“What is a professional
employer organization?”

(And other PEO questions we’ve been asked.)

1. What is a professional employer organization?

A professional employer organization (PEO) helps your business manage complex employee related matters, including health benefits, workers’ compensation claims, payroll, payroll tax compliance, and unemployment insurance claims.

A PEO who partners with your business will perform these processes, assume associated responsibilities, and provide ready expertise in human resources management.

At Genesis HR, we offer a tailored HR solution to effectively manage your critical human resource responsibilities and employer risks. A PEO delivers these services by establishing and maintaining an employer relationship with the employees at the client’s worksite and by contractually assuming certain employer rights, responsibilities, and risk.

2. How does co-employment work?

PEOs and their clients sign a co-employment agreement in which both parties have an “employment relationship” with the worker. This means the PEO and client company share and allocate responsibilities and liabilities. A PEO typically allows a business to have one partner to manage all of these pieces, while the business owner and their employees can focus on the product or service they provide.

The PEO assumes much of the responsibility and liability for the business of employment, including risk management, human resource management, and payroll and employee tax compliance.

The client company retains responsibility for and manages the product development and production, business operations, marketing, sales, and service sides of the business. The PEO and the client share certain responsibilities for employment law compliance. As a co-employer, the PEO provides a complete human resource and benefit package for worksite employees.

3. How will our employees benefit by being in an employment relationship with Genesis HR?

Genesis provides the advantages of a large company’s benefit program without the runaround of a big, corporate company. Some of these benefits include:

  • Access to our experts for advice and guidance whenever you need help. We’re happy to help whenever you (or your employees) need us.
  • Both company-provided and voluntary insurance products to meet the needs of your employees.
  • An expertly managed 401(k) savings plan (if applicable) with high-quality investment options and easy-access information, both online and in print.
  • Powerful, easy-to-use online tools. Our portal puts information at your employees’ fingertips and reduces how much work you have to do to make changes, updates, or fill out forms.
  • Employee discount programs.

4. What are the pitfalls of trying to manage my company’s HR, payroll, and benefits in-house?

Complexity, distraction, changing regulations, costs, compliance, endless health care variables and legal puzzles are stealing the time, energy, and imagination of your management team. In addition, your employees expect the peace of mind of “larger company” benefits and programs like online information portals and high-quality 401(k) plans. When you try to manage all of these things yourself, you may not be able to provide the quality of systems (or compliance) your employees expect and the law requires.

5. Why is ESAC accreditation important when picking a PEO?

Choosing a PEO with Employer Services Assurance Corporation (ESAC) certification is critical for your business. ESAC accreditation sets PEOs apart by showing employers that a PEO meets the industry’s “gold standard” for financial stability, ethical business conduct, and adherence to operational standards and regulatory requirements.

  • ESAC audits and certifies PEOs on a quarterly basis.
  • ESAC-certified PEOs are held to extremely high standards for compliance and financial stability. Of the more than 700 PEOs in the country, only 30 are ESAC-certified.
  • We’ve been ESAC-accredited since 1996—only a handful of PEOs have continuously maintained that high standard for as long as we have.

6. Will I lose control of my employees when I partner with a PEO?

No. Keep in mind, the co-employment aspect of the PEO relationship is a good thing for business owners. A PEO partner does not interfere with the daily operation of a business. You’ll still be responsible for controlling your workplace and your employees: who to hire or terminate, who to promote, how your employees are paid, etc. As your PEO, we are there to help ensure wage and hour laws are followed, and you keep your employee files up to date. In very rare circumstances, a PEO might choose not to bring an employee into the co-employment relationship.

7. How are my taxes affected when I partner with a PEO?

This depends on the time of year and the state(s) where your business has employees.

  • If you partner with a PEO at the first of the year, there should not be any tax implications. Any payroll taxes with wage caps will be reset whether or not you use a PEO.
  • If you partner with a PEO during the calendar year, you will be subject to some tax restarts. Federal Unemployment Tax will restart when you begin your partnership.
  • State Unemployment will also restart in “file by PEO” states. You can check with your PEO partner or NAPEO for a list of these states. Keep in mind that you will also assume the rate of the PEO in these states. This may be more or less expensive than your own rate in these states.

8. Is working with a PEO expensive?

PEO services do have a cost, which can vary considerably between providers. However, that cost is often offset by the financial and time savings for your company. Partnering with a PEO on things like employee benefits, retirement accounts, and workers compensation can save you money. You can also save a tremendous amount of time with a PEO, which translates into a positive return on investment.

9. Do PEOs work with my industry?

PEOs vary in the industries they service, but most industries are covered. If you are in a specialized or high-risk industry and searching for a PEO partner, NAPEO can be a good resource for you.

10. Is there a benefit to working with a privately held PEO or a publicly traded PEO?

Publicly traded PEOs are held accountable by their shareholders, who are very interested in seeing growth. This often leads to publicly traded PEOs spending more time and energy selling new accounts and not as much time and effort helping existing clients. Privately held PEOs tend to have stronger customer service, happier clients, and higher client retention rates.


Hourly or Salaried?
Exempt or Nonexempt?

Classifying employees is just one of myriad issues facing companies like yours. We know it can be a little overwhelming, so we put together this guide to help you sort it out.

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