WHAT IS A PEO?
PEO is an acronym for Professional Employer Organization. PEOs specialize in payroll, workers compensation, risk management, payroll taxes, and HR Services. A PEO provides services which allows businesses to cost-effectively outsource necessary functions which require an increased degree of expertise. This arrangement helps the business to more clearly focus time and resources on their core competencies and increase their bottom line.
Businesses who need help managing complex employee-related matters (such as employment law, workers' compensation, unemployment insurance claims, payroll, payroll tax compliance and risk management) can contract with a PEO to share responsibilities for those matters in an arrangement called co-employment.
Under a contract of co-employment, both the business and the PEO have a relationship with each individual employee. The PEO becomes the employer of record for tax purposes and assumes responsibility for payroll and related payroll tax filing, and unemployment or workers' compensation claims. The business retains full ownership of the company and continues to direct day-to-day worksite operations, hiring/firing of staff, determining wage levels, and strategic business decisions. The PEO is there as an extended “back office”.
Businesses today need help managing increasingly complex employee related matters such as benefits, workers' compensation claims, payroll, payroll tax compliance, and unemployment insurance claims. Engaging a PEO enables companies to share these responsibilities and provide expertise in these areas. This allows PEO clients to focus on the operational and revenue-producing side of their business.
Because PEOs combine the purchasing power of several companies into one large buying pool, they can often secure better rates on workers' compensation coverage and health benefits. This savings is passed along to the client and can create a significant savings for client businesses.
Professional Employer Organizations have thrived because they have helped their client companies succeed by providing:
Improved employment practices, compliance and risk management to reduce liabilities.
Relief from the burden of employment administration.
A wide range of personnel management solutions through a team of professionals.
Access to a comprehensive employee benefits package, allowing clients to be competitive in the labor market.