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Why Choose a PEO to do your Payroll?

Updated: Apr 13, 2022

Business owners should trust a PEO to handle their payroll needs.

Small business owners constantly struggle with the decision to manage payroll on their own or to outsource it. The thought of gathering employee information, issuing paychecks each pay period, and accurately withholding the correct taxes and withholdings can be challenging. When considering alternatives to in-house payroll, you have multiple options such as standard payroll services and payroll software. But if in addition to payroll, your business needs other services such as HR, employment taxes, benefits administration, and risk management; consider using a professional employer organization (PEO).

How does Payroll Through a PEO Work?

When a business decides to partner with a PEO, they enter into a co-employment agreement. The PEO assumes the responsibility of managing the client’s payroll administration and the payment of employment related taxes. The taxes and payroll are filed under the PEO’s federal tax identification number rather than the clients. However, despite taxes and payroll going through the PEO, you still maintain responsibility for the day-to-day operations and management of your employees.

Benefits of Using a PEO for Payroll

An efficient payroll process is crucial to the success of any small business and maintaining employees. With limited resources and time available for this non-revenue generating activity, business owners frequently find themselves facing significant headaches when it is time to process payroll. According to a survey by Zenefits, 40% of business owners say that payroll is the issue that concerns them the most. Some of those headaches include:


How can a business owner efficiently manage the payroll process when they are constantly on the move or working on site? After all, they have a business to run! Payroll processing takes the average small business 4 hours and 52 minutes every week. That is 21 days each year! Let a PEO lift the administrative burden of payroll by providing an automated payroll solution. Automation gives business owners peace of mind that payroll is always accurate and timely, not necessitating manual calculations. Many PEOs have their own software application that allows employers to report payroll from their phone wherever they have cell service.


54% of the American workforce (82 million people) are impacted by payroll issues. The American Payroll Association (APA) states that up to 8% of timecard entries contain errors. These errors are costly, it’s estimated that 35% of HR employee’s time is dedicated to payroll and error correction. With the usage of payroll software and a team of experienced payroll professionals on your side, you can be sure that your payroll will be accurate. If there is an error, it can be corrected with the click of a button and will no longer require long hours to adjust.


Whether it is paying for an in-house bookkeeper or using your valuable time, payroll always carries a cost. The APA says roughly 40% of businesses incur additional cost in the form of IRS penalties, an average of $845 a year, due to errors. The APA has found that automation reduces payroll costs by up to 80%. Partnering with a PEO eliminates any unforeseen payroll expenses. When that is coupled with the reduction in fines and penalties, PEOs more than pay for themselves.


How do you manage certified payroll reporting requirements or prevailing wage? How do you accurately tie payroll to job costing so you can maximize profitability? How do you adjust your payroll process to comply with the newest tax guidance from the IRS? How do you manage multiple vendor payments for garnishments? PEOs provide certified reports, prevailing wage management and job costing at no additional cost to clients. Reports can easily be generated to give you a detailed outlook on your payroll data.


Keeping up with the guidelines related to filing federal, state, and local taxes can be dizzying for business owners. Filing deadlines are always changing and determining which local and state taxes an employer is obligated to pay is no easy task when opening the 6,500+ page IRS tax code. The IRS watches employers closely, ready to levy fines of 15% of gross payroll for failure to deposit and a 5% penalty for each month your tax bill is unpaid. Employers are also liable to be penalized by states for failing to comply with garnishment orders. Some states fine up to $1000 for a single missed payment. Let the payroll experts ensure that you are tax compliant as your business grows. With outsourcing payroll, taxes and garnishment processes, business owners can fully focus on revenue-generating activities. According to research from QuickBooks, 31% of business owners say this peace of mind is the greatest benefit of outsourcing payroll.

Benefits Administration

How do you keep and retain top talent? Do you have the resources to accurately and efficiently monitor the benefits that you are offering your employees currently? Are you properly tracking eligibility and compliance with ACA, HIPPA, COBRA, etc.?

Feeling stressed out? Attract and keep top talent by offering them a wide range of benefits including health, dental, vision and voluntary benefits as well as 401k plans! With the help of a benefits team, you can get help managing your benefits offerings and make sure your employees have access to the benefits that they, along with their loved ones, need.

Additional Services provided by PEOs

Aside from providing payroll services, PEOs also provide human resources, employee benefits, workers compensation insurance, risk management, and assistance with compliance and regulations.

Partnering with a PEO is a great way to save time and relieve administrative burdens that come with excess paperwork. Not only do you have a team of HR professionals working to support your business, but you also can get access to benefits and insurance rates that are usually reserved for Fortune 500 companies.

The Cornerstone Advantage

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.


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