The main business purpose of a PEO, generally, is to provide a client with human resource and human resource management services. PEOs are also typically responsible for payroll, withholding and remitting employment taxes and benefits management for clients. These PEO/client relationships often involve shared control or co-employer agreements. However, as the MBT recognizes, the PEO must maintain the ultimate control in the relationship to be treated as a PEO under the tax.
In contrast, staffing companies generally supply temporary employees to supplement a customer’s workforce. Staffing companies have nearly complete control of these employees. In the staffing company situation, the recipient of employees generally has no more control over the employee than direction of daily tasks or rejection of the preffered individual.
The pros and cons of initiating a client relationship with a PEO or employee leasing firm is the same with any company. The main hurdle would be administration of temporary employees checks if you are a day pay or day labor temp firm. Some employee leasing firms or PEO’s have the ability to let you cut checks on site through their systems or find a pay card so the employees can receive their funds even if they didn’t have a checking account with direct deposit. Really this is the main hurdle we have singing in the marketplace. You do alleviate a lot of the employment practices liability’s and you can focus on hiring the perfect employee for your client company.
I’m not saying this is the perfect scenario for everyone. But for the right customer, using the PEO model can be an attractive option. If you are trying to rehabilitate an experience MOD or be creative with deductible/loss can create a mutual profitability for both the client and the employee leasing firm. You need to strongly consider creative options in the absence of competition due to several carriers who have pulled out of the marketplace. Without proper education and experience broker I don’t recommend taking the leap blindly. There are several things you need to look out for in the PEO marketplace.
When it comes to work comp the PEO is responsible for all claims as the employer of record. You can verify coverage of the PEO has active coverage on the work comp verification services for your individual state. When it comes to work comp the PEO is responsible for all claims as the employer of record. VERIFY COVERAGE FOR EACH STATE. As a client of the employee leasing firm your work comp should be independently verifiable through the appropriate department of labor as well. You also want to check for proper licensing and if there are any outstanding tax liabilities. An ideal situation would be proof of a tax bond and independently audited tax records. These are common questions and usually a top-tier PEO or employee leasing firm will happily provide this information.
If you’re looking for coverage and want to know if employee leasing or a PEO option is right for you please feel free to swing by our website at www.CoverStaffing.com or www.StaffingWC.com We will happily provide a complete risk evaluation and see what product fits best for you and your company.