employee leasing company

A Quick Guide to PEO

By: Sunder Singh

PEO means ‘professional employer organization,’ and it refers to a company which offers better benefits to your employees and helps you save money as well. They act as an employer for your worker for some legal purposes and take care of the cost of the administration for payroll, HR, compliance, time and attendance, etc. Some key advantages of having a PEO include:

  • They offer the best benefits to your employees
  • Reduce the cost of providing benefits
  • Benefit from all the HR services without hiring staff
  • Reduce risk and ensure compliance


Working of PEO

They take advantage of co-employment (a special legal arrangement) which allows them to work as an employer of your worker for special situations. You will have full control of the company, your people and all the decisions that you take will not be affected. It’s only for the benefits and HR, and they are taken care of by the experts of PEO.

This arrangement is better than outsourcing (employee leasing company) the HR function. In outsourcing, the HR team is from the other company. They can’t bring the employees of your company under their benefit network, and they don’t have any power in disputes and the claims. You can consider them as an additional employee of your company whom you don’t offer any benefits.

However, PEO act as an employer so they can offer other employee benefits as well.  They benefit from the economy of scale as they have many clients and they work like a huge company which gives them access to the most competitive benefits packages at highly discounted rates. As a client of PEO, you’ll be able to offer the benefits akin to some of the best companies irrespective of the number of employees you have.


Co-existing with PEO

Under this co-employment relation, both of you have clearly defined roles:

  • As a primary employer, you will have authority over the PEO. You can keep full control over the employees’ day to day work. It includes the day to day work of your employees, the job descriptions and the management and the organizational structure as well.
  • PEO will take some specific employer obligations which you may choose. You can give the PEO the power to handle crucial administrative tasks like payroll, tax withholding, and they can also provide many benefits to the workers. The PEO can also represent in case of employee disputes, unemployment claims, and worker-related claims, etc.


Key Benefits You Get

Your PEO is a take care of the HR and the compliance as well. You will not have to outsource the same to multiple vendors and get these benefits:

  • Better Rates- When you take the services of a PEO, you get a lot of benefit plans at highly competitive rates which are lower than what you own.
  • Compliance- Your PEO will also take care of the compliance requirements of the Affordable Care Act.


In the End

PEO is a better arrangement than employee leasing company as you will have all the control over your people.


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