What is a PEO?
A Professional Employer Organization (PEO) is a company that provides comprehensive human resource solutions for businesses. When working with a PEO, a business enters into a co-employment relationship, meaning that the PEO shares certain employer responsibilities with the client. These responsibilities are outlined in the Client Services Agreement (CSA).
Services Provided by PEOs
PEOs offer a range of services, including:
- Payroll processing
- Human resources management
- Risk management
- Claims management
- Workers’ compensation coverage
The Size and Impact of the PEO Industry
There are over 900 PEOs operating in the United States. The industry is well-established, and its impact is significant. In fact, if you combined the total number of employees from companies like Amazon, Starbucks, AT&T, Apple, Wells Fargo, and Google, the total would still be less than the number of employees managed by PEOs nationwide.
Why Businesses Choose PEOs
Many businesses turn to PEOs for:
- Cost Savings: PEOs provide HR and risk management services at a fraction of the standard market cost.
- Payroll Tax Management: The PEO handles payroll tax remittance due to the co-employment arrangement.
- Compliance Support: PEOs help businesses navigate complex employer obligations and labor laws.
Important Considerations
Business owners considering a PEO should carefully review how payroll taxes are handled, as this function is managed by the PEO. To fully understand the implications, it is recommended to consult an expert before signing a CSA.
Final Thoughts
PEOs offer an efficient and cost-effective way for businesses to manage HR, payroll, and risk management. However, due diligence is necessary to ensure the right fit for your business needs.
For further questions on this or any other risk management topic, please contact us. We look forward to assisting you!
