Does a PEO force you to give up control of your business?

Does a PEO force you to give up control of your business?

If you’ve investigated group health insurance alternatives, you’ve probably heard of Professional Employment Organizations. PEOs manage your employee payroll, tax withholding, benefits, and many other traditional employer responsibilities. They provide these services for a number of companies, so their cumulative numbers qualify them for significant insurance premium savings. This works because your employees become the PEO’s employees too.

So does that mean you give up control of your business?

When a PEO assumes some of your employer responsibilities, you are still the boss but you must share that role. You can still make critical business decisions. You can still establish employee expectations, but your PEO has employer’s rights as well. If it doesn’t, your arrangement wouldn’t meet IRS, Social Security, and other government guidelines.

Professional Employment Organization arrangements work because they’re more than just employers on paper. They issue your W-2s, process your payroll, and more. PEO staffs interact with your employees, as necessary. They do what’s appropriate to maintain the common law standard that defines an employer as having the right to tell a worker “...what will be done and how it will be done…”

Co-Employers

When you outsource your employer responsibilities to a PEO, you become co-employers. You both have equal standing but for different obligations. As an employer, your PEO may hire or fire your employees. Depending on your contract, they may manage compliance, liability, workers comp, and other employer’s rights and responsibilities.

Does that seem like a drastic move just to save on insurance?

Relinquishing your role as the undisputed boss may sound like a steep price to pay for an insurance discount. That depends on how much it costs, how much you save, your ability to avoid certain taxes and penalties, and what other benefits you might receive from the arrangement.

Some businesses sign PEO contracts as an HR department alternative. When you outsource payroll, withholding, and other tasks, you save the salary you would have paid to have someone else do it for you. If you’ve been performing HR tasks yourself, you can use the extra time to build your business. The healthcare insurance discount is only one of many PEO advantages.

How Can We Help?

If you need help figuring out if a PEO is a reasonable alternative for your business, contact us. Our benefits experts will explain PEOs and other new health insurance options that might be better for your business.