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What
is a PEO? |
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A
professional employer organization (PEO) is
a company which contractually assumes and
manages critical human resource and
personnel responsibilities and employer
risks for small to mid-sized businesses by
establishing and maintaining an employer
relationship with worksite employees. |
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How
does a PEO arrangement work? |
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In
the relationship between a PEO, a worksite
employee, and a client company, there exists
a co-employment relationship in which both
the PEO and client company have an
employment relationship with the worker.
The PEO and client company
contractually allocate traditional employer
responsibilities and liabilities.
The PEO assumes responsibility and
liability for the “business of
employment” such as human resource
compliance, and payroll & employee tax
compliance.
The client company manages the
employees, and all other facets of its
business, such as production, marketing,
sales, and service.
The PEO assists the client in
developing a complete human resource and
employee benefit package. |
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Why
would a small or medium size business use a
PEO? |
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The
average annual cost of regulation,
paperwork, and tax compliance for firms with
fewer than 500 employees is about $5,000 per
employee, compared with $3,400 per wmployee
for firms with more than 500 employees - U.
S. Small Business Administration, 1995.
The average small business owner spends
between 7% and 25% of his or her time
handling employee-related paperwork. - U.
S. Small Business Administration.
Business owners want, and need, to focus
their time and energy on the “business of
their business” and not on the “business
of employment”. As businesses grow, owners don’t have the necessary human
resource training; payroll and accounting
skills; knowledge of regulatory compliance;
or backgrounds in risk management, insurance
and employee benefit programs to meet the
demands of being an employer. |
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Who
uses a PEO? |
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The
average client customer of a PEO is a small
business with 16 worksite employees, though
larger businesses also find value in a PEO
arrangement.
These small business customers
include every single type of business from
accountants to zoo keepers, and every
profession in-between including doctors,
retailers, mechanics and more. |
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How
many Americans are employed in a
co-employment PEO arrangement? |
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It
is estimated that 2-3 million Americans are
currently co-employed in a PEO arrangement.
PEOs are operating in every state,
and the industry has grown between 20-30%
per year. Today,
there are approximately 2,000 PEO companies
who are responsible for over $18 billion in
employee wages and related human resource
and employee benefits. |
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What
is the difference between temporary staffing
services and a PEO arrangement? |
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A
temporary staffing service recruits
employees and assigns them to clients to
support or supplement the client’s
workforce in special work situations, such
as employee absences, temporary skill
shortages, or seasonal workloads.
A PEO contractually assumes and
manages employer responsibilities for all or
a majority of a client’s workforce.
Industry ratios identify the PEO
arrangement as a long-term relationship with
nearly 90% of our clients and worksite
employees remaining with the PEO for a year
or longer. |
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Source
for the above: National Association of
Professional Employers "Common
Questions About PEOs Answered" |
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Level
the playing field with who? |
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UPS,
Ford, GE, and other corporate giants.
Large
employers do have a definite advantage
for two reasons; economies of scale
and buying power.
Both reduce per employee cost for
virtually all H.R. expenditures, including
payroll, employee manuals, 401K plan, 125
cafeteria plan, recruiting, administration,
etc…etc. You can help level the playing field by outsourcing your HR to Ahead Human Resources. |
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What
do you mean Ahead Human Resources are Buyers
not sellers of insurance and benefits? |
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We
leverage our large number of employees to
negotiate better rates and benefits for our
clients.
We are buyers of insurance and
benefits, not sellers. |
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How
do I benefit from Ahead Human Resources
economies of scale? |
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Lower
cost!
We amortize our cost over our large
number of employees resulting in reduced
cost
to you for 401K, employee manuals,
direct deposit, payroll processing,, 125
plan, claims processing, etc. |
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How
can Ahead Human Resources reduce my employee
turnover? |
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By
providing services like low cost
comprehensive benefit plans.
By increasing employees’ take home
pay through pre-tax cafeteria 125 plan,
pre-tax
dependent care plan, and
tax deferred 401K plan.
More importantly, employees
appreciate the professionally administered,
employee friendly, service and assistance
programs, employee payroll services, and
conveniences such as credit union, direct
deposit, employee manuals, etc… |
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Can
a 125 plan and 401K plan increase my
employees’ take home pay at no cost to me? |
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Yes!
Not only can your employees take home
more pay at no cost to you, incredibly your
cost will be lower as well.
The 125 plan allows employees to
purchase health, dental, dependent care,
life, and supplemental benefits pre-tax.
(Federal and state)
Additionally, neither the employee
nor the employer pay FICA or FUTA on 125
plan purchases.
Not only do the employees increase
their take home pay, the employer saves
8.45% on FICA and FUTA on those
contributions.
The 401k plan allows employees to
defer taxes
(federal and state) in a qualified
retirement plan. |
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What
are your underwriting requirements? |
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How
do I evaluate a PEO? |
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First
determine if the PEO is a full service PEO
(i.e. does it provide recruiting,
pre-screening, interviewing, temporary
employees, etc.?).
Then check the following: |
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Evaluate
firm’s financial standing- check bank
and credit references
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Is
the PEO a member of in good standing
with NAPEO/Chamber of Commerce/NATSS
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Check
a large number of client references
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Does
the PEO have a full complement of
professional and technical expertise to
provide services-HR specialist,
attorney, benefits specialists,
computer/software specialists
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How
are the employee benefits funded (fully
insured or self funded)
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Who
is the Third Party Administrator or
Carrier of the benefits
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Do
they provide a 30 day cancellation
provision in the contract?
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Is
the PEO licensed (if required by state)?
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Is
the PEO in good standing with the Better
Business Bureau?
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Will
the PEO provide onsite enrollment
services
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Have
your attorney review the offering and
contract
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Is
the PEO in good standing with Federal,
State and Local Tax authorities?
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