What You Need to Know About PEOs and Employee Leasing
Differences Between PEOs and Employee Leasing
Business owners and executives often confuse PEOs, also known as professional employer organizations with employment leasing. But, the two are different in pricing structures and offering of services. Whether you own a start-up company or an established corporation, be careful when selecting the provider.
First, create a thorough plan based on your daily needs within your organization. For an example, if you need a worker for four weeks, you would select an employee leasing agency for services. Then, learn the differences between a professional employer organization and an employee leasing firm and the services they provide.
A PEO is an accredited service provider of human resource management, payroll, compliance, insurance plans, and recruitment services. You can research a list of professional employer organizations on the website of NAPEO to locate a reputable provider in your state. All PEOs must have accreditation including certification through the Internal Revenue Service and Employer Services Assurance Corporation (ESAC).
As you review the list of professional employer organizations, be observance of its credentials and comments from prior clients. With that information, you can shorten the list to at least five to ten companies. Next, compare the costs of services based on your company’s needs.
How PEOs structure costs? The pricing varies from one organization to the other. Some PEOs charge clients based on a fixed or percentage rates per service, such as payroll & benefits administration and/or workers’ compensation. There may be another fee for benefits administration associated with various costs.
Type of Services Professional Employer Organizations Provide
- Human Resource Management service handle the hiring process including interviewing prospective employees and accepting employment applications. Use the service to eliminate the administrative side of your business and relieve you of some responsibilities and liabilities. PEOs help companies by accepting liability for complying to state and federal laws on the completion of forms, such as W-9s.
- Payroll administrative service focuses on the processing of employees’ paychecks and deductions. A professional employer organization does all work for you to ensure proper tax report filings and deposits.
- Insurance plans offering is another service some PEOs provide to clients. You select the type of healthcare plan appropriate for you and your employees. PEOs also have optional plans for workers’ compensation in case an employee receives an injury on the job.
- 401K retirement plan is a human resource service offered to employees and business owners. An administrator oversees the plan and keeps track of contributions from each employee to ensure deductions for payments to the plan.
- Tax compliance services ensure you are in compliance with reporting of federal withholding and state taxation. PEOs make sure your deposits from withholding and social security taxes goes to IRS on time. They will report and deposit all employers taxes quarterly and yearly.
What is Employment Leasing?
Employment leasing is an agreement between a client and an agency offering companies access to workers for temporary employment. It is the same as a temporary employee contract. It works as a temporary agency supplying contractors or new employees to a client temporarily. This is what makes employee leasing different from PEOs.
PEOs partners with clients to provide particular services and don’t supply workers. The organization works on behalf of a company as an IRS expert or Certified Public Accountant. The terms of the contract are the same for a PEO and worker leasing agency which can be long-term or short-term.
How employment leasing structure costs? Most agencies offering employment leasing structure cost based on an hourly rate. Administrative costs may include a fee based on the length of the temporary contract.
When You Need PEOs
If you just started a new business and have employees, consider a PEO to partner with instead of hiring an accounting full-time employees. It can save your company on administrative and overhead expenses. You will have no tax liabilities and avoid taxation.
From your list of PEOs, select the one with the most experience and based on accreditation. It will relieve you of many responsibilities to keep you focused on growing and expanding your businesses. It can save you thousands of dollars long-term while protecting you at the same time.