5 Myths About PEOs

18 Feb 5 Myths About PEOs

Myth Number 1 – You Give Up Control Of Your Employees

This is not true.  The PEO client/business owner 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 per a client service agreement (CSA). The PEO will generally only assume responsibilities associated with a “general” employer for purposes of administration of benefits and remittance of payroll and payroll taxes. The client will continue to have responsibility for worksite safety and compliance. The PEO will be responsible for remittance of payroll and employment taxes, may maintain employee records and may retain a limited or general right to hire and fire, as delineated in the CSA. Because the PEO also may be responsible for providing access to workers’ compensation coverage, many PEOs also focus on and provide assistance with 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.

Myth Number 2 – With The PEO Fees Added In, You Don’t Actually Save Money

This is not true.  There are over 700 PEOs that comprise a billion dollar industry. Why is this industry successful?   Because the PEO concept works! The new financial and legal implications passed down by the ACA are the number one reason small businesses consider a PEO.  Researching and paying for the benefits and insurance that a company must now provide is costly and time consuming.  PEOs can provide these services for a fraction of what it would cost to go out on your own.   Many times with the savings from being on the PEOs large group medical plan, the PEOs cost is $0 and there are many times when you see a significant net savings from working with a PEO!

Myth Number 3 – If the PEO gets sued my company will be part of that suit.

This is not true.  The PEO is a separate legal entity and as such they have their own EPLI insurance plan and any lawsuits against them would not affect your company at all.

Myth Number 4 – The PEO is just a glorified staffing company.

This is not true.  A PEO does not staff your company.  You do.  A PEO has a full compliance team of HR specialists, benefit specialists, and payroll specialists who can support you through the life cycle of the employee.  The PEO also has master health plans, and workers comp plans and their own SUTA rates which could offer substantial savings to you.

Myth Number 5 – I’m Locked In, Even If I Don’t Like It.

No one wants their employees to suffer and be unhappy.  Typically your company is not locked in to an unhappy contract. Sometimes, renegotiating your contract is all you need. If not, a better PEO can turn your frown upside down.  PEOs want to work with you to make enrollment processes easy. PEO Consultants will be happy to help you find a different PEO at no cost to you.



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