A certified public accountant's (CPA) main focus should be on financial management. CPAs help assist their clients with anything from financial auditing, budgeting and even financial planning. And while the goal of a CPA is to support their clients, sometimes the CPA firms may need some extra support themselves.
Partnering with a PEO can be a great way CPAs provide extra value to their clients while outsourcing areas that aren’t necessarily within their scope of expertise.
What is a PEO?
A Professional Employer Organization (PEO) is an organization that enters into a co-employment relationship, which leases personnel to an employer, allowing the PEO to share and manage many of the employer's employee-related responsibilities and liabilities. Employers can now outsource HR tasks such as employee benefits, compensation and payroll administration, workers' compensation, and employment taxes to a third party.
For a more in depth explanation of how a PEO operates, click here.
Adding Value to your Clients
When looking at income and expense reports, you’ll quickly notice that health benefits and payroll are among the largest expenses for a small business owner. According to the Bureau of Labor Statistics, health benefits account for 7.5% of all firm expenses in the private sector and are the most expensive benefit.
While this is a major expense for many companies, it also provides a great opportunity as an accountant to offer a solution that helps cut down on these expenses.
As premiums continue to rise, you may be shaking your head at the lack of options to reduce costs associated with employee benefits. A PEO may be a great fit for companies struggling to control their benefits costs.
A PEO gives small businesses access to the same benefits as Fortune 500 companies. They accomplish this by taking advantage of economies of scale and pooling their clients together, purchasing a large group benefits plan. Because of this, PEOs are able to administer benefits at a much cheaper cost than if a small business were to do it themselves. Not only does this save small businesses money, but it frees up their time to focus on the day to day operations and growing their company.
One of the main functions of a CPA is payroll. A good CPA will make sure employees are paid on time and that all payroll taxes and deductions are accounted for. The issue is, doing payroll is a very time consuming and mundane task.
It also isn’t a high revenue service.
By outsourcing payroll to a PEO, you not only are providing immense value to your clients, but you are freeing up time to focus on your area of expertise and other high revenue generating services. Additionally, PEOs are experts in different state tax laws whereas a CPA may be just familiar with local laws. For example, states like California have much more complex labor laws for overtime pay than many other states. Failure to follow the state’s labor laws can result in fines and a tarnished business reputation. PEOs are often a great choice for multistate employers and can help supplement a CPAs offer.
Another hefty expense that business owners face is workers compensation costs. According to the Bureau of Labor Statistics, workers comp insurance accounted for 1.2% of total expenses for small businesses. Depending on the industry, businesses may struggle keeping this cost under control. One claim could result in a massive increase in workers comp costs, which could drastically affect any budget or financial plan.
PEOs are a great fit for companies struggling with workers comp costs. Similarly to benefits, a PEO pools their clients to purchase large workers comp policies at a cheaper cost than if a small business were to purchase it themselves.
Getting workers comp through a PEO also has other advantages. Due to the unique co-employment agreement, a PEO can also help lower a company’s experience modifier, saving them on workers comp in the future. This is possible because the employees actually fall under the PEO’s EIN. This means any claim that takes place while in a PEO agreement penalizes the PEO experience mod, not the client company. PEOs will also help you create a safer workplace since they are financially incentivized to limit claims.
You can feel confident recommending a PEO
According to the National Association of Professional Employer Organizations (NAPEO), small businesses that use a PEO grow 7-9% faster than those that don't, have 10-14% reduced employee turnover, and are 50% less likely to fail. You can trust the performance of PEOs since, on average, 90% of organizations that join a PEO stay with them after the first year.
The Cornerstone Advantage
PEOs are a great option for small to medium sized businesses of all industries. Cornerstone PEO partners with multiple accounting firms and has even set up a CPA referral program. We've found that after advising clients to employ a PEO, the vast majority of CPAs receive an overwhelmingly positive response from their clients.
Furthermore, CPAs love working with Cornerstone PEO because we are 100% transparent in our invoices. Other large PEOs such as ADP and Paychex don’t itemize their invoices and send you flat amount bill. They are also notorious for adding hidden fees that are hard to keep record of since the invoices are not itemized. Cornerstone PEO lists out each item you are billed for so you know exactly how much you paid for workers comp, payroll, etc. Because we believe in transparency and trust with our business relationships.
Like other PEOs, Cornerstone will help you save significantly on employee benefits, automate your payroll, lower your experience modifier, and help with certain employee related compliance. However, unlike other PEOs, our focus is on excellent customer service.
Other PEOs will just add you to their system and send you an invoice. At Cornerstone we assign a professional customer service rep to work with your account. This not only adds more of a human touch, but it also allows us to create custom solutions unique to your business. Got questions? We have a rep to help you answer them. A problem occurred? You have a rep who understands your business and can create an effective solution.
Contact us here for a FREE consultation.