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What is a PEO?
Professional employer organizations (PEOs) enable clients to cost-effectively outsource the management of human resources, employee benefits, payroll and workers' compensation. PEO clients focus on their core competencies to maintain and grow their bottom line.
Professional employer organizations (PEOs) enable clients to cost-effectively outsource the management of human resources, employee benefits, payroll and workers' compensation. PEO clients focus on their core competencies to maintain and grow their bottom line.
Why would a business use a PEO?
Business owners want to focus their time and energy on the "business of their business" and not on the "business of employment." As businesses grow, most owners do not have the necessary human resource training; payroll and accounting skills, the knowledge of regulatory compliance, or the backgrounds in risk management, insurance and employee benefit programs to meet the demands of being an employer. PEOs give small-group markets access to many benefits and employment amenities they would not have otherwise.
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. 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.
How many Americans are employed in a co-employment PEO arrangement?
It is estimated that 2-3 million Americans are currently co-employed in a PEO arrangement. The average PEO has grown more than 20 percent per year for each of the last six years, according to a survey of NAPEO members. About 700 PEOs that offer a wide array of employment services and benefits are operating today in 50 states. The PEO industry generates approximately $42 billion in gross revenues annually. PEOs have an 86 percent client retention rate due to strong client satisfaction. NAPEO member companies are estimated to account for more than 70 percent of the industry's gross revenues.
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