Frequently Asked Questions
PEO stands for: Professional Employer Organization.
How a PEO Company Works for You
Basically, this means that the Peo acts as an “Administrative Employer” while you act as the “Managing Employer”, both of which are equally important yet exclusive responsibilities. Since some tasks just can’t be outsourced, you continue directing and controlling your workforce hours, pay rates and other days to day operations.
However, your PEO company, acts as your workers’ employer for certain legal purposes, letting you to tap into the PEO’s benefits network, insurance, workers comp, and HR resources. Your company gets all the advantages of having a professional HR team and world-class benefits.
Usually, more than 5 employees. The reason being that most states mandate workers compensation for employers with at least 5 employees. Peo’s service employer groups from 5 to 5000 employees. Basically, it depends on your needs. Some PEOs will service companies with less than 5 employees depending on the state and Industry.
If benefits are a part of your main reason for looking into a Peo, normally you will need a minimum of 2 employees. Each being on the medical.
The client will take on the entire employer burden for those employees and items that the Peo provides. That means unemployment taxes start accruing under the Client FEIN number. Any benefits that were secured under the PEO FEIN will cease to be available and the client will be responsible to replace those benefits for its employees. Workers compensation will need to be replaced and other coverage secured.
- The Peo will be responsible for paying the employees during the time covered.
- The Peo will handle all W2’s for any employees under the dates they were covered
- The Peo will still perform functions as normal until the termination effective date.
Situations arise where your relationship with the Peo is just not working out.
There are many reasons for this… (which we don’t have space to cover here).
The key takes away is that we at Peo Source try to teach our clients the best way to protect themselves in this type of event.
- Don’t act rashly. Stay Professional!
You do have a contract with the Peo. Always give yourself wiggle room when you can. If you are terminating the relationship review your contract and give the Peo a written notice… Normally 30 days (make sure to review your contract for details). This allows you time to get all your ducks in a row without leaving any gaps that could leave your company exposed.
- Even though the grass looks greener... It may not be!
See #1. :)Dont burn a bridge that you don’t have to.. The reason being that there is almost always some type of information you need even after the relationship ends… It’s always easier to get it if you were nice… even if you don’t want to be.Also, depending on the reason the relationship ended, you may decide to come back at some point in the future. Maybe that “sweet” deal some other sales person sold you on was not so sweet after all..
PS.. use Peo Source so this dosen’t happen!
- Review your contracts
Most Peo’s do have a early termination fee if you don’t give them fair warning. Some can be very hefty. Make sure you understand your role and theirs when moving on… it will be laid out in the contract.
- Coordinate with your pay-cycle
Always work around the beginning day of your pay-cycle when giving notice. It makes the transition easier for you and does not leave you having to figure out payroll for a half a pay-period.
If you’re unsure of the last day you will be effective with the Peo… just ask. They’ll help.
- Educate yourself!
Not all Peo’s act professionally as they should. Know your rights.
Don’t be afraid to ask questions. 99% of all Peo’s will act proper and help you in anyway possible. For those that don’t.. we can always contact the state agencies where they do business for guidance..
Example: Billy Bob Peo had you covered under their workers compensation coverage then wanted to terminate you as a client. Billy Bob gave you a 5 day notice which arrived by mail and based on the date of the letter, your coverage ended 2 days ago…
Depending on the state, the Peo MUST allow you an opportunity to find new coverage in a reasonable time frame.. Hopefully, you won’t have a claim so no harm no foul… but if Billy isn’t willing to help… we’ll try to obtain some relief….
NOTE: See #6 below…. NO Pay, NO play… If you didn’t pay Billys invoice, you’re only covered up to the point that you up to date..
- Last… Pay the Bill!!
Even though you hold the money… the Peo owes you NOTHING if you don’t pay what you owe…
You can always fight that battle later…
More importantly, lets make sure that you’re clean and smooth when you go… That way, there won’t be interuptions in your business. Keeps you covered in regards to benefits and work comp as well as any reports, taxes or other.
As a reminder: most of the time, the Peo has already paid all the requirements and at that point, you’re just reimbursing them the expense..
Remember the sugar or vinegar thing your dad always spoke about.. It really helps here.. 🙂
If you’ve never used a Peo before, then January 1st, of course, is optimal, but it can make sense at other times, depending on your reason for the change. Some clients prefer to start on January 1 due to tax implications. Others prefer to make the change when their benefit plans renewal since rates and plans are usually changing anyway.
The second best time is at the beginning of a quarter. Beyond that, it’s really more about why you need to use the Peo.
Honestly, better deals are made earlier in the year… Closer to EOY, the Peo has probably already hit quota and the last quarter is always their heaviest workload as they onboard many clients for the new year...
Wanna save a little $$ by transitioning earlier?? Peo Source can help.. 🙂
If you’re just changing from one Peo to another… Any time of the year is a good time…
Just be aware that FUTA and SUTA may have to start over as not all PEOs are set up to roll them over… Peo Source always takes these items into account if you’re considering a change..
Wow… People still get a real pay-check?? 🙂
In most cases, both the client and PEO name appears on the paycheck or pay-stub. Quite a few PEO can also show your company logo on the checks.
The Peo also signs the check…while in a few cases, the PEO may allow you to sign and produce checks on-site...
Since most employees now have options of direct deposits or pay-cards, unless you in the construction industry… 80% of all pay is paperless now.
FYI: The Peo is listed on most year-end W3’s.
Actually, the answer is yes they can… and most will!
You have to remember, your company is wanting to “become a member” with the PEO...
That means that they will underwrite all portions of the business to determine the risk factors involved. Safety, benefits, ethics, etc… If you are declined for any reason.. then the Peo can’t add your company to their pool of other companies… Any decline whatever the reason, never goes to the open market.. It stays internally with the Peo…
Most rules of thumb are:
If you have had more than 25 employees on your current medical… then only a large group questionnaire is normally required.
If you have less than 25 on the medical, then it will depend on the Peo and Industry you are in. 95% of all Peo’s will ask for PHQ’s “Personal Health Questionnaires for each person on the payroll. The rest of the carrier rules do apply in regards to contribution or participation. They are a little different from Peo to PEO..
Feel free to reach out if you need assistance or have any questions.
Sometimes. There are many PEOs that allow this setup, and will still manage all the administration in regards to your plan. Some will pay the bill while othes will credit it back to you. Most national firms do not allow this.
Not all PEO's treat Medical deductionsa the same.
Some will take the deductions every pay-period while others (especially in regards to Bi-weekly pay-cycle where there are 26 pay-periods a year) will only take it out 24 times a year, leaving your employees 2 times a year where they take home a few extra dollars.
Similar to #7 the answer is: Depends on the Peo.
Some states may not allow it and most National Peo’s will not allow it...
If you are allowed to “carve out” your workers compensation, in most cases the Peo will still manage the deductions and associate it with each work comp code used. Some will even make payments to the carrier for you. They’ll also provide payroll reports an audit to help out.
There are still a few states that are known as “Monopolistic”, meaning that you have to purchase your workers' compensation coverage directly from that state.
They are North Dakota, Ohio, Puerto Rico, U.S. Virgin Islands, Washington, and Wyoming.
The Peo knows how to assist and handle these states.
Depends on the PEO..
Most the PEO state license and workers compensation coverages normally go hand in hand.
While larger PEO’s have national workers compensation coverage and cover all states. The limitation here is that they mostly write white collar or gray collar businesses… so if you don’t fit that box… then you’re out.
Each PEO will utilize different carriers and are licensed in most states. Mid-sized PEOs cover on average 25-30 states, while smaller (mom & pop) PEO’s are more localized and may only have coverage in a few states.. The carrier they use will mostly determine which states the PEO can write work comp in.
(Some PEO’s have multiple carriers to help cover gaps).
Also, if a PEO is not covered in a state you need, it doesn’t mean that they’re too small for the job... Most of the time it’s more about wasting money where it’s not needed. Why maintain a cost of coverage in a state that the PEO doesn’t currently have employees in?
The real determining factor here is what do you need, where do you need it now and where will you need it in 2-4 years.
The PEO that’s a perfect fit for you today may not be the one you need 3 years from now…
PEO's all have different service fees and offerings… like the PEO above… why waste money today that you don’t have to.
Gotta love it as this is actually my favorite question.
Just like your home or business insurance agent, PEO Source has multiple providers to choose from... no matter if you’re a 2 person roofer or a 500 employee tech firm. Can be from Florida to California to Maine.. We have partners that cover international as well.
We partner with those that are in the market for your type of business, then… just like your agent, we get the information out to them to quote it. Negotiate the deal, review the numbers, make sure that all your needs are covered.. bring it to you and review all the information to make sure the PEO can accomplish what you desire.
Then, if you contract with a PEO that we partner with… we get paid directly from the PEO… just like your agent gets paid from the carriers they partnered with.
The best part is, we have YOUR interest to protect here… not the PEO… We’re always here after the sale to make sure you’re happy or answer any questions you have..
Just like your agent, if you’re not happy, we don’t get recommendations or referrals… then we’re not happy.. then my wife isn’t happy… and if she’s not happy. well, you know the rest.
At that point, we’ll contact the PEO directly as you need to get things corrected. If we need to change PEO’s… (you shop your car insurance every couple of years if the rates go up to don’t you), we’ll review your new needs and make a plan to determine stay or go.. Remember #2 above? We need to be strategic if a change is needed… not reactive.
The PEO’s that we partner with have to earn their keep. If they are not providing service at a level they should, then we will look at removing them from our list of providers.. or place them on probation until they fix their gaps.. (A technology platform change is a classic example of probation as there is ALWAYS hiccups in changing systems).
Hey, we all have our lemon clients… That being said, it doesn’t mean that a bad experience means that a PEO is a bad fit for your company..
Have you ever had a bad meal at a restaurant? Did you stop eating out or find a better restaurant?
To the best of our abilities, we always strive to make sure your first stop is at a better restaurant.
Why Choose PEO Source?
We’re all about making the right connection, and we believe you deserve a custom solution to all the payroll, workers comp, liability and compliance issues you face.
At PEO Source, we work with you to assess your unique situation and find a vendor whose strengths fit your needs. To us, you’re more than a client.
We believe in sharing ideas via good, old-fashioned conversation and use that to determine if we’re the right fit for your needs.