A primer for busy execs looking to learn more about PEOs.
What does PEO mean?
PEO, or Professional Employer Organization, is one of the best-kept secrets of many successful small businesses. Essentially, PEOs manage all your HR needs, including payroll and administration, employee health and retirement benefits, workers’ compensation insurance, and state and federal compliance issues. They even share in the employer-related risk associated with having employees. All the client company has left to do is hire, supervise, promote (or fire) their employees as needed.
Where do PEOs come from?
The very first Professional Employer Organizations (PEOs) can be traced to the adoption of the Tax Equity and Fiscal Responsibility Act of 1982. This Act cleared a path for the creation and expansion of such entities. Today, Professional Employer Organizations (PEOs) are now ubiquitous. They operate in all 50 states and, according to the National Association of Professional Employer Organizations (NAPEO), employ between two and three million employees under PEO arrangements. The industry earned $92 billion in gross revenues in 2012 (gross revenues are the total payrolls plus the fees charged by the PEO). Annual revenue is projected to hit $169 billion dollars in 2016.
How do PEOs work?
When working with a PEO, your company enters into a shared employment relationship, called co-employment. The PEO then becomes the “Employer of Record” and is financially responsible for the client’s payroll and payroll tax filings, employer compliance, benefits administration, workers’ compensation, unemployment claims management, benefits, 401K and other HR-related administration and liabilities. They legally share these liabilities. Below is a brief summary of the some of the specific responsibilities offered by top PEO companies:
Key PEO responsibilities:
- Streamline Employee Administration
- Payroll processing and Tax filing
- Integrated HR, Payroll, and Benefits
- Regulatory guidance and compliance
- Access to pooled employee benefits
- Benefits Administration
- workers compensation and Risk services
- Healthcare reform compliance
Each party in a PEO-client relationship is responsible for certain obligations as well as for various shared responsibilities. Because responsibilities are shared in a co-employment arrangement, finding a PEO that is not only reputable but also a good fit is paramount. PEO Broker can help. We are one of the top PEO companies in the PEO industry.