PEO’s or Professional Employers Organizations, have been around for the better part of 20 years, yet remain a mystery to most business owners. When employers hear the phrase, PEO, or Staff Leasing Companies, the most common reactions are, “no, we prefer to have our own employees”, or, “we don’t use “temporary staffing”, or “we’re happy with the staff we have”.
In reality, a PEO takes your existing employee pool, and becomes a co-employer with your company. It does not provide temporary staffing, it does not manage or supervise your employees or tell them how to do their job, and it certainly does not re-assign employees from one company to another. There is virtually no change in the day to day operations of the company. The only main difference is by virtue of membership in the PEO Staffing Company, the employees enjoy significant benefits at virtually no additional cost to the employer.
PEOs provide a tremendous benefit to the employer. The PEO company becomes the co-employer, and in doing so, assumes employer related liability and accountability for all the employees. It assumes responsibility for Human Resources, Payroll Processing, Group Health & Life Insurance, Workers Compensation, Un-employment & Wage Benefits. Also, since the PEO uses its own Tax ID number, they assume full accountability for IRS payroll tax liabilities and audits. What does this mean? It means that the IRS will not audit you or send you notices for Payroll Tax audits since you are not the employer on record.
In addition to that, PEOs assume the Workers Compensation policy under their own company. In almost every case, the Workers Compensation rate, Experience Modifier & State Unemployment Rate for a PEO will be far lower than what a company can qualify on its own. With an average of 15,000 employees under their umbrella, a PEO can negotiate aggressive rates with all their carriers, for Workers Compensation, and Group Life & Health.
Another big advantage with a PEO is one does not pay the large deposit associated with a typical Workers Compensation Policy. A PEO, is a Pay As You Go program, avoiding large deposits and year end audits, allowing more efficient use of cash flow.
8 out of 10 employers go on record stating Human Resources & and Employment Practices Discrimination weigh heavily when faced with employee disciplinary issues. PEOs shift that burden to the PEO company, since they are the co-employer on record. The last category, i.e. Employment Practices Liabilities, is one of the most overlooked liabilities. Most employers feel there will never be a discrimination lawsuit or wage dispute claim. But, the majority of claims brought about in a discrimination or employment practices lawsuit do make it to court, and damages are awarded. Such court battles and damages are usually crippling for a company. This is where the PEOs experience in HR management comes into play. And, since the PEO is the Employer On Record, it is obligated to defend the lawsuit.
Bottom line
- PEOs have experienced professionals in HR Management, Benefits, Workers Compensation & Risk Management, Payroll Specialists & Employment Specialists, Dispute Resolution, Legal Counsel on their staff.
- PEOs assume Federal employee related liabilities, such as discrimination, harassment, EPLI, OSHA
- PEOs perform Claim Management (Workers Compensation, Health Claims) on behalf of their employees.
- PEOs provide customized Employee Handbooks & Safety Manuals specific to your industry.
- PEOs report and remit Local, State, & Federal taxes
- PEOs file Annual & Quarterly Tax Reports, including Forms 940 & 941, W2 & W3.
- PEOs can provide automatic time clock / attendance devices, job & department costing.
- Resume’ Searches, Job Postings, Interviewing qualified candidates, pre-employment screening, background testing, drug testing, dispute / conflict resolution.
- Workers Compensation & Unemployment claims do not go against your company’s record.
- PEOs perform client safety services, including site visits, safety training, and assist with ISNetWorld Compliance.
- More efficient use of cash with a Pay As You Go Workers Compensation premiums, meaning no large deposits and year end audits.
- PEOs provides access to comprehensive benefits with many options such as HMO, PPO, COBRA, 401K at no cost to the employer, Section 125 Plan at no cost to the employer, Flex Spending Accounts, MasterCard Pay Cards.
- Happier Employees. PEOs provide security, affordable health insurance, more opportunities for retirement, and a safer workplace. Job satisfaction and productivity increases when workers are provided quality human resource services.
- Most importantly, PEOs allow a business to focus on their core operations and allow the PEO to tailor benefits that appeal to their employees, fostering employee satisfaction and allow for recruitment of talent from other companies.
Who uses a PEO?
Most businesses can find value in PEOs. PEOs traditionally have strong web based HR Management systems which are made available to their clients. They also have Payroll & Accounting specialists who can customize payroll reports based on virtually any criteria. A new trend for companies with more than 200+ employees is to merge in-house HR with the PEO, creating the best of both worlds.
Businesses who work in a high risk environment find it beneficial to team up with a PEO because of the lower Workers Compensation rates. Similarly businesses use PEOs to craft benefit rich programs to retain and recruit top talent from the competition. PEO clients range from Oil & Gas Contractors, Pipeline Inspection, Electrical Contractors, Plumbing Companies & Food Service. Many professional clients, such as Accountants, Lawyers, Doctors, & Architects also turn to PEO to outsource or augment their HR & Payroll Department.
What is the cost?
The annual cost of PEOs is surprisingly low. PEOs work off the savings on their lower Workers Compensation, Federal & State Unemployment Rates, and increased efficiencies due to their expertise in HR & Payroll Administration. For companies with high Workers Compensation Experience Modifier, or a high Federal or State Unemployment rate, there is a net savings from the transition to the lower Experience Modifier. Most chemical plants and refineries do not allow companies with a Experience Modifier of > 1.0 to work in the plant. By switching to a PEO, the company can utilize the lower Experience Modifier and gain access to the plants.
Moving to a PEO and restructuring the in-house Payroll and HR department will yield a substantial savings, create greater efficiencies, and allow the company to focus on their primary business. It is a time tested and proven solution.
Call 281-930-1600 to learn more about PEOs and to find out how a PEO can benefit your company. Or go online to www.cglobalpeo.com to get an instant quote.
