A Professional Employer Organization (PEO) is a company which contractually assumes and manages critical human resource and personnel responsibilities and employer risks for small to mid-sized businesses by establishing and maintaining an employer relationship with worksite employees.
In the relationship between a PEO, a worksite employee, and a client company, there exists a co-employment relationship in which both the PEO and the client company have an employment relationship with the worker. The PEO and client company contractually allocate traditional employer responsibilities and liabilities. The PEO assumes responsibility and liability for the “business of employment” such as human resource compliance, and payroll and employee tax compliance. The client company manages the employees, and all other facets of its business, such as production, marketing, sales, and service. The PEO assists the client in developing a complete human resource and employee benefit package.
Business owners want, and need, to focus their time and energy on the “business of their business” and not on the “business of employment”. As businesses grow, owners don’t have the necessary human resource training; payroll and accounting skills; knowledge of regulatory compliance; or backgrounds in risk management, insurance and employee benefit programs to meet the demands of being an employer.
“Our no. 1 asset is our experience” – William Bellis, Owner Ahead Human Resources, Inc.
It is estimated PEOs provide services to 175,000 small and mid-sized businesses, employing 3.7 million people. There are 907 PEOs in the United States. The PEO industry’s 175,000 clients represent 15% of all employers with 10 to 99 employees. Between 2008 and 2017, the number of worksite employees employed in the PEO industry grew at a compounded annual rate of 8.3%. This is roughly 14 times higher than the compounded annual growth rate of employment in the economy overall during the same period.
Lower cost! We amortize our cost over our large number of employees resulting in reduced cost to you for 401K, employee manuals, direct deposit, payroll processing, 125 plan, claims processing, etc.
By providing services like low cost comprehensive benefit plans. By increasing employees’ take home pay through pre-tax cafeteria 125 plan, pre-tax dependent care plan, and tax deferred 401K plan. More importantly, employees appreciate the professionally administered, employee-friendly, service and assistance programs, employee payroll services, and conveniences such as direct deposit, employee manuals, etc.
According to a recent study by noted economists Laurie Bassi and Dan McMurrer, small businesses that use PEOs grow 7 to 9 percent faster, have 10 to 14 percent lower employee turnover, and are 50 percent less likely to go out of business. (Why use a PEO – NAPEO.org)
Yes! Not only can your employees take home more pay at no cost to you, incredibly your cost will be lower as well. The 125 Plan allows employees to purchase health, dental, dependent care, life, and supplemental benefits pre-tax. (Federal and State) Additionally, neither the employee nor the employer pay FICA or FUTA on 125 Plan purchases. Not only do the employees increase their take home pay, the employer saves 8.45% on FICA and FUTA on those contributions. The 401K Plan allows employees to defer taxes (Federal and State) in a qualified retirement plan.