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:
A Professional employer organizations can remove much of the burden of liability from the backs of individual employers. Think of the PEO as the corporate strength behind a family-owned business, insulating them from payroll tax liability, state unemployment liability, and state/federal regulatory compliance. With the burden of liabilities being shared by another company, small and medium-business can focus on what matters most: their customers.
Many employers are leery of outsourcing their payroll to a third party, in this case a PEO. You may not know that payroll processing is a vital part of the PEO business model. Reason being, payroll is a leading factor when calculating workers compensation premium. Premiums are billed on every hundred dollars in payroll an employee earns. Allowing a PEO to process your payroll ensures that you pay the appropriate premium per employee. This becomes a huge benefit to our clients because they no longer are required to undergo year end premium audits.
AccountFirst takes great pride in carefully selecting our markets based on a vigorous vetting process that ensures, no program offered by our offices will include any hidden fees. All associated costs are thoroughly covered by our representatives before execution of the policy.
FUTA and SUTA taxes, as many employers know, have cutoff limits or caps. For example in California, once an employee earns $7,000 in gross wages for the year the employer is no longer obligated to pay FUTA and SUTA taxes this is referred to as a tax cutoff. Our PEO partners honor this cap and the documentation of this cutoff are included in the binding agreement.
A common misunderstanding associated with PEOs is that an employer who partners with a PEO will lose control of the operation as a whole. Fortunately this is just not true, In contrast a PEO actually gives the employer back the reins to hire and fire, manage daily operations, and most importantly securing new avenues of revenue through capital growth.
There are thousands of regulations to which business must comply, and learning them all can be extremely time-consuming and frustrating. Worse, a lapse in this area can lead to a fine or lawsuit. Luckily, with a PEO at the helm, such tasks are handled by people with full knowledge of state and federal laws.