PEOs vary from one another but most offer a long list of services. Some of these services can be carved out and some cannot.
Payroll is an example of a service that is mandatory in order to partner with a Professional Employer Organization (PEO). The reason for it is that the payroll is the needed staple that creates the co-employment relationship.
Employee benefits are an example of services that are optional.
PEO services are vast; however, they can be categorized into four core areas (Payroll, Human Resources Administration, Worker’s Compensation/Risk Management, and Employee Benefits).
PEO SERVICES – PAYROLL
Processing payroll and making sure your employees are paid accurately and promptly is the PEO’s payroll specialist primary function.
In order to accomplish this, the PEO sets up an online time-entry or standard file upload mechanism with your company. Clients can access payroll reports via self-service or by request.
An important function of processing payroll is tax compliance.
PEOs need to make sure your employee’s local, state, and federal withholdings are properly deducted and disbursed to the appropriate tax-collecting parties.
Record Keeping and Reports
Record keeping is an important function provided where the PEOs abide by federal and statutory regulations.
Records kept include deductions, vacation, holiday, sick pay, salary history, etc.
Many PEOs will supply some information directly to your employees through a self-service web-based portal. This information accessed will frequently be in the form of payment history and check copies.
Many other kinds of reports are often generated for management where they can access employee data. This is helpful for statistical purposes, comparisons, and decisions regarding employees. These reports can typically be downloaded into Excel and most accounting software.
W-2s and Direct Deposits
Year-end W-2s are the responsibility of the PEO.
PEOs aggregate prior year payroll data and forward all employees their W-2s for tax purposes.
Payroll from a PEO standpoint is very similar to what a payroll company would offer except PEOs do not charge for payroll processing directly, as it is included in their administrative fee.
Other offered features are direct deposit where some PEOs can fund up to three separate accounts per employee.
PEOs payroll processing help reduce paperwork and headaches by taking care of all the documentation and negating any reports to fill out as well as handling audits. They do this for you and more.
PEO SERVICES – HR ADMINISTRATION
Most small and mid-sized businesses do not have the necessary human resources expertise to properly cover their administrative obligations.
Complex laws and regulations have only increased in recent years creating a significant burden for them. Outsourcing this burden is the most effective solution.
Many PEOs will assign several dedicated specialists to your company.
As mentioned above a payroll specialist will handle all payroll-related issues and for HR, the PEO will also allocate a service professional. These service professional(s) will handle all of the following major three categories:
This is a large area where the PEO HR specialists help your company with administrative support with new hire reporting, I-9 authorizations and renewals, social security verification, and EEO-1 tracking and reporting.
EEO-1 or Equal Employment Opportunity 1 Report is required to be filed with the US Equal Employment Opportunity Commission’s Committee.
Under Federal and State guidance PEOs will help keep you compliant with FLSA (Fair Labor Standards Act), Title VII/Discrimination, Americans with Disabilities Act (ADA), Age Discrimination in Employment Act (ADEA), and Family Medical Leave Act (FMLA).
If you are having a hard time keeping up with all the 3 to 4-letter acronyms it is precisely why companies use PEOs for this and the list goes on.
Companies develop their own culture and set of rules that work for them.
The PEOs are here to help them customize an employee handbook that captures all of that and simultaneously keeps them compliant with federal and state mandates.
This is an area where companies when they first partner with a PEO will consult within the first three months.
PEOs’ HR specialists will also help with FSLA review and training as well as Americans with Disabilities Act (ADA) job description development.
PEOs HR service center can provide specialized certified HR professionals when needed usually for an additional hourly fee which would help with more complex issues operationally as well as an employee relations manager consultant.
They would help with employee disciplinary action and performance improvement plans. The above specialists will also help with HR operational policy and program reviews and recommendations.
PEOs will also provide their HR support with unemployment consultations and claims management. They would handle initial claims processing, claim validation, eligibility determination, and protesting unlawful benefits.
Human Resources Information System (HRIS)
Most PEOs in addition to the above major three areas will also provide a Human Resources Information System (HRIS).
This HRIS is an online tool where both employer and employee can enter and retrieve data. A worksite employee can access his or her personal information via self-service and enter employment changes where authorized.
The employer can submit wage and hour data as well as employee changes.
HR Administration has become more complex in recent years and PEOs have adapted well to the constant change in compliance requirements keeping you most protected from violations.
PEO SERVICES – WORKER’S COMPENSATION AND RISK MANAGEMENT
This area alone is a reason many of our clients seek a PEO relationship.
If your company is in the white-collar space, the worker’s compensation will likely not currently give you too much trouble as employees do not typically get hurt in the workplace.
If your company is in construction or it requires more physical type of work; there is a good chance you have had some claims in the past.
Many PEOs offer your company access to their master worker’s compensation policy and some offer only individualized policies for every client.
PEOs will assist you in creating and maintaining a safe work environment as well as several other aspects of it.
Claims Management Oversight
When a claim occurs, you would notify the PEO and they process the initial claim intake reporting.
They will also verify active employment and review the initial fact canvass reports for fraud indicators.
Year End Audit
When a company handles their own worker’s compensation policy a year-end audit will be performed directly with them and this can take many valuable hours of their time.
When a PEO’s policy is in place they no longer have this burden.
The PEO handles all annual audits for their co-employees.
Risk Management is always at the forefront of the PEO services.
This area encompasses HR administration, Health insurance, and Worker’s compensation as they all have regulation around it and the risk of failing to comply as well as the risk of higher costs due to reoccurring claims.
Occupational Safety & Health Administration (OSHA) was created by Congress in 1970 to assure safe and healthful working conditions for working men and women by setting and enforcing standards and by providing training, outreach, education, and assistance.
PEOs’ role is to guide you in complying with these standards and help your company maintain the required work environment.
PEOs have the ability to analyze your company and the way it operates to recommend safety protocols that would reduce injury risk for your employees.
They do this by performing on-site safety inspections and coordinating safety training and certification.
PEOs can assist you with the implementation of a drug-free program as well as testing and providing counsel further reducing the risk of having an unsafe work environment and increasing productivity.
PEO SERVICES – EMPLOYEE BENEFITS
Companies know that if they want to recruit and keep the best employees in their industry, they must offer a competitive benefits package.
PEOs offer benefits that rival ‘Fortune 500’ companies and are very comprehensive.
These benefits most often are pass-through costs for the PEOs allowing their co-employees to take advantage of their large buying power and keeping costs at a discount for the employer.
PEOs collect their fees most often solely from the administrative fee they charge keeping these employee benefits costs without additional fees.
This is the most sought-after type of employee benefit and is frequently the primary reason a company partners with a PEO.
Since Affordable Care Act was implemented, PEOs have become more valuable in this area for four reasons; lower cost, higher quality of their health plans, better coverage network, and compliance reasons (PEO helps keep companies compliant with ACA).
PEOs handle health insurance in two ways.
The first is by administering your company’s own individual policy which only your employees are a part of and the second is to provide you with access to their master health insurance policy.
PEO’s master health plan tends to have anywhere from 5 to a dozen different plans to choose from ranging from High Deductible plans to Executive health plans. Some offer HMOs or EPOs and PPOs or POS plans allowing for more variety and choice.
PEOs handle the underwriting of health insurance in different ways.
Some PEOs have uniform rates for every person under each plan and some PEOs based on a census analysis provide different tiers of rates unique to a client company. This analysis looks at age and gender parameters.
For example, a younger demographic company such as a tech startup can be offered lower rates by the PEO than a law firm with mostly senior partners; however, they will be competitive compared with what the company can get on their own.
If your company is spread out throughout the US, there is a good chance you are offering different carriers and plans because of network coverage area limits. National PEOs have the ability to do this for you without going outside their master health plans.
PEOs also offer dental insurance and vision care.
Other Insurance Employee Benefits
Other employee benefits can be extensive.
PEOs compete to make sure they do not leave anything off the table for your employees and want to be the one source for your company of all benefits.
National PEOs would most often have the most comprehensive list.
These benefits are administered on a voluntary basis and can be employer-paid or paid by the employee as a payroll deduction. These insurance benefits vary among PEOs but include:
- Short-term and Long-term Disability
- Hospital Indemnity
- Roadside Assistance
- Life and AD&D (PEOs offer fairly often a complementary $10 – $30K coverage per employee with the option to buy up several times salary)
- Credit Card Protection
- Identity Theft Protection
Financial Savings Plans
401(K) retirement plans are usually offered by the PEOs.
These plans have a wide variety of options but you can always choose to keep your own plan. You are not obligated to switch to the PEOs 401(k) retirement plan.
PEOs will handle the regulatory and compliance needs to administer this plan such as the 5500 filings with the IRS.
Other financial savings plans at a tax advantage status can include:
- Health Savings Accounts (HSAs)
- Flexible Spending Accounts (FSAs)
- Parking and transit section 132 plans
Many PEOs have a form of employee assistance program in place where employees can go for additional support.
Some programs such as Health Advocate can assist employees with claims resolutions and finding doctors in their area as well as carefully explaining their benefits in case the web portal is not sufficient.
Some PEOs have access to a wellness coach where employees can call for advice.
In addition to all the above PEO services many PEOs for an additional fee can help your company with recruitment.
They can help with advertising through the web or newspapers.
Many can assist with the hiring process if needed.
PEOs usually have agreements with background-checking companies and can help check references as well as provide help with permanent or temporary hiring.
Some PEOs even help with resume or telephone screening as well as skills testing.
Choosing the right PEO can be a difficult task among the hundreds operating in the US.
Knowing which PEOs can provide the services that are important to you is a very time-consuming task.
Our goal is to keep you at the highest operational level. Contact us today.