Having A Good HR Team Is Important

What is a PEO (Professional employer organization)? A PEO becomes the employer of record for tax purposes by means of a co-employment contract. All of the paper work regarding the employees is filed under the identification numbers of the PEO as opposed to being filed under the client company's identification numbers. The client company directs all the day-to-day activities of the employee while a PEO provides functions like payroll for a small charge. The charge will normally run between 3 and 15% of the total payroll plus the employer's share of FICA, unemployment insurance withholding and Medicare.



In essence the PEO company takes over all the human resources operations for a company. One of the benefits is that the PEO may be able to get lower costs for things like workman's compensation insurance and company employee benefits packages because with handling multiple company's HR, they can apply for a discounted rate because they are the employer of record for a much greater number of employees.



What makes a PEO differ from a ASO? The primary difference between a PEO and an ASO is that the PEO company files all paperwork for each one of the client's employees under their EIN (employee identification number) which, essentially, makes them the legal employers. This provides the client company benefits like getting reduced cost on some company benefits and services which are required by law.



An ASO is a company which provides all or almost all of the human resources operations for a client company, but the company lists all of the employees under their personal EIN and not that of the ASO's. Providing the administrative functions for the human resources department can relieve the company of the many headaches which they may not be ready to deal with, and so an ASO can be an answer to providing those services with the help of an outside contracted company.



What responsibilities does a PEO assume for a company? The PEO provides a wide range of management responsibilities using their team. The PEO provides improved employment practices and risk management, which will reduces liabilities. They are able to assist a company to help escalate productivity and profitability. This provides a company a relief from the load of employment paperwork. A PEO will provide a company access to a complete benefits package, which allows clients to be more aggressive in their section of the market.



Without having to maintain a human resources department a company can certainly improve their profitability and productivity. Coming from a paperwork point of view the company will have no employees of their very own and thus less liability. They can still deduct the expense of labor because they are the co-employers of the employees which they pay the PEO company to supply. The PEO thus is responsible for providing all of the human resources functions of the client company.



Which is the better choice PEO or ASO, and why? There are a lot of things to consider when making a choice between the services of a PEO or an ASO. For example you may want to keep all of your employees under your business license while having the primary portion of your human resources handled by a separate company. This usually happens as a company moves from a small to a medium size company. By having administrative functions of your human resources operating at another location you can get by with having just only one HR person at your location as the liaison with your ASO.



When you continue to grow into a much bigger company, it could provide lots of benefits to allow your employees be filed under the licenses of a PEO company while they staff your on-site human resources. Having your employees listed under the PEO's licenses you are relieved from a great deal of liability while maintaining a good staff and having all the difficulties of maintaining all of the facets of human resources handled by a PEO company. Each senior executive of a company will look at all of the costs and advantages of each and select the method which will be best for their particular company.



ProHR is a full service professional employment organization, which can provide your company a headhunter to find top talent. Visit proHR.com for more information.