2. Professional Employer Organizations (PEO)

The PEO is also a Guaranteed Cost Program option.

The Client Company Co-Employs with the PEO and pays a premium to the PEO who in turn pays all Medical, Indemnity and Litigation costs associated with that Clients Company’s claims for the 12 month period following.

There may or may not be a deductible based on the practices of the individual PEO.

*Because of the statutory requirements of the Payroll, the PEO quotes its rates as a composite of the SUTA, FUTA, FICA and Workers’ Compensation Premium Rate.

The Premium for the Workers’ Compensation Insurance, SUTA, FUTA and FICA is collected with each payroll. The amount of the Composite Rate charged for each Class Code is an addendum to the PEO Agreement with the Client Company.

In general, a PEO is outsourced Human Resources for companies with 500 employees or less. They bring optional benefit programs to small business that in many cases they don’t or can’t offer. Programs such as 401k, Cafeteria 125, Health Insurance, Dental and Optical are examples.

*Cost to perform all aspects of Human Resources is from 3 to 7% of your payroll based on the size of your company. (US Dept of Labor Statistics)

A 401(k) usually requires a set-up fee and an annual maintenance fee. The PEO provides a 401(k) that all employees can participate in with no set-up fee or annual maintenance fee. It also allows the employer to pick and choose the employees for whom they choose to match contributions.

Rates for Health Insurance are partially based on the number of enrolled participants at the Client Company. The PEO has a much larger number of participants in the plans and because of the value of numbers, can often offer a lower cost for the Non-Occupational Health Insurance coverage to the Client Company.

An employee can give themselves a raise in net pay by participating in a before tax Cafeteria 125 Plan. The plan is administered by the PEO at no additional cost to the Client Company.

You sign a Co-Employment Agreement with the PEO and they take over the Statutory Requirements for the employees and you continue to run the every day tasks associated with your business.