Building a People-First Culture

Any business can find value in a PEO relationship. Increasingly, larger businesses also find value in a PEO arrangement because PEOs offer robust web-based HR technologies and expertise in HR management. PEOs can partner with companies that have 20, 50, 500 or more employees and work in conjunction with their existing human resources department depending on size.

PEO clients include different types of businesses ranging from accounting firms to high-tech companies, healthcare companies and manufacturers. A broad range of professionals, including doctors, retailers, mechanics, engineers and plumbers, also benefit from PEO services.

Once a client company contracts with a PEO, the PEO will then co-employ the client’s worksite employees. In the arrangement among a PEO, a worksite employee and a client company, there exists a co-employment relationship, which involves a contractual allocation and sharing of employer responsibilities between the PEO and the client pursuant to a client service agreement (CSA). The PEO typically remits wages and withholdings of the worksite employees and reports, collects and deposits employment taxes with local, state and federal authorities. The client company retains responsibility for and manages product development and production, business operations, marketing, sales and service. The PEO and the client will share certain responsibilities, as determined in the CSA. As a co-employer, the PEO will often provide a complete human resource and benefit package for worksite employees.

Business owners want to focus their time and energy on the “business of their business” and not on the “business of employment.” As businesses grow, most owners do not have the necessary human resource training, payroll and accounting skills, the knowledge of regulatory compliance, or the backgrounds in risk management, insurance and employee benefit programs to meet the demands of being an employer. PEOs give companies access to many benefits and employment amenities they would not have otherwise.

In short, no! The PEO client/business owner retains ownership of the company and control over its operations. As co-employers, the PEO and client will contractually share or allocate employer responsibilities and liabilities per a client service agreement (CSA). The PEO will generally only assume responsibilities associated with a “general” employer for purposes of administration of benefits and remittance of payroll and payroll taxes. The client will continue to have responsibility for worksite safety and compliance. The PEO will be responsible for remittance of payroll and employment taxes, may maintain employee records and may retain a limited or general right to hire and fire, as delineated in the CSA. Because the PEO also may be responsible for providing access to workers’ compensation coverage, many PEOs also focus on and provide assistance with safety and compliance. In general terms, the PEO will focus on employment-related issues, and the client will be responsible for the actual business operations.

PEOs provide services to between 156,000 and 180,000 businesses, employing between 27 and 34 million people.

Through a PEO, the employees of client businesses gain access to big-business employee benefits such as: 401(k) plans; health, dental, life and other insurance; dependent care; and other benefits they might not typically receive as employees of a small company. And, when a company works with a PEO, job security is improved as the PEO implements efficiencies to lower employment costs. Job satisfaction and productivity increase when employees are provided with professional human resource services, enhanced benefits, training, employee manuals, safety services and improved communications.