PEO Solutions for the Staffing Industry

Updated: Nov 19


Any business owner with a growing company knows that expanding the workforce is often inevitable and a necessary step. More and more business owners are relying on staffing agencies to supplement their workforce. The staffing industry is largely unique with its own set of challenges.


Professional Employer Solutions (PEOs) can be a perfect solution for staffing companies who want streamlined HR services and to save time and money.


What is a PEO?



PEO stands for Professional Employer Organization. PEOs are a type of outsourcing option for a full array of HR services including payroll, employment taxes, employee benefits, risk management, workers’ comp, and other employer administrative functions. When a business partners with a PEO, they enter into a co-employment agreement. The PEO becomes the professional employer of your workforce whereas you maintain control of all organizational decision making, your employees’ job functions and day to day tasks. A client service agreement (CSA) will be reached to determine which functions get outsourced.


What is co employment?


Co-employment can be described as the contractual client service agreement (CSA) that allocates certain responsibilities between the PEO and the client company according to NAPEO, the governing body of all PEOs nationally. The PEO will assume responsibility for some employment related functions like processing payroll, administering employee benefits, and securing workers’ compensation coverage just to name a few. As the business owner, you would still be responsible for the day-to-day operations including the hiring or firing of employees, business operations, and financial decisions. A PEO just acts as an extension of your HR team. Each client service agreement may vary from client to client along with the services the PEO is responsible for.


How can a PEO benefit my staffing firm?


Provide Valuable benefits for your employees

Competition is often fierce in the staffing industry with similar companies competing for the same talent and jobs. Notoriously, the staffing industry is known for having high employee turnover. According to research done by LinkedIn, the annual turnover rate for the staffing industry is 25%, while the average for all industries is only 10%.


Offering a robust benefits package not only makes your firm stand out amongst the competition, but it also lowers employee turnover saving you money. In fact, 72% of surveyed professionals say having more work benefits would increase their job satisfaction.


By using a PEO, small business owners can offer the same employee benefits packages as a Fortune 500 corporation. Think of a PEO as a mutual fund for benefits. The client companies pool together under the PEO umbrella to purchase a large benefits group policy. By using economies of scale, PEOs are able to offer their clients robust benefits offerings for a fraction of the price.


Lessen your administrative burden

If you operate in the staffing industry, you are constantly recruiting employees and reaching out to employers. With the hiring process being a top priority, its possible other HR tasks aren’t getting the attention they deserve.


Due to the PEO’s co-employment relationship, the PEO is deemed the employer of record, meaning the PEO manages payroll, employment taxes, workers’ comp claims, and employee benefits on your behalf. The PEO also assists with onboarding new employees, aids in HR issues, and helps maintain compliance with ever changing labor laws and regulations. As co-employers, the PEO is liable for reporting wages and paying contributions on time and could face legal consequences if done incorrectly. This acts as an incentive for the PEO to accurately handle payroll and other services on the client’s accord.


Maintain Compliance

Many small business owners don’t have time to keep up with every new rule and regulation. It also becomes increasing difficult to maintain compliance while doing jobs across state lines without the help from a third party. However, if a claim does occur, business owners are covered by the PEO’s Employment Practices Liability Insurance (EPLI) master plan.


A PEO is a great resource for maintaining compliance and avoiding lawsuits. Even more nuanced topics such as FMLA, ADA, FLSA, immigration compliance, working with independent contractors, and more are covered under the PEOs expertise.


Workers Comp

If you operate a business, you are federally mandated to supply your employees with workers’ comp coverage. Additionally, the role of a responsible business owner is to keep their workers safe and free from injury. Depending on the industry your staffing company operates in, acquiring comprehensive and affordable workers’ comp insurance should be a top priority.


Traditionally, individual policies have high upfront premiums and annual audits. However, when partnering with a PEO, you join a large group policy with other PEO clients, similar to benefits. By leveraging the vast number of businesses in the PEO’s network, workers’ comp coverage can be purchased at a significant discount. This means by joining a PEO, companies get access to lower workers’ comp rates, a flexible payment schedule, and the removal of annual audits.


PEOs also generally have broader, riskier appetites when it comes to getting covered under certain class codes than traditional carriers. PEOs also help companies lower their experience modifier. An experience modifier determines how much premium for workers’ compensation coverage costs dependent on the number of claims. PEOs help lower experience modifiers a number of ways. When you first join a PEO, your experience modifier is likely to drop. This is because the PEO takes the aggregate amount of all their client’s experience modifiers to reduce risk. On top of that, the PEO also provides safety trainings and materials to help limit claims.


Save time

By utilizing a PEO, you save hours of time every week. The PEO essentially becomes your own HR department. HR management is a very important aspect of running a successful construction business but can eat up a serious chunk of time every day. Administrative tasks such as payroll processing, state and local taxes, employee benefits, unemployment claims and wage garnishments are time consuming and confusing. You did not go into the construction business to do paperwork and clerical work. A PEO can help save time and allow you to focus on actually running your business.


The Cornerstone Advantage


It’s clear that PEOs are a great option for companies in the staffing industry. Not only do PEOs help your bottom line, but they also save you a lot of time. A PEO is also the easiest option when considering outsourcing. Why would you want to deal with multiple organizations for payroll, benefits, insurance, etc. when it is much simpler to use one organization who can provide all those services?


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