Benefits of Using Employee Leasing - PEO Services

What is an employee leasing company or PEO (Professional Employer Organization)?

A professional employer organization (PEO) provides payroll, workers' compensation, human resources and employee benefits administration. It does this by hiring a client company’s employees, making the PEO their employer of record. It then leases the employees back under contract to the original employer. This practice is known as co-employment or employee leasing. This is done by filing the paperwork through the PEO's identification numbers. The client company remains in control of the employees and their day to day activities. They still hire, fire, and train their staff.

The 3 main aspects of a PEO (Payroll, Human Resources, Risk Management)

Payroll - Payroll administration is the basic function of a PEO. In addition to just cutting payroll checks, they also offer relief of quarterly and annual reports, 940, 941, UCT-6, W-2's, and W-4's. The client also gets relief of payroll tax deposits, penalties, writing checks, software, payroll forms, and hiring additional staff. By filing the quarterly and annual reports under the PEO's identification numbers, client companies are no longer responsible for state unemployment claims and hearings. This brings up the second main function of a PEO.

Human Resources - The human resource function of a PEO covers everything from employee handbooks to a reduced state unemployment rate for some companies. Your labor cost become predictable because you can easily break down all of your cost associated with each employee. This can be especially beneficial for job costing. Compliance assistance with OSHA and DOL are also within the services. Which brings up the third main function, risk management.

Risk Management - The biggest issue traditionally covered in the risk management function is workers compensation. The PEO secures a policy through an insurance carrier. When you enter into the co-employment relationship, the employees are added onto that policy. Savings on workers comp rates is custom in the blue collar industry because the PEO is not subject to experience rated pricing. This becomes important for newer companies, companies with losses, or high risk industries that have high premiums. PEO programs can help your business identify potential loss exposures. They can also provide claims management. They want to work with you to minimize lost time for injured workers and to help reduce fraudulent claims.

Written by Justin Fuller

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