What is a PEO?

Today, there are approximately 700 Professional Employer Organizations (PEOs) operating in the United States, covering 2-3 million working Americans.

What is a PEO?

A Professional Employer Organization or PEO provides integrated services to help business owners effectively manage critical employer responsibilities and employer risks. PEO services typically include management of human resources, employee benefits, payroll processing, payroll tax compliance, workers' compensation and other strategic services such as recruiting, risk/safety management, and employee training and development.

Partnering with a PEO involves a contractual allocation and sharing of employer responsibilities between the client and the PEO. This shared employment relationship is called co-employment.

Co-Employment

As co-employers, PEOs contractually assume substantial employer rights, responsibilities, and risk through the establishment and maintenance of an employer relationship with the employees of its clients. More specifically, a PEO establishes a contractual relationship with its clients whereby the PEO:

• Co-employs workers at client locations, and thereby assumes responsibility as an employer for specified purposes of the workers assigned to the client locations.
• Reserves a right of direction and control of the employees and retains a right to hire, reassign and fire the employees.
• Shares or allocates with the client employer responsibilities in a manner consistent with maintaining the client's responsibility for its product or service.
• Pays wages and employment taxes of the employee out of its own accounts.
• Reports, collects and deposits employment taxes with state and federal authorities.
• Establishes and maintains an employment relationship with its employees that is intended to be long term and not temporary.

Is a PEO right for my business?

Businesses today need help managing increasingly complex employee related matters, including employee relations, health benefits, workers' compensation claims, payroll, payroll tax compliance, and unemployment insurance claims. They contract with a PEO to assume these responsibilities and provide expertise in human resources management. This allows the PEO client to concentrate on the operational and revenue-producing side of its operations.

Deciding to partner with a PEO and choosing a PEO takes careful thought. You need to do your homework, and the best place to start is by leveraging the industry knowledge and experience of Advantage SBS. Our PEO Broker division offers free consultation and analysis of your current business environment and assists in the process of investigating and selecting the right PEO for your business.

To learn more, visit our PEO Broker Services page.