Frequently Asked Questions (FAQs):
Q: What is a PEO?
A: At a glance, A PEO is a company to which you can outsource a range of your business human resource needs, including recruitment, termination, Health benefits, payroll, and workers’ compensation insurance. Your business and the PEO work in a co-employment model which allows you to access competitive insurance and HR options. This enables you to potentially lower employee benefit costs, reduce workers’ comp costs, reduce administrative workloads, and manage critical HR functions by outsourcing a portion of these to the PEO.
Q: What type of businesses hire a PEO?
A: Any type of for-profit and nonprofit entity can hire a PEO. It doesn’t matter the sector of business you’re in; you can still join forces with a PEO. Some PEOs even offer industry-specific solutions, even for high-risk businesses like roofing, tree trimming, and construction.
Q: Do small businesses use PEOs?
A: Yes, typically. Even though large businesses can use a PEO it is usually the small businesses that have the greatest opportunity to benefit from a PEO relationship. Small companies in tech, manufacturing, construction, health and wellness, retailers, mechanics, plumbers, and many other firms have found great success when entering a PEO relationship with their company. Small businesses with 5-500 employees can use a PEO. Typically, businesses with 5-200 easily fit the model.
Q: What is the difference between using a PEO and outsourcing your HR Needs?
A: The PEO works in a co-employment model at risk with you. With outsourced HR, there is no co-employment. Yes, you hire a service that takes care of your HR needs, but you’re still responsible and liable for all the outsourced work. Using a PEO provides greater security because of the shared liability when it comes to HR needs.
Q: What is co-employment within the context of PEO?
A: Co-employment, sometimes called employee leasing, is an arrangement in which the PEO is the employer on record for the employer’s contribution to payroll taxes and is responsible to assist your company with all HR-related tasks, including (but not limited to) administering benefits, processing payroll, making your workers’ compensation insurance payments, and providing risk management. There is shared liability between your company and the PEO. The PEO will not run your day-to-day business, they will just remain a professional resource at risk with you that you can rely on to protect, streamline, and help you to focus on growing your business by removing some of the non-revenue producing overhead from your daily tasks.
Q: What type of liabilities will the PEO assume on behalf of my company?
A: The PEO company will be at risk with you and will be responsible for assisting you in complying with HR-related laws and regulations concerning wages, benefits, work comp insurance, and taxes. All of the details will be laid out in the CSA (customer service agreement) that is agreed upon between you and the PEO. You can pick and choose many of the responsibilities the PEO will have, and decide what will be the best fit for your company.
Q: Does this mean I have to relinquish control of my business by using a PEO?
A: No, absolutely not! Your relationship with your PEO is a partnership, as far as employee administration is concerned. The PEO will not interfere with how you manage your business and supervise your employees, but instead be a resource relating to labor laws, employer handbooks, IIPP safety manual, wage and hour issues, and risk management questions when you request or need the help.
Q: Will a PEO offer options of health insurance plans I can choose from, or do they offer just one plan?
A: Some PEOs will generally give you options from different health insurance plans, including different provider organizations and deduction options. However, others may have a negotiated competitive deal with one provider that they offer to their clients. Some PEOs have a pre-qualified mandatory plan and require their employees to sign up for it. Others do not offer health benefits. Whatever the case, you can and should always ask for a detailed description of the plan identified and whether it is optional or mandatory.