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Professional employer organizations (PEOs) enable clients to outsource the management of human resources, employee benefits, payroll and workers’ compensation. Companies contract with a PEO to assume these responsibilities and provide expertise in human resources management. A PEO delivers these services by establishing and maintaining an employer relationship with the employees at the client’s worksite and by contractually assuming certain employer rights, responsibilities, and risk.
As co-employers with their client companies, PEOs contractually assume substantial employer rights, responsibilities, and risk through the establishment and maintenance of an employer relationship with the workers assigned to its clients. Some of these responsibilities include:
- Employee benefits administration.
- Payment of wages and employment taxes of the employee out of its own accounts.
- Reporting, collecting and depositing employment taxes with state and federal authorities.
PEOs and State Registration and Licensing Acts
PEOs operate throughout the country. Individual states may have comprehensive registration and licensing acts related to the PEO industry. In addition, state unemployment codes, workers’ compensation acts, and other statutes may have a direct impact on how PEOs operate in a particular state.
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