How a Professional Employer Organization (PEO) Works: A Guide

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How a Professional Employer Organization (PEO) Works: A Guide

May 26, 2022  |  georgev Categories: Blog

Did you know that, according to NerdWallet, there are several top reasons good employees quit? These reasons include feeling that there’s a lack of trust or respect, low pay, a poor company culture, feeling underappreciated and overworked, and more.

If you’re worried about good employees quitting their jobs at your company, this can be stressful.

Fortunately, with the help of a professional employer organization (PEO), you can outsource a large number of your human resource functions.

In this article, we’ll review how a PEO works. Finally, you can use this solution to run your business more smoothly. Read on to learn more.

What a Professional Employer Organization (PEO) Is

If you’re asking the question, “What is a PEO?” we’ll answer that question here. This is a company that a professional employer works with. The PEO will provide the employer with human resources expertise and services that the employer might not have been able to provide on their own.

When an employer works with a PEO company, the PEO allows that employer to do several things.

These include sharing employment liability and outsourcing many human resources functions. Often, they also include gaining economies of scale. These bring a benefits package that’s improved to the employer’s employees.

What Is PEO in Terms of Services?

PEO services often include handling things such as workers’ compensation claims, health benefits, tax compliance, payroll processing, human resources practices and policies, and unemployment insurance claims.

Additionally, PEOs can offer even more specialized services. These include (but aren’t limited to) risk management, international partnerships, and employee development and training.

How PEOs Work

The way that a PEO works is related to the co-employment concept. Co-employment is a term that refers to a contract where responsibilities are allocated and shared. When a PEO and an employer do this, they’re sharing certain employer responsibilities.

The way this works in practice is that responsibilities and risks are things that both the employer and the PEO share when they’re working together. Much of this relates to employer compliance.

The PEO, as a co-employer, will provide you with information regarding federal and state compliance issues that have an impact on your business and you.

The PEO representative working with you will communicate what these requirements are. Often, they’ll also provide you with guidance on how you can meet these requirements.

Sometimes, however, you’re the one responsible for taking the action that’s required for meeting compliance.

For example, say that the PEO provides you with a poster that’s required by federal and state labor law.

Even though they provided you with it, you’d be the one responsible for posting it in a worksite area where it’s visible to all of your employees.

The important takeaway from all this is to understand that both you and the PEO are responsible and taking on risk. So both of you are invested in ensuring that you minimize and mitigate your and their risk.

Specific Tasks PEOs Can Do for You and Their Benefits

If you’re looking for the best PEO for you, it’s important to know what specific tasks they can do for you and their benefits. These include HR professionals managing administrative HR tasks for you, having an expert resource regarding compliance issues, and more.

HR Professionals Managing Administrative HR Tasks

One of the tasks PEOs can do for you is managing administrative HR tasks. They’re HR professionals, so they can more easily manage payroll. They’ll ensure that you’re staying compliant and managing tax properly.

Additionally, they can administer direct deposit transactions and keep records that are accurate and thorough.

You can still maintain oversight when it comes to payroll, even though they’ll be managing it for you.

This will make it possible for you to be aware of what’s going on with payroll while spending more time focusing on other tasks at work.

It will also free up time for your employees to focus on what they’re specialized in, getting important work done.

Having an Expert Resource Regarding Compliance Issues

A huge benefit that comes with working with a PEO is that you’ll have an expert resource regarding compliance issues. A PEO can keep you informed of local, state, and federal compliance regulations. They can also advise you on these matters.

As a result, you won’t have to deal with any unexpected penalties in a situation where you haven’t followed compliance regulations correctly.

Access to Better Benefits (For Your Employees)

When you’re working with a PEO, another benefit you get is that your employees can have better benefits. This is especially the case if you run a smaller business. It’s hard often to compete with large businesses when it comes to benefits.

However, a PEO will make it possible for you to offer more because they’ll have those benefits available.

For example, they would have access to health insurance. You might have many limits or costs in regards to health insurance if you own a small business, but you won’t have to worry about this if you’re working with a PEO.

Want More Information?

Now that you’ve learned how a professional employer organization (PEO) works, you might want more information. Maybe you want to learn more about other ways you can solve business solutions or make your employees happier.

In this case, you should look no further than Bradford Jacobs. We’re experts when it comes to helping businesses, especially concerning their employees.

We also offer global recruitment services. To learn more about these services, contact us now.