This means that this company leases employees to another business which helps. For more than 50 years, Paychex has been working with business leaders to support their HR needs. This can sometimes put your company at risk of compliance violations and, in turn, costly penalties. By turning things over to a PEO that has tons of HR experience and expertise, you won’t need to worry about these issues. Instead of having to worry about HR, business leaders can focus their efforts on other activities that grow the company. Meanwhile, the client retains control over the hiring and firing of its employees, and business leaders continue to make the day-to-day operating decisions for their company.
One myth seems to come up more often than others – a PEO relationship and employee leasing are the same. Although there are many great benefits that come with working with a professional employer organization, there are a few disadvantages you should be aware of. We offer a workers’ compensation payment service option that allows you to pay premiums based on actual wages — not estimates — to help eliminate big premium deposits and improve your cash flow. If you decide to work with a PEO, you’ll be able to hammer out all the financial details from the very beginning. This will provide your company with a fixed cost, which you can add to your annual expenses.
- Instead, a PEO provides employee-related services, such as payroll and benefits.
- Large leasing companies may offer a limited number of plan options, such as an indemnity plan versus a health maintenance organization , and several “tiers” of benefits within each plan.
- Alternatively, employers may be able to offer a higher quality benefit package for roughly the same amount of money.
- In some countries, employee misclassification can lead to serious implications for companies and individuals.
- This responsibility falls on the client, as do any other staff-related decisions.
When you begin to work with them, your employees may notice their name on their paychecks but will continue to operate as usual. Lastly, you can’t count on a PEO to assist with marketing, sales or product distribution as that typically is outside of their scope of work. All employees are either currently with the client, or future employees who are hired by the client.
More than 800 PEOs in the U.S. provide a variety of services to between 156,000 and 180,000 small and medium-sized companies employing 2.7 to 3.4 million people. As a co-employer, the PEO becomes the legal and tax-related employer for the employees of all client companies. This allows the PEO to negotiate more expansive and less expensive benefits, workers’ comp, and unemployment insurance rates while offering state-of-the-art administrative services.
Once an employee is assigned by a staffing agency to work for you, their workers’ compensation insurance, taxes and wages are paid by the staffing company. With an employee leasing company , the employer has a shared relationship over their employees for the purposes of payroll processing, workers’ compensation insurance coverage, benefits administration, and HR services. Instead of being a leased or temporary worker, employees end up having two employers – the company who hired them AND the professional employer organization. The PEO becomes the company of record for HR, payroll, benefits, employment taxes, and other HR-related purposes. It is a contractual arrangement in which the employee leasing company, also known as a professional employer organization , is the official employer.
Employer Options for Human Resources Management
However, there are some major differences to consider before you understand which one your small business would benefit from. Additionally, instructing a PEO takes the burden of having to go through recruitment processes, running background checks, reviewing resumes, and interviewing which can take time away from business activity. Similarly, time is saved by not having to set up payroll systems and looking into the local laws and regulations in each country of operation. If you already have a preference for who you want to use for your health insurance and benefit offerings, you may not be able to use them. Although this may seem like a disadvantage, it could end up being a massive benefit.
A business can benefit by using a staffing or temporary help service in variety of ways, as well. Companies that opt for an HRO don’t need the full-service human resources support that a PEO provides. There is no co-employment relationship between an HRO and its large-company clients. If you decide to work with a PEO, you’ll be required to use their benefits providers and, therefore, have less flexibility for your employees. This is because PEOs usually have their own relationships with a specific set of companies that offer health insurance, retirement plans and other benefits. Filing paperwork, negotiating with benefits companies and learning about labor laws can take up a lot of your precious time.
When you work with a PEO company, they can take care of all of the administrative tasks, so you don’t have to. This allows you to focus more on running your business instead of dealing with smaller administrative tasks. Create effective action plans to help you comply with business and industry regulations and keep employees safe at work. Process payroll anytime, anywhere, from desktop or mobile, or over the phone with a dedicated payroll specialist. We’ll also help you file federal, state, and local payroll taxes and send payment to the appropriate agencies.
What Is the Return-on-Investment (ROI) of a PEO?
However, if needed, some PEOs offer comprehensive recruiting services, including job advertisement creation, interview assistance, offer letter creation, and more. Also known as a temporary employment arrangement, employee leasing is the practice of supplying new workers or contractors to a client, usually temporarily. Often, employee leasing is for work on a specific project with a start and end date.
Here, we take a deep dive into this critical concept of employee leasing, explain how it differs from PEO, and the pros and cons of employee leasing as an HR solution. This will clarify why the PEO business model has superseded the employee leasing model. Want to discover how a co-employment relationship with ExtensisHR can help you reach your business goals?
What a PEO Doesn’t Cover
There’s still a chance they might make a mistake or forget to do something that leads to consequences for you and your business. We satisfy Hawaii’s employment needs and provide our clients’ professionalism with the spirit of https://adprun.net/ aloha. When your employee gets hurt, you can rest assured that your PEO company will take care of the claims administration process. Even if you’re a smaller business, you must abide by those laws when working with a PEO.
Moreover, human resources management has seen increased lawsuit activity in recent years, a trend that has led some PEOs to ask for varying levels of input in the realms of hiring and firing of workers in their clients’ workforce. Small business consultants also encourage their clients to insist on a contract that includes a termination clause. This clause should allow the business to terminate the agreement with the leasing company with 30 or 60 days’ notice . “The more specific your contract about the leasing firm’s responsibilities, the better,” concluded Sherrid. Many leasing companies provide extensive safety and personnel loss control services to their clients.
Are leased employees considered employees?
Costs related to workers’ compensation, unemployment tax and payroll administration are much less in comparison to a staffing or short-term employment arrangement. As you can imagine the more employees as a business has, the more time has to be devoted to employee issues- what is peo employee leasing company therefore the value of outsourcing this work becomes a more profitable decision. In practical terms, a PEO will handle tasks such as payroll processing, benefits administration, workers’ compensation insurance, and regulatory compliance on behalf of their clients.
With some similarities to contract staffing agencies, a PEO is able to provide assistance with hiring and recruiting global talent to ensure that companies are employing the most suitable individuals. As well as this, PEOs take away the burden of having to set up payroll and do tax administration tasks in order to abide by local labor and tax laws. Partnering with a PEO can provide your company with several different benefits, and you can customize what you need most.