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Purple Elephant Outfits? June 8, 2006

Posted by Amanda in Business Tails.

I’ve been working on a project aimed at PEO’s and while talking with my co-workers, none of them actually knew what a PEO was. So, for those of you who don’t know:

A PEO or Professional Employer Organization is essentially the outsourcing of a small to medium businesses management of human resources, employee benefits, payroll and workers’ compensation. Some PEO’s also offer other services, such as employee training, and business plan advising.

Also, be on the lookout for BPO’s or Business Process Outsourcing, as it’s another term to describe similar companies.

According to NAPEO or the National Association of Professional Employer Organizations, Businesses across America have discovered the incredible value of PEOs because they provide:

  • Relief from the burden of employment administration.
  • A wide range of personnel management solutions through a team of professionals.
  • Improved employment practices, compliance and risk management to reduce liabilities.
  • Access to a comprehensive employee benefits package, allowing clients to be competitive in the labor market.
  • Assistance to improve productivity and profitability.

One of the biggest questions asked is: Do the business owners lose control of their businesses?

No. 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. The client will continue to have responsibility for worksite safety and compliance. The PEO will be responsible for payroll and employment taxes, will maintain employee records and reserves a right to hire and fire (Only exercised in extreme cases I expect). Because the PEO also may be responsible for workers’ compensation, many PEOs also focus on and improve safety and compliance. In general terms, the PEO will focus on employment-related issues and the client will be responsible for the actual business operations.

From everything I’ve read and researched about PEO’s, they seem like at least a partial solution to the rising cost of healthcare and insurance to small businesses. This allows small businesses to compete in benefits with their larger counterparts, attracting more Job applicants. It also allows business owners to focus on what they do best, rather than have to worry about a lot of the paper work. If you’re interested in learning more about PEO’s check out the NAPEO’s website, http://www.napeo.org. They also have listings so that you can find a PEO near you 🙂

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1. PEO Advisor - June 16, 2006

Nice introductory information on PEOs Amanda! It looks like you know a bit abou the PEO – Professional Employer Organization industry. Over 77,000 businesses are using a PEO to provide HR services for their company. Studies by NAPEO show that the once a company engages a PEO they rarely want to take the HR functions back “in house”. Researching the background on any PEO you are considering is good advice. Professional Employer Organizations operating in the USA take the fiduciary aspects of their business very seriously. 26 states now require some sort of licensing and or bonding. NAPEO and other industry leaders have worked diligently to create set managerial standards that protect PEO clients.

At StaffMarket we recommend that anyone hiring a PEO consider the following:

1) Be ready to share detailed information about your workplace safety practices, work comp claims and HR situation. Since your workers’ compensation coverage may be under the PEO’s master policy they have an interest in your claims history. Unless your business operations are largely office work, any PEO who quotes should be asking for this information. If they don’t… think twice.
2) Ask for proof of Workers’ Compensation insurance coverage. PEOs will gladly show you a copy of the “cert” that confirms the policy coverage. If you will not be covered under the PEO’s master policy then you need to ensure that you have other coverage in place. Many PEOs can assist with acquiring a stand-alone policy that covers your staff.
3) State licensing. If your state requires a PEO to be licensed, ask for the license number and call or visit your state government web site to confirm the license validity. For a listing of states that require licensing, visit http://www.staffmarket.com
4) Review the PEO Client Services Agreement. This document clearly delineates the client’s responsibilities and the PEO responsibilities. If necessary, have your lawyer review the terms so there are no misunderstandings.
5) Health coverage. Any PEO that offers access to a health insurance plan should be provided by an insurance company that is registered with your state’s department of insurance. In addition it makes sense to review the networks in areas where you have employees. A great insurance plan that has no local network support may not be so great after all.
6) Get references.

StaffMarket.com offers a great way to find a PEO. For a complete listing of PEOs across the USA, visit http://www.StaffMarket.com for PEO – Employee Leasing Solutions.

2. Edie Clark, NAPEO - June 20, 2006

Amanda, thanks for mentioning NAPEO. May we offer our Web site, http://www.napeo.org, as an additional resource?

3. Amanda - June 21, 2006

Thank you for posting a comment on my blog, however, I’m not completely sure I would recommend NAPEO as a good resource for people who are interested in finding information about the PEO industry.

Most of the information on the NAPEO’s website is member only access, other than the basic What is a PEO that can be found almost anywhere else.

The amount of access and resources given to Associate Members for $750 is nothing more than a magazine subscription and a printed version of information that is available for free online. Oh, and the bragging rights to be able to say you’re an associate member. Yes, for an additional $1,500 you can have access to the whole shebang, but is it really worth it? I’ve seen nothing so far that convinces me.

I’m much more willing to recommend sites if they have a good database of PEO information for free, and I’m not talking about just PEO locations.

4. PeoBigWig - October 24, 2007

Good information here posted by all. I tend to agree with the NAPEO comment. NAPEO only works to help the larger PEO’s get larger, all while pushing the smaller PEO’s out of the market with the suggestion of reduculious legislation. Look at the history. The largest scams pulled in the industry were by NAPEO members if not by some board members of NAPEO. Just FYI

Here is some more information about PEO’s provided by PML one of the longest operating PEO’s in the United States. http://www.planmarc.com

What is a PEO client?

A PEO client is a business or corporation that enters into a PEO agreement and is assigned shared employees by the PEO company. Clients can keep their current workforce!

How does a PEO arrangement work?

Once a client contracts with a PEO company, the PEO will then co-employ the client’s current work-site employees. Among the PEO company, work-site employee, and client employer, there exists a co-employment relationship in which both the PEO company and client employer have an employment relationship with the worker. The PEO company and client employer share the responsibilities and liabilities of employees. The PEO assumes responsibility and liability for the business of employment such as payroll and taxes , workers compensation , unemployment , employee health benefits and employee compliance . The PEO client retains responsibility for the management of employee production, business operations, marketing, sales and service.

Who uses a PEO?

The average client of a PEO is a smaller business (less than 100 employees) , though larger businesses (over 100 employees) find value in the arrangement such as reduced employee health benefit costs. These small business customers include most industry types from accountants to professional sports teams. and every profession in between.

For more information visit http://www.planmarc.com or call 800-567-0235 ext 201

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