Many business owners are interested in the savings and benefits offered through PEO services but are afraid of losing control over their relationship with employees. While this concern is understandable, business owners need not worry. PEOs are not interested in interfering with a client and its employees. Rather the PEO services offer clients the tools, resources and expertise to improve the way that they manage their own employees.
Much of the concern originates with the term co-employer, which describes the relationship between the PEO, the client and the client's employees. Employees' wages are reported under the PEO's federal employer identification number (FEIN), allowing the PEO to assume responsibility for paying and filing payroll taxes, obtain workers' compensation insurance and to procure employee benefits that compete with those offered by large companies.
The client and the PEO split employer duties into three sections:
- Those for which the client is responsible,
- Those for which the PEO assumes responsibility,
- Those for which both the client and PEO are jointly responsible.
The PEO is able to leverage its resources, expertise and capital to reduce the client's HR costs and liabilities. The PEO then helps clients to improve their HR practices by ensuring that HR policies and procedures comply with federal, state and local labor laws and regulations. Client managers can consistently apply these policies by using the PEO's services and tools such as customized handbooks and online training. The PEO also provides a team of accountants, attorneys and certified HR professionals to advise clients on how to successfully resolve employee problems.
Business owners can rest easy knowing that using a PEO's service will not mean they would lose control. Rather PEOs help clients to improve HR practices, reduce labor costs and focus on running their business rather than dealing with the unproductive hassles of managing human resource tasks. In short, the PEO exists to supplement, not supplant, the client's role as employer.
Learn about some of the most popular PEO services [C1] for small and mid-sized companies.
[C1]Perhaps link to a service page?