effective solutions for managing employer challenges such as medical benefits, workers’ compensation claims, payroll tax compliance, and unemployment claims.

How does a PEO arrangement work?
A PEO provides services to effectively manage critical human resource responsibilities and employer risks for clients. A PEO delivers these services by establishing and maintaining an employer relationship with the employees at the client's worksite and by contractually assuming certain employer rights, responsibilities, and risk.

The client company enters into an agreement with the PEO to establish a co-employment relationship between the PEO, client company, and worksite employee. The client and the PEO become co-employers, each having an employment relationship with the worker. The PEO and client company contractually allocate some and share other traditional employer responsibilities and liabilities.

Why use a PEO?
Most business owners don’t have all of the necessary human resource training, payroll skills, knowledge of regulatory compliance, or background in risk management, workers’ compensation insurance, and employee benefits to meet the demands of being a good employer. By contracting with a PEO, businesses are able to:

• Control costs;
• Save time;
• Reduce paperwork hassles;
• Ensure professional compliance with state and federal laws and regulations;
• Expand available benefits;
• Provide better benefits packages;
• Reduce employee turnover;
• Attract better employees;
• Effectively manage workers’ compensation and unemployment claims.

Will I lose control of my business?
Absolutely not. The client retains ownership of the company and manages the day-to-day activities of the employees. As co-employers, the PEO and client contractually share or assume employer responsibilities and liabilities.

Guidelines for selecting a PEO

• Assess your payroll, human resource management, employee benefit, and risk management needs.
• Meet the people who will be serving you. 
• Evaluate the depth and level of experience of their internal staff.
• Ask the PEO to demonstrate that payroll taxes and insurance have been paid.
• Ask for client and professional references.
• Investigate the company’s service competence.
• Understand how the employee benefits are funded.
• Determine if the employee benefits fit the needs of your employees.
• Review the service agreement.
• If required, is the PEO licensed, or registered?

Allowing you to get back to business!