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. Doing so, PEOs can help medium-sized and small businesses save time and money while reducing administrative burdens. Human Resource Outsourcers (HRO) and Professional Employer Organizations (PEO) offer similar services. HROs are separate entities hired by companies with fully staffed HR departments to handle specific human resource services, like payroll and benefits administration. In comparison, PEOs handle all aspects of human resources management.
You can count on them to manage your employee-related administration and risks but it’s up to you to make operational decisions that steer your business toward success. Payrolling is a service where a third-party company takes on the payroll processing duties for a business. This can include calculating and processing employee paychecks, managing tax withholdings, and distributing tax documents at year-end.
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This includes hiring new talent after the PEO partnership is established. 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.
- Using a PEO company to help you manage your daily administrative tasks gives you more time to focus on running the business.
- Co-employment means you share responsibility for your employees with the PEO.
- It is a contractual arrangement in which the employee leasing company, also known as a professional employer organization (PEO), is the official employer.
- Partnering with a PEO helps you figure out the challenges of running or expanding your business.
These companies are beneficial tools that provide you with the services you need to stay compliant while you scale and focus on your bottom line. This confusion may stem from the relationship between a PEO and its client, called co-employment. And while many think employee leasing and co-employment are the same, they are very different. Since the PEO is handling payments for all your employees, the PEO’s name will also be on their paychecks. Your employees remain your employees to manage, promote, hire, and so on, even after your partnership with the PEO ends.
Additional services from leading Global PEOs
When your employee gets hurt, you can rest assured that your PEO company will take care of the claims administration process. In the event that your employee sustains an injury or an illness at the workplace, you will want to make sure you have coverage for that. Depending on the state your business operates in, you may or may not need to purchase workers’ compensation coverage. Even if you’re a smaller business, you must abide by those laws when working with a PEO. Want to discover how a co-employment relationship with ExtensisHR can help you reach your business goals? We do this with a simple and friendly platform, expert support from real people when it’s needed, and access to corporate-level benefits that ensure people feel secure and valued.
Employee leasing works best when there is a definite project with a start and end date in mind. Leased employees are hired for the skill sets they bring to a particular situation. Small businesses can choose how they would like to do the employing just like employees can. A PEO vs. employee leasing creates two very distinct yet equally interesting solutions for employing and employee management.
What types of businesses can benefit from PEOs?
Because the PEO is the legal employer, it may have more say in how the employees are managed, trained, and evaluated. Another potential disadvantage is that PEOs can be expensive, and the costs may not be immediately apparent. These fees can add up quickly and may not be reflected in the initial quote. A leased employee or leased staff member is still an employee, but their legal employer is the PEO/leasing company.
How to evaluate which PEO is right for you
The problem with an office of leased employees just filling your hiring needs indefinitely is very expensive. Leased employees provided by a staffing agency are typically billed at TWICE their pay rate. If you want to pay double for every hour you hire someone, go right ahead. Sure, you might not have to deal with HR issues at all, but it won’t help you grow your business. In summary, both Employee Leasing and PEO services have their pros and cons worth weighing. The Employee Leasing arrangement suits businesses aiming to maintain control over their workforce while needing a helping hand with temporary hires.
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Filing paperwork, negotiating with benefits companies and learning about labor laws can take up a lot of your precious time. A PEO may free up your time so you can focus on expanding your offerings and growing your business. In addition to time savings, a PEO might save you money by improving your hiring practices and locking in the best rates with insurance companies and other benefits providers. https://adprun.net/peo-and-employee-leasing-whats-the-difference/ A Professional Employer Organization (PEO) is a company that provides HR services and helps manage the employer-employee relationship. PEOs essentially act as co-employer with their clients, meaning that they share certain employer responsibilities with the client company. An ASO company may take over a PEO’s tasks (payroll and benefits administration and employment-related compliance).
Employee Leasing Is Not Typically A Long Term Solution
PEO co-employment is an interesting workforce management option for many businesses because it allows them to share employer responsibilities for their normal workforce with a PEO. Complying with complex and ever-evolving federal and state employment laws is easier said than done. A PEO can assist with payroll and benefits compliance so you don’t have to worry about it. They’re experts in classifying employees correctly, issuing and filling out tax laws and ensuring you adhere to equal employment opportunity (EEO) and other laws. 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.