What is a PEO? A PEO (Professional Employer Organization) is a human resources specialty company that partners with businesses as a co-employer in order help clients reap benefits of a large scale business. PEO clients focus on their core competencies to maintain and grow their bottom line while the PEO focuses on the human resources, employee benefits, payroll and workers’ compensation.
Why would a business use a PEO? Business owners who want to focus their time and energy on the “business of their business” and not on the “business of employment” will benefit greatly by using a PEO. 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. This is where a PEO can become a very viable business partner.
Do the business owners lose control of their businesses? Absolutely not. The client 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. The PEO will generally only assume responsibilities and liabilities associated with a “general” employer for purposes of administration, payroll, taxes and benefits.
Who is responsible for the employees’ wages and employment taxes? PEOs assume responsibility and liability for payment of wages and compliance with the rules and regulations governing the reporting and payment of federal and state taxes on wages paid to its employees. PEOs have long established their role as reporting income and handling withholding, FICA and FUTA. In 2002, the IRS issued guidance confirming the ability of PEOs to offer qualified retirement benefits. Learn more at NAPEO.org.