Will I lose control of my business if I use a PEO?

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. In general terms, the PEO will focus on employment-related issues, and the client will be responsible for the actual business operations.

How does a PEO arrangement work?

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 serve 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 PEO also issues the Form W-2 for the compensation paid by it under its EIN. 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 for worksite employees.

Why would a business use a PEO?

Business owners want to focus their time and energy on the “business of their business” and not 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 small-group markets access to many benefits and employment amenities they would not have otherwise.

Is my company too small for a PEO?

Any business can find value in a PEO relationship. The average client of a PEO is a business with 19 worksite employees, however, there is no business too small or too large for a co-employment relationship.

How do PEOs help their clients control costs and grow their bottom line?

A PEOs economy of scale enables each client company to lower employment costs and increase the business’s bottom line. The client can maintain a simple in-house HR infrastructure or one at all by relying on the PEO. The client also can reduce hiring overhead. The professionals at the PEO can provide critical assistance with employer compliance, which helps protect the client against liability. In many cases, the client can pay a small up-front cost for a significant technology and service infrastructure or platform provided by the PEO. In addition, the PEO provides time savings by handling routine and redundant tasks for its clients. This enables the business owner to focus on the company’s core competency and grow its bottom line.

How do employees benefit from a PEO arrangement?

Through a PEO, the employees of small 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, then 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 and improved communications.