As an employer, there are various administrative tasks you’re responsible for, such as managing payroll, benefits and human resources. Depending on the size of your business and the bandwidth of your team, managing these tasks can be overwhelming, complex and time-consuming. In many cases, employers may turn to a professional employer organization (PEO) service.
What is a PEO service, and how does it work? In this guide, we’ll walk through everything you need to know, including what a PEO is, why companies may work with a PEO and what sets Experian apart so you can understand what services your company may need.
What Is a PEO and How Does It Work?
What is a PEO service provider, and how do they work? A professional employer organization is a type of outsourcing service that small to medium-sized businesses work with to help manage their human resources and payroll responsibilities, such as benefits administration, workers’ compensation, state and federal employment law compliance, and other administrative tasks.
When an organization works with a PEO, it creates a co-employment relationship bound by a client service agreement (CSA). In a CSA, the relationship between the client and the PEO is clearly defined so both parties understand their roles and responsibilities. Employers and PEOs will share some responsibilities while also managing separate responsibilities. For example, the employer will continue managing the organization and conducting day-to-day operations, while the PEO will take on HR and administrative tasks.
Once an employer partners with a PEO, they will inform their employees, who will be onboarded and informed about the changes and the role of the PEO in their employment. As a result, PEOs can take on time-consuming and complex administrative tasks, putting more time back in the hands of the employer and their employees.
Why Do Companies Use PEO Service Providers?
What is a PEO payroll service? You may know the answer, but why do companies use PEO service providers? There are many reasons why an employer may enlist the help of a PEO service provider, such as:
- Offload HR and administrative tasks: One of the primary reasons a company uses PEO service providers is to offer HR and administrative tasks, such as processing employee wages, withholdings and benefits, reporting payroll taxes to the proper authorities, remaining compliant with employment laws, managing workers’ compensation and more. PEOs are experts in human resources, which can help companies handle employee-related matters more effectively.
- Cost savings: Another primary reason companies turn to PEO service providers is to save money. Building a robust HR team in-house can be expensive, as these team members require their own salaries and benefits packages. By using a PEO service provider, you can outsource HR and payroll-related tasks to a third party that can cost a fraction of the price. Additionally, PEOs have connections within their industry, allowing them to negotiate better rates and benefits for retirement plans, health insurance, workers’ compensation and more.
- Compliance assistance: PEO service providers are also well-versed in employment laws and regulations, helping employers remain compliant with ever-changing laws that can impact their business. This can help reduce the risk of penalties and legal and financial consequences.
- Risk mitigation: PEOs share some of the same responsibilities with the employer, which can help distribute and manage risk associated with employment-related claims, liabilities, and lawsuits.
- Recruiting and retention: PEO service providers can also help employers throughout the recruitment and retention process. For example, PEOs can help draft and communicate employee handbooks, offer training and onboarding programs and provide assistance throughout the employee life cycle to reduce turnover.
These are some of the many reasons an employer may create a partnership with a PEO, as they can help save time and money, increase compliance and improve employee satisfaction.
What Makes Experian Employer Services Different From a PEO?
While Experian Employer Services is similar to a PEO, it differs in several ways. Experian Employer Services offers employer services, which refer to a wide range of products businesses can use to manage their workforce. Experian Employer Services is similar to a PEO in that workforce management solutions include services like tax withholding and payroll solutions. However, the product portfolio offers other solutions employers can use to streamline processes and increase efficiency, such as income & employment verification fulfillment and unemployment management.
Here’s what makes Experian Employer Services different from a PEO:
- I-9 administration: With comprehensive dashboard reporting, you can ensure federal compliance when bringing new team members to your organization, as our solutions can keep you one step ahead of missing data to help reduce your risk of an audit.
- Income and employment verification fulfillment: Ensure you build a team you can trust with detailed income and employment verification. This allows you to remain compliant with data privacy laws while accessing employment and income information to make smart hiring decisions.
- Pay statements: Create custom pay statements that meet company requirements and state laws, with the ability to send email and text alerts to give employees universal access to their pay information.
- Payroll tax consulting services: Ensure compliance and reduce internal costs with our payroll tax consulting services, where our professionals can provide strategic tax consulting to help eliminate overpayments.
- Tax credit management services: Take advantage of cost-saving opportunities through our tax credit services, which can help you identify and apply for tax credits that can help maximize your return.
- Tax withholding compliance solutions: Ensure employees accurately complete their tax forms and file them by the correct deadlines to remain compliant with IRS and state requirements, withholding the correct amount no matter where your employees reside.
- ACA reporting: Ensure timely delivery and compliance with our ACA reporting solutions that help you complete 1095-B and C forms that meet IRS and state-specific regulations.
- Year-end tax statements: Our year-end tax statements and payroll reports help improve your payroll team’s productivity during the busy tax season by allowing them to deliver multiple tax statements on one form, make corrections and reissues easily, and generate year-end payroll reports.
- Unemployment management: Streamline your unemployment claims management process to reduce the risk and cost associated with managing unemployment benefits claims and overpayments.
- Compliance library: Gain access to digital labor law posters, state compliance forms and monitoring of state-level compliance requirements through our compliance library.
When Would You Want to Work With Experian Employer Services ?
While a PEO can offer many helpful services, Experian Employer Services offers additional solutions to fill in gaps for employers looking to save money and improve their employee life cycle. Employer Services solutions range from I-9 administration to unemployment management to improve employee satisfaction and save time and money for HR and payroll teams.
Frequently Asked Questions
Does partnering with a PEO affect my company culture?
Partnering with a PEO can affect your company culture, with the impact depending on how the partnership is managed. In most cases, PEOs positively affect company culture, as PEOs can help increase communication and transparency, streamline HR policies and practices, and improve the employee experience by offering efficient services and attractive benefits.
What is the difference between a PEO and HR outsourcing?
The primary difference between a PEO and HR outsourcing is the services offered. While PEO and HR outsourcing delegate certain HR functions to a third-party service provider, a PEO creates a co-employment relationship that assists with a broader range of responsibilities, such as payroll, benefits and compliance. In contrast, HR outsourcing refers to outsourcing specific HR tasks, such as payroll processing.
Can a PEO fire an employee?
While a PEO can help employers throughout the entire employee life cycle, including recruiting, onboarding and termination, it is up to the employer to make the final decision on employee retention.