Lessen Your Burden By Acquiring a PEO in Your Company

What exactly is a PEO (Professional Employer Organization)? A PEO becomes the employer of record for tax purposes using a co-employment contract. All of the paper work concerning the employees is filed under the identification numbers of the PEO as opposed to being filed under the client company's identification numbers. The client company directs all the day-to-day activities of the employee while the PEO provides functions like payroll for a fee. The charge will normally run between 3 and 15% of the total payroll plus the employer's share of FICA, unemployment insurance withholding and Medicare.



Basically the PEO company takes over all the human resources operations for a company. One of the benefits is that the PEO might be able to get lower costs for things like workman's compensation insurance and company employee benefits packages since with managing multiple company's HR, they can apply for the discounted rate because they are the employer of record for a much greater number of employees.



What makes a PEO differ from a ASO? The main difference between a PEO and an ASO is the PEO company files all paperwork for each one of the client's employees under their EIN (employee identification number) which, in essence, means they are the legal employers. This gives the client company benefits such as getting reduced cost on some company benefits and services which are required by law.



An ASO is a company which provides all or almost all of the human resources operations for the client company, however the company lists each of the employees under their own EIN and not that of the ASO's. Providing the administrative functions for the human resources department can relieve the business of many headaches which they may not be prepared to deal with, therefore an ASO is an answer to providing those services with the help of another contracted company.



Just what responsibilities does a PEO assume for a company? The PEO provides a wide variety of management responsibilities using their team. The PEO provides improved employment practices and risk management, which in turn reduces liabilities. They are able to assist a company to help increase productivity and profitability. This provides a company a rest from the burden of employment paperwork. A PEO will give a business access to a complete benefits package, that allows clients to be more aggressive within their area of the market.



Without having to keep up a human resources department a company can actually improve their profitability and productivity. Coming from a paperwork point of view the company will have no employees of their own and thus less liability. They can still deduct the expense of labor since they're the co-employers of the employees which they pay the PEO company to supply. The PEO thus is responsible for providing all of the human resources functions of the client company.



Which is a better choice PEO or ASO, and why? There are a lot of points to consider when making a choice between the services of a PEO and an ASO. For instance you might want to keep all of your employees under your business license while having the major portion of your human resources handled by a separate company. This usually happens when a company moves from a small to a medium size company. By keeping administrative functions of your human resources operating at another location you could get by with having just a single HR person at your location as the liaison with your ASO.



When you keep growing into a much larger company, it may provide lots of benefits to allow your employees be filed under the licenses of a PEO company while they staff your on-site human resources. With your employees listed under the PEO's licenses you are relieved from a great deal of liability while keeping a good staff and having all of the difficulties of maintaining all the aspects of human resources handled by a PEO company. Each senior executive of a company can look at all of the costs and benefits of each and choose the method that will be ideal for their particular company.



ProHR is a company that provides PEO services and executive job search services. Visit proHR.com for more information.