Network - Fall 2009 - (Page 15)

What is a PEO? The Professional Employer Organization model for small, medium-sized businesses By TriNet acronym “PEO” and wondered what it meant? It stands for Professional Employer Organization. PEOs provide small to medium organizations with outsourced human resources services, specifically employment and HR management. Traditionally, PEOs manage functions such as payroll, employer tax compliance, employee benefits, workers compensation and government compliance, but those services have steadily expanded to include optionals such as talent acquisition, employee training and performance management. However, a PEO is not a staffing company. An example where a PEO can be valuable is in negotiations with health insurance/benefits providers using the economies of scale. Since a PEO serves large numbers of aggregated employees, it can get benefits at a lower price than a single company – with at most only several hundred people. Ever heard the Especially for professional industries where having top talent is the main asset, the reality is this: PEOs can manage your organization’s HR functions better and more efficiently, allowing you to stay focused on your core mission. PEOs and the co-employment relationship A PEO works by sharing a tax ID with its customers, which is called a “co-employer” relationship. This arrangement enables a company to transfer many of its key employer responsibilities to the PEO, including aspects of employer-related risk and compliance. A formal Customer Service Agreement specifies the division of responsibilities between the PEO and its customers. What is co-employment? The three-point relationship Your relationship with your employees consists of simply two points: the organization and your employees. Once your organization enters into a coemployment relationship, a third point is added. Your employees still work for you and you retain complete control over operations, hiring and terminating and building company culture. With the co-employment relationship, many of the other tasks related to administering HR become the responsibility of the PEO. These tasks include administration of payroll and benefits, assisting with employer compliance and other HR services such as workers compensation, reports and metrics, benefits, PEOs’ unique selling point: HR isn’t your main business The reason for PEOs and their primary selling point is this: You did not enter into business to become a human resources manager. You probably have no interest in contending with payroll, negotiating benefits or worrying how to comply with a litany of government regulations. You entered into business to sell a product or provide a service, serve your members and industry and generate revenue. But HR is a necessity. What could be better than taking a piece of your business – which although a necessity, is also a distraction – off your plate? funding strategies, policies and handbooks, PTO and leave processing, voluntary benefits such as FSAs and HSAs, and more. The government recognizes there are two employers in this situation, but for the most part government agencies look at the PEO as being the responsible party for administration and HR, or the Employer of Record. This means your employees’ checks will carry the name of the PEO, though to the rest of the world they are employed by your organization. And if there are any legal problems arising from the HR function, the PEO assumes some of the risk with respect to paying workers, administering payroll and benefits and complying with business regulations. Is there a downside to co-employment? There can be, if you partner with the wrong PEO. When you use a PEO, you are putting a great deal of trust in another company. You want to make sure to select a PEO with a proven track record, extremely efficient systems and solid financial strength to ensure it will be around for the long term. Using a PEO should be a long-term strategy, not a short-term fix. ■ NOTE: TriNet delivers HR outsourcing services that allow small companies to do what they do best. To learn more visit or Michael Brophy at (972) 789-3935. 15 NETWORK Fall 2009

Table of Contents for the Digital Edition of Network - Fall 2009

Network - Fall 2009
HRIA President’s Message
HRIA Executive Director’s Message
Membership Has its Privileges
HRIA Conference Chair’s Message
What is a PEO?
The Performance Framework
Canada’s Training Ground
The Care and Feeding of Your Team
Social Networking Meets Recruitment 2.0
Making Serious Brand Impact
Establish Sound Legal Footing
It’s Dialogical
Index of Advertisers

Network - Fall 2009