What Is It Like for an Employer Switching to a PEO?
According to the NAPEO, more than 17,0000 small and midsize businesses have switched to Professional Employer Organizations (PEOs). PEOs allow small and mid-size businesses to access the same level of human resources support and employee benefits as large corporations. These businesses are poised for growth and have lower turnover than comparable businesses.
For many businesses, switching to a PEO is transformational. There are so many benefits. The first step to switching to a PEO is fully understanding this relationship. PEOs are in the family of other Human Resources Services but there are significant differences. Companies working with PEOs have a close partnership, much closer than traditional outsourcing and consulting. The biggest difference is the co-employment relationship.
Understanding the Co-Employer Relationship
- Typically, your PEO will be the Employer on Record for your employees. The PEO will assume all legal responsibilities for your workforce. Employees will be paid and W-2s will be issued through the PEO under its EIN. The PEO will be responsible for the payment of all federal, state, and local employment taxes. The PEO will handle all administrative human resources processes from recruitment to citizenship verification, background checks, worker’s compensation, through termination. Employee benefits are accessed through the PEO. Data is secure and accessible through the PEO’s human resources information system.
- The business will retain the employee responsibilities tied to services and/or goods. The business will have access to systems and analyses that would otherwise be out of reach. The business owner gains peace of mind that the risks tied to human resources are reduced and in the hands of experienced and dedicated human resources professionals.
- Other responsibilities that may be shared include strategy development, performance management, diversity, equity and inclusion programs, and staff development training. Your PEO is also a fantastic partner for regional expansions.
What to Expect During the Switch to a PEO
Every business is unique. The employer and the PEO will partner to assess the needs of the employer and define the terms of the relationship in a Client Service Agreement. This agreement is the road map for the relationship. Your PEO will work with your organization to ensure that the terms and services are fully understood.
Because PEOs are the employer of record for many businesses, they have the buying power of large employers. This economy of scale is great for employees who gain access to attractive and competitive benefits packages including health insurance and retirement programs.
While PEOs are there to support your strategic vision and cover the administrative tasks, your business retains all the responsibilities tied to success, growth, and customer satisfaction including operations, product or service development, marketing, and sales.
While each implementation plan is customized to the needs of the organizations, some steps are universal. While this list is comprehensive, it is important to note that you will be solidly in the hands of a trusted and experienced partner for this entire process.
- The Client Services Agreement will be developed.
- An implementation plan will be developed.
- Benefit packages will be identified.
- A solid communication plan will be developed to inform employees about the relationship and answer questions they may have.
- Employee enrollment will be scheduled to transfer the employer on record and enroll in benefits. This would include paperwork including I9, W4, payroll enrollment.
- The PEO will migrate human resources data into the new human resources data systems and/or employees will create and update their new accounts.
- Employee training on new systems
- Supervisor and leadership training so managers understand the relationships and how it impacts hiring, performance coaching, and termination.
- All human resources documents, policies, and handbooks will be updated.
Once enrollment has been completed, the PEO will:
- Remit wages and withholdings of the client’s workers.
- Issue Form W-2s under its Employer Identification Number.
- Report, collect and deposit employment taxes with local, state, and federal authorities.
- Ensure compliance of local, state, and national regulations.
- Partner with the Employer on shared responsibilities and other consulting.
An effective PEO/business relationship leverages the experience and expertise of both partners. This is the key to success. Businesses that can focus on the value promise of their brand, thrive. Your business will be able to do what you do best with your PEO handling the administrative responsibilities of your workforce.
Contact Us Today
TANDIUM Corporation is a complete human resources service organization, offering PEO, ASO, HR consulting, and payroll services. TANDIUM Corporation has the expertise to partner with business owners to reduce risk, maximize growth, and thrive. Our knowledgeable staff is committed to providing personalized attention. Contact us today for more information.