Major Benefits of a Professional Employer Organization


Thanks to the lagging economy of the past couple decades, the employer-employee relationship has changed dramatically. Businesses are increasingly seeking out the assistance of a professional employer organization to reduce prices and make their organizations more effective.
Employer of record

Businesses always look to cut costs anywhere they could and wages and benefits are usually the greatest cash outlay for employers. One of the most important functions performed by a PEO is managing payroll and insurance problems. Essentially, an employer leases workers from a PEO. The company clearly maintains direct management of workers, however, the professional employer organization functions as the true employer for taxation purposes. There’s some thing of a co-employer relationship which enables company managers to concentrate their efforts on expanding their company and growing profits.

For a company with just a couple of workers, PEOs could be beneficial – and perhaps even crucial – for avoiding legal hassles. Employers need to pay employees compensation and unemployment insurance on every worker. PEOs can basically turn a small business to a large one by grouping it with other tiny companies for better purchasing power and more leverage in cost discussions. They also generally offer legal compliance consultants and guidelines so companies are guaranteed that they cover the right amount in all the a variety of government taxes and fees required to conduct business.

So far as benefits, a professional employer organization allows small companies to compete with large businesses for the best employees by offering the broad range of advantages provided by large companies. The PEO also manages the management of health benefits, supplying information seminars and regular updates on policy changes or registration periods.

The PEO acts as an elongated human resources department – something that the average small company may not have. They could manage recruiting, background and reference checks on potential employees, interviewing and drug testing – taking these duties off the back of the company so he can concentrate on the actual performance of his organization. The professional employer organization handles the actual payroll too. Employers can coordinate with all the PEO to set the salary rate of each worker and basically forget about payroll. The PEO problems the paychecks and pays all relevant FICA and Medicare taxes, federal state and local payroll taxes, and oversees any benefit payments such as insurance premiums, healthcare spending accounts, and health programs.

Most small businesses can’t manage modernization of anything other than production equipment or processes. A professional employer organization could provide a great deal of online options for workers to enroll in benefit programs, manage timeclock issues, and direct deposit of paychecks.

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