A Professional Employer Organization (PEO) consolidates and administers back office HR solutions through a co-employment relationship. Essentially, this means the business continues to manage the operation of the company while the PEO aids in administrative operations relating to human resources, benefits, payroll etc.
What is Co-Employment?
Co-employment is a contractual business relationship where the client company is the worksite employer while the PEO becomes the employer of record for administrative purposes. This means that the client company, as the worksite employer, sets the direction of the worksite and business decision-making, like assigning work to be performed and maintaining control of the environment and culture. The PEO serves as employer of record merely to aid in administrative functions like payroll and the administration of employee benefits.
How does it work?
The PEO and the client company enter into an agreement where certain duties related to payroll, tax filings, employee benefits, and human resources are handled by the PEO. The employees continue to abide by current worksite supervisor, policies, and perform their daily duties as they would with or without the PEO. Typically, the only time an employees would think of the PEO their company is partnering with is when they review their pay stubs or need a verification of employment for a loan.
Who uses a PEO?
Companies all over the world, in almost every industry, can use a PEO. PEOs are a functional outsourcing relationship, similar to outsourcing your accounting or other non-essential functions, to allow your business to focus on its core operations and driving the bottom line.The National Association of Professional Employer Organizations (NAPEO) is The Voice of the PEO Industry NAPEO's 250 PEO members provide payroll, benefits, workers' comp, regulatory compliance assistance, and other HR services to more than 173,000 small and mid-size businesses employing 4 million people.
What all is included with a PEO’s services?
Services will typically include management of human resources compliance, employee benefits, employee consulting, etc., but each PEO has their own offerings. For Marvel HR, services include payroll processing, tax remittance, benefits administration, worker’s compensation administration, unemployment administration, and HR administrative support. Marvel also meets with its clients up to four times a year to align with the operations of its clients. In these meetings we review goals and employee turnover that we compare to previous years.
The better question would be, why shouldn’t a company outsource? Small and mid-sized businesses need the ability to focus on their main functions; outsourcing frees up valuable time and resources for growth and scaling. Partner with experts in human resources, benefits, payroll, etc - industries a company might not know to leverage talent and grow your business. Partnering with Marvel HR improves efficiencies, limits liabilities, and reduces overhead expenses.
If I use a PEO, do they have to process my payroll?
Yes, the payroll is processed by the PEO. This allows the PEO to seamlessly offer a suite of benefits related to insurance, risk management, etc. while having the appropriate payroll-related records that are important to those functions of your business. The PEOs also file quarterly 941s on behalf of their customers under the PEO EIN.
Who pays the taxes?
The PEO pays relevant taxes and wages on the given frequency decided; however, it is the client company’s responsibility to make the funds available to the PEO on a timely basis to pay for the costs as part of the contractual relationship.
Is there a national organization for PEOs?
Absolutely, NAPEO (National Association of Professional Employer Organizations), of which FullStack is a member. In fact, NAPEO has their own FAQ page.