How PEOs Go Beyond Mere Benefits Administration
April 18, 2023
Any of your clients looking for a little more help with HR administration, but without giving up full control over the workforce, might want to consider working with a professional employer organization (PEO). A PEO goes beyond mere benefits administration to offer a full range of HR functions.
The model under which a PEO works is known as co-employment. You need to know that co-employment is not the same as employee leasing. Temp agencies employ and lease workers on a short-term basis. A PEO operates on a different model. PEO companies act as the employees of record for their workers, but the companies those employees work for retain full control over the workforce on a day-to-day basis.
PEO brokers should certainly talk about benefits administration when discussing this particular option with employers. But benefits administration should only be a small part of the discussion. Brokers should also get into all the other aspects of the PEO business model.
In terms of benefits administration, PEOs can handle everything from health insurance to dental plans and COBRA. But what about payroll management? Can a PEO offer anything there? Absolutely.
A PEO handles all aspects of payroll administration and SUI management. This includes calculating hours, wages, overtime, etc. It includes withholding and submission of state and federal payroll taxes. At the end of the tax year, the PEO files all the necessary tax forms.
Compliance with the Affordable Care Act (ACA) is still enforced despite the individual mandate having been done away with. Companies are still required to file the annual paperwork. They are still required to offer compliant insurance benefits to all qualifying workers who want them. A PEO handles all of this on behalf of its clients.
This is big when you consider how many employers continue to struggle with ACA compliance more than a decade after the law was implemented. PEO services take the burden of ACA compliance off employers by handling it for them. Most PEOs employ compliance experts whose sole job is to make sure clients always stay on the right side of the law.
Working with a PEO would enable your clients to offload most HR functions. The PEO would handle recruiting, hiring, and training. It would handle all EEOC and labor law compliance issues. Even worker's comp would be taken care of. Every aspect of worker’s comp—from audits to workplace safety to OSHA regulations—are the domain of the PEO.
Working with a PEO even eliminates the responsibility of administering retirement accounts. Because a PEO is the employer of record, it handles setting up and administering retirement accounts which, these days, are most likely to be 401(k) accounts. The PEO handles payroll deductions, 5500 filings, and more.
As the employer of record, a PEO handles all the legal responsibilities of recruiting, hiring, and maintaining a workforce. At the same time, the organization does not interfere with the day-to-day operations of its clients. Businesses choosing to utilize a PEO maintain full control over how employees do their work. They also maintain control over employee wages, benefits, scheduling, and time off.
A PEO arrangement is obviously not the best option for every employer. Yet some of your clients could benefit from such an arrangement. As a broker, it is up to you to discuss the PEO model with those clients for whom you believe the arrangement would be a good fit. Whenever you discuss the PEO as an option, remember that it goes beyond mere benefits administration.
To learn if PEOs may be a good fit for your employer groups, contact a BenefitMall PEO specialist today.