PEO Frequently Asked Questions
XMI has offered professional employer organization (PEO) services for more than two decades. Over that time, we’ve fielded many questions about our unique industry. Below are some of the questions we’ve heard most.
What is a PEO?
A professional employer organization (PEO) provides human resources services to companies of all sizes. These services include managing payroll and taxes, providing regulatory compliance, as well as procuring and administering benefits such as health insurance, life insurance, 401(k) plans, wellness programs, employment practices liability insurance and other benefits that are attractive to employees but are either out of reach for certain sized employers or difficult to administer to large groups of employees. A PEO carries out all these tasks through a relationship called Co-Employment.
What is co-employment?
The National Association of Professional Employer Organizations defines co-employment as a “contractual allocation and sharing of certain employer responsibilities between a PEO and its client, as delineated in a contract.”
In co-employment, employees have two employers—the company for whom they work and the PEO that contracts with that business. In co-employment, the company retains control over daily operations, corporate strategy, revenue generation, while the PEO assumes responsibility for HR operations.
Co-employment serves two main purposes—risk mitigation and economies of scale. As co-employer, the PEO shares in the liability for the list of responsibilities it handles. In the event of an employment lawsuit, for example, the PEO would bear some of the risk. A co-employer also pools co-employees across all of its worksites, which opens up access to Fortune 500-level benefits that are normally out of reach for smaller or mid-sized companies. Co-employment also unlocks access to top-quality expertise without having to manage an entire HR team.
For more information, read PEO 101: Understanding Co-Employment.
So, co-employment is not employee leasing?
No, not at all. A PEO does not supply labor to a company. Instead, a PEO supplies HR services and benefits to a company and its existing workers.
It’s a frequently asked question because the PEO industry previously used the term “leasing” to describe what it did. That inadvertently connected our industry to temporary staffing services, which is a completely different field but also uses the term “leasing.”
Why should a business use a PEO?
Many companies want to handle HR tasks internally, which is understandable. But when you consider the vast knowledge and expertise needed to do all of those tasks correctly, especially as a company grows and its workforce increases in size, it begins to make a lot of sense to partner with a PEO. As the expert, the PEO knows how to make sure all tasks are carried out correctly. That means accurate, on-time payroll and employment tax payments, documents and practices that are compliant with up-to-date rules and regulations, rapid and effective attention to sticky employment situations, and modern, web-based HR technology to help facilitate all of it. The PEO also learns best practices across its entire client base, so companies get more robust, leading edge HR practices than they’re capable of providing in house.
Additionally, when a company partners with a PEO, time and money that had been dedicated to HR functions can be directed elsewhere, like revenue growth, innovation, and product and service development.
But don’t take our word for it. The research is clear: According to the National Association of Professional Employer Organizations, 60% of PEO clients report that their profitability has increased since partnering with a PEO, while businesses that use a PEO have employee turnover rates that are 14-16% lower than companies that don’t use a PEO.
How are PEO services different from human resources outsourcing?
In many ways, PEO services and human resources outsourcing are identical. In both models, the vendor—either the PEO or administrative services organization (ASO)—can provide comprehensive HR services, including payroll administration, human resources management, risk and compliance, and benefits. The difference is co-employment.
For more information, read PEO 101: What’s the Difference Between PEO Services and Human Resources Outsourcing?
Is there a typical business that uses a PEO?
Companies across all industries and of all sizes use PEOs. These businesses are recognizing the value of partnering with an expert to help them navigate an ever-changing patchwork of HR-related rules and regulations, attract and retain talent in an increasingly competitive marketplace, and provide comprehensive benefits amid skyrocketing insurance costs.
How will this impact my employees?
In a positive way, we hope! There will be no disruption in payroll or benefits, and employees will begin to notice almost immediately the investment you’ve made in HR through improved policies and processes. From onboarding on, our PEO will help streamline employee communication, ensuring messages are delivered clearly, concisely and in a way that enhances your company culture.
When you partner with a PEO, your employees will also gain enhanced visibility into their employment information through our robust employee self-service portal. From updating personal information to keeping up with paid time off to increasing 401(k) contributions, your employees are empowered to manage many of their own HR activities electronically.
And we haven’t even spoken about the employee benefits that accompany a PEO partnership—medical, dental, vision, healthcare spending accounts, wellness programs, life insurance, workers’ comp insurance, disability insurance, tuition reimbursement. All of that and more can be administered flawlessly by your PEO partner.
How much does a PEO charge?
PEOs typically charge a fee per employee per year, which covers the entire range of HR services. Our experience shows—and research confirms—that PEOs tend to provide cost savings over time (versus performing and staffing the same services in house) with improved forecasting of future expenses and a decrease in unexpected expenses.
What happens if we want out of a PEO?
This isn’t a timeshare. While studies show businesses that use a PEO rarely want out, the time may come when it’s necessary. There’s paperwork involved, of course. And if you’re working with XMI, we will ensure a hassle-free offboarding with all of your payroll and HR data provided back to you for a seamless transition.
Ready to get started? Put XMI to work for you today.
What Clients Say...
XMI’s HR team has been a valuable, trusted resource for our clients for more than a decade. XMI is cost effective to the medical practices that we manage and can help reduce many of the administrative risks facing small business.
Brian White, Managing Partner
Competitive Solutions, LLC
As the CEO of four businesses, I recognized when I needed help. I have called XMI to provide consultation and advice on all sorts of issues and liabilities as well as a complete overhaul of our employee handbook and policies.
Mark Faulkner, President & CEO
Vireo and Besway Systems
I see XMI as our HR department. With a virtual team in multiple states, I count on XMI to support my employees and business and XMI delivers.
Jason Wolfe, President & CEO
The Beryl Institute
Continued excellence in every aspect.
Ed Cantwell, President & CEO
Center for Medical Interoperability
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We don’t believe in one-size-fits-all solutions. Instead, XMI offers human resources outsourcing, PEO services and outsourced accounting based on the results of a complimentary, A-to-Z analysis that determines your company’s specific needs.
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