How PEO Employee Leasing Works

by VENDIREX on 06/09/2015 - 02:58 pm |

Tag: HR Software

First, let’s define the main difference between HR Outsourcing (HRO) and a Professional Employer Organization (PEO). Though they both are in business to relieve you of the burden of managing your firm’s paychecks, benefits and policies, PEOs are actually co-employers of your workers.


Generally, the typical client using a PEO - Employee Leasing firm has fifteen to twenty employees, and has no experience in handling human resources. One great benefit of such a small company using a PEO is that they have access to benefit plans typically reserved for larger organizations; thereby lowering one of the usual higher costs of your business.


Larger firms can take advantage of lowered insurance rates, as PEO services share a benefits pool with industries having lower risk. If you are a construction firm, for instance, and are subject to extremely high insurance factoring, partnering with a PEO can significantly increase your bottom line; without your having to suffer higher rates when you have had no history of injuries.


Your company will still be involved in meeting and pre-screening the employees, though aside from this the PEO handles staffing needs and will also visit your office as needed to discuss any problems, handle disputes, etc. Think of them as your go-to partner in emergency situations, as well as routine operations involving anything to do with your employees.


Essentially, your PEO firm of choice should provide the following functions:


  1. Human Resources Management - assures you are in compliance with rules and regulations (including labor posters), assists in employee policies and handbook creation and training documentation maintenance. They also provide recruitment, screening, drug tests and background checks for leased employees.


  1. Payroll and Taxes - the provider is responsible for paychecks, direct deposits, withholding the proper taxes, garnishment handling and year end W-2s. They assume liability for errors and take part in any audits.


  1. Administration of Benefits - as mentioned above, PEO vendors can provide competitive rates for worker requirements such as health and dental insurance, disability insurance and retirement plans. They would handle all associated paperwork.


  1. Risk Management - This is the specialty service a PEO provides which can bring the most value to your company. The PEO assumes liability for job related injuries or harassment accusations, makes certain your facility is in compliance with OSHA regulations, and ensures you are not discriminating against any protected workers. Interestingly, the Internal Revenue Service regards the PEO as the employer of record, making them liable for all associated payments.



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