|How does a business owner go about selecting which PEO is right for their business?||Q: How does a business owner go about selecting which PEO is right for their business? |
A: 1. Assess your workplace to determine your human resource and risk management needs.
2. Make sure the PEO is capable of meeting your goals. Meet the people that will be serving you.
3. Ask for references, how long have they been in business, etc.
4. Check to see if they are a member of NAPEO, the national trade association of the industry.
5. Investigate the companies administrative and risk management competence. What experience and depth do they have.
6. Make sure all of their insurances are with a-rated carriers and that they are fully funded products.
7. Review the service agreement carefully. Are the parties responsibilities clearly laid out? What provisions are there to cancel the contract.
8. If your state requires a license of PEO's make sure you are dealing with a licensed PEO. (required in Louisiana as of 01-01-02)
|How does a PEO arrangement work?||Q: How does a PEO arrangement work? |
A: In a relationship among 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 the client company contractually allocate some of the shared traditional employer responsibilities and liabilities. The PEO assumes the responsibility and the liability to the "business of employment", such as risk management, personnel management, human resource compliance, payroll and tax compliance. The client company manages product development and production, marketing, sales and service. The PEO assumes and establishes an employment relationship with the worksite employee and provides a complete human resource and employee benefit package.
|How many workers in the United States are in a co-employment PEO arrangement?||Q: How many workers in the United States are in a co-employment PEO arrangement? |
A: NAPEO, (the National Association of Professional Employer Organizations), estimates that between 2.5 and 4 million American workers are currently co-employed in a PEO arrangement. PEO's are operating in every state and the industry has grown between 20% and 30% per year over the past 10 years. Today there are well over 2000 PEO companies that are responsible for over $20 billion in employee wages and human resource and employee benefits.
|Is this just another "fired and rehired" scheme?||Q: Is this just another "fired and rehired" scheme? |
A: NO, workers are never fired by the client business and rehired by the PEO. Instead, a worker becomes an employee of two employers in a contractual co-employment relationship. The PEO assumes employer responsibilities and liabilities for the human resource and personnel obligations of the worksite employees. This responsibility includes employee wages and employment taxes, workers compensation and unemployment insurance and employee benefits. The small business retains employer responsibilities and supervision of production of the products or services, or the delivery of such services.
|What is a PEO?||Q: What is a PEO? |
A: A professional employer organization,(PEO), is a company which contractually assumes and manages critical human resource and personnel responsibilities and employer risks. Today 17 states provide some sort of licensing, registration, or regulation for PEO's. The internal revenue service also acknowledges that a PEO may be the employer for federal income and unemployment taxes.
|What is the difference between an ASO and a PEO?||Q: What is the difference between an ASO and a PEO? |
A: First of all, ASO stands for Administrative Service Organization. The largest difference is that the employees do not shift to a co-employment relationship. The employees remain with the employer and all taxes are paid under the clients tax ID numbers. The services are exactly the same as far as how the clients are treated internally by Delta. We still handle all the Human Resource issues, Risk Management issues, Benefit Issues and Payroll and taxes are still processed by Delta. There is not as much of a shared liability because there is not the co-employment relationship. Contractually Delta still assumes the tax liability as long as the invoices are paid on time. Some clients need the employees to remain in their corporate ID because of certain internal issues, or they may be getting government funds for the amount of employees they have on staff, etc.
|Why would a small to medium sized business use a PEO?||Q: Why would a small to medium sized business use a PEO? |
A: Small to medium sized business owners want to focus their time and energy on the "business", not spend all of their days doing paperwork for the government. Most small business owners do not have the necessary human resource training, payroll and accounting skills, knowledge of regulatory compliance, or background in risk management, insurance or employee benefits to meet today's demands put on us by the government. Even if you do, is this where you want to spend your time in creating a business that is growing and successful? This is the opportunity to provide something special to the worksite employees, beyond what they normally would have working for a small business, and concentrate solely on the business at hand.
|Why would a worker of a small to mid sized business want a PEO as an employer?||Q: Why would a worker of a small to mid sized business want a PEO as an employer? |
A: Workers seek financial security, quality health insurance, a safe working environment, and opportunities for retirement savings. PEO's may provide Fortune 500 quality employee benefits. Job security is improved as the PEO economy of scale permits a business to lower employment costs. Job satisfaction and productivity increases when workers are provided quality human resource services like employee manuals, grievance procedures, and improved communications.