What is a PEO?
How can using a PEO help your business?
A PEO is a Professional Employer Organization, also referred to as an staff leasing company. The PEO concept is simple - by allowing the PEO to establish a co-employment relationship with your workers, employer responsibilities can be shared between you and the PEO. You focus on growing your business and most importantly, increasing revenue. The PEO, on the other hand, takes care of the non-revenue producing areas of your business, including:
Payroll administration is a basic function of a PEO and the one most commonly associated with a staff leasing company. This function includes the following:
· Support for hourly, salary, tipped and piece-work employees
· A variety of payment methods, including payroll check, direct deposit and, in some cases, a debit card arrangement
· Payroll input methods via phone, fax, Internet (not all PEOs offer this service)
· Filing local, state and federal government paperwork (W2s, W4s, FICA, etc)
· Tax Reporting and Compliance
· Certified Payroll, Job Costing and Departmental Billing
Shopping for health insurance is a time-consuming and frustrating task. The PEO spends a great deal of resources in finding cost-effective, comprehensive medical and dental plans. The plans offered are typically PPO (Preferred Provider Organization), HMO (Health Maintenance Organization). By pooling its employees in one group, the PEO is able to spread its medical claims over a larger premium base. This means much lower annual rate increases, compared to those suffered by small businesses.
One of the least promoted yet extremely valuable services to the client business is the risk management provided by the PEO in the areas of workers' compensation and unemployment. PEOs aggressively manage claims in both areas. Why? Because a work comp or unemployment claim goes against the PEO's experience and could affect its ability to compete. This is one of the greatest benefits of the co-employer relationship. Imagine a construction company with 10 employees that incurs a $200,000 work comp claim. The owner does not have the resources to manage this claim and it goes against the company's experience. This, in turn, raises the work comp rates to a point that could literally drive that company out of business. A PEO, on the other hand, has a department that will manage this claim, working to find a quick resolution. These efforts will inevitably result in a much lower claim cost.
In today's business environment, keeping up with the pitfalls of employee-related laws requires a dedicated department. Most small businesses do not have the manpower to do so and can find themselves involved in an expensive lawsuit that, with access to an HR department, could have been avoided. The PEO acts as your off-site HR department, offering consultation in the areas of sexual harassment, discrimination, FMLA (Family Medical Leave Act), hiring and firing practices and a number of other areas. Other services included in the human resources area may include:
· Background Checks
· Pre-Employment Testing
· Resume Screening
· Customized Employee Handbooks
· Position Descriptions
· Drug-Free Workplace