What is a professional employer organization (PEO)?


A PEO is an All-inclusive outsourcing alternative for the time-consuming HR jobs and employer obligations — those which are typically your sole responsibility, such as payroll and benefits.

When you join a PEO, it turns into the professional company of your current workforce, providing benefits and services (but no staff).

As operating Employer, you keep control of all organizational decision-making, like managing your employees’ job functions and daily tasks.

Now that you can answer the question, “What is a PEO?” Let us look closer at the advantages of using one.

Why small-medium companies use PEO services

HR challenges can Be a real deterrent to your business’ growth. It’s easy to overlook crucial revenue-generating chances when you are consumed with your HR to-dos.

Perhaps that’s why At a PEO arrangement, companies have been shown to (NAPEO):

Grow 7 to 9 percent faster

Have 10 to 14 percent lower turnover

Be 50 percent less likely to stop operations

When you join Forces with a PEO, they could offer you the infrastructure, time, and resources so that you can concentrate on growing your business.

Here Is What services PEOs can provide to help you reduce costs:

Recruiting support

A PEO can help you Design the perfect recruitment procedure that fits your unique business. It may also work with you to:

Create job descriptions

Conduct wage and salary surveys

Boost your hiring managers’ interview and candidate selection skills

Performance management support

A PEO can help you Design and conduct employee performance evaluations on a regular basis. Moreover, to support ongoing performance improvement, PEOs often give you:

Damages tools and resources

Manager coaching

Assist with project descriptions

Reward and recognition program design

Base pay structures

Self-help tools and worksheets for changeable and sales compensation structures

Business climate surveys

Strategic HR support and preparation

A PEO can help you Develop a strategic HR plan that lets you earn HR management decisions today that will support the future direction and growth of your company.

How does a PEO operate?

Let’s discuss how PEOs work and what they do and do not do for your organization.

Knowing the co-employment model

When you join a PEO, a business relationship known as”co-employment” is created.

The co-employment relationship is a contractual agreement between you (the customer company) and the PEO that allocates and divides your employer responsibilities. Within this arrangement, your company’s employees (also referred to as worksite employees) are employed by your organization and from the PEO.

PEOs typically Price their services as a percentage of payroll or as a flat monthly fee per worker.

So, let us clarify What PEOs do not do to help you determine if it is truly a choice that will work for your company.

What a PEO does not do

1. PEOs do not control your company.

Rest assured that a PEO is your co-employer just for the purposes you’d expect based on your arrangement (e.g., paying your workers and other HR responsibilities specifically named on your CSA).

PEOs provide access To HR consultants whose advice and advice that you can call on when you need help.

They help manage Your company’s employee-related management and dangers, but you keep control of company and all operational decisions.

2. A PEO will not replace internal HR staff.

PEOs align with Your organization’s existing HR department or personnel to offer complimentary experience, such as aid in managing office policies and making changes in business culture.

A Respectable PEO Will employ experienced, certified HR professionals that have experience with many industries. And as a PEO customer, their experience is at your disposal.

3. Respectable PEOs do not cause disruption to your office

Your existing Workers will experience little-to-no disturbance when you become a PEO client.

They’ll notice the PEO’s name on their paychecks, but they will pay the most attention to how their benefits package has probably been updated since your involvement with a PEO.

Additionally, some PEOs provide online self-service options that enable workers to access and manage their personal information, benefits, and pay stubs anytime they want.

PEO vs. certified PEO

You may have come Across a PEO that states it is a certified PEO. Next, we will describe what this designation means.

The IRS has an Established classification for PEOs — the certified professional employer organization (CPEO).

This certification Process entails providing comprehensive financial information to the IRS, especially about the PEO’s employment tax payment history. Being accredited by the IRS as a CPEO has particular federal employment tax implications for both the CPEO and its customers and clients.

Let’s break down what that means.

When you join a PEO, from the IRS’ standpoint, the PEO becomes your employees’ employer of record, and their wages are reported together with the PEO’s federal employer identification number (EIN).

When a PEO is not Certified, if employment taxes are not paid, the IRS can go after both the PEO and the client company for what is owed, even if the customer already paid the PEO for all these taxes.

But a CPEO assumes The sole obligation for federal employment taxes for wages it pays to worksite employees.

So, one of the key advantages to employing a certified PEO is greater reassurance that comes from understanding your PEO is committed at a higher level and will be held liable by the IRS to get a number of their responsibilities for your own organization. *

Summing up it

Joining a PEO is an Amazing way to break free from many of the responsibilities you have to keep on top of as a company which likely are not the reason you based your own organization.

Having another Business step into as administrative co-employer makes it possible to move HR duties off your mental load once-and-for-all, understanding they bring as much attention, experience, and dependability to the relationship with your employees as possible.

Benefits, payroll, HR compliance and many more providers get compact into one, easy-to-manage Seller relationship with a PEO. You save time, find ways to become more efficient, And get tactical help with areas of your company that would be too costly or Time-consuming to seek out when you did not have access to it through your PEO.