So what’s the big secret? Frankly, it’s no secret at all. In fact, it’s one of the fastest growing employee administration trends for all Industries across the nation.  You can accomplish everything presented within this article through contracting with a Professional Employer Organization (PEO).  The PEO concept was conceived over 30 years ago in the state of Florida to help businesses deal with the high cost of workers compensation coverage.  The concept is simple, pool businesses together to leverage the power of large group number or small businesses to take advantage of their combined “economies of scale” and in doing so receive significant discounts on their workers’ compensation costs.  PEO’s are able to provide their clients and their workforces with the savings, services, and benefits they provide through a “co-employer relationship.”  In a co-employer relationship the client company is recognized as the “on-site employer.”  Nothing changes on the outside the client company run’s his day to day business as usual.  The PEO does not run or interfere with how the client’s business.  However, the PEO is recognized as the “statutory employer.”  And this is where the power of this relationship really begins.  Even though the client still has direction and controls of its business the PEO as the statutory employer takes on many of the liabilities and responsibilities that you once had.  The key is that employee’s are moved from the clients Federal Employer Identification Number (FEIN) to the FEIN of the PEO.  This is what is called a game changer!  By moving into this type of relationship the client company has taken advantage of a number of opportunities and has maximized and leverage several key components with its labor force. 

Take for example workers compensation insurance.  Now that the client’s employees are on the PEO’s policy the client avoids the usual up front deposits he has to face each year.  In addition, the premiums are built into the billing rate that is billed every pay period so it is technically “paying as you go” each pay period.  As a result, there is no need or concerns for annual audits.  But that’s not the half of it.  If there are any loss claims made by your employee’s no longer going to affect the clients experience modifier but instead reported on the PEO’s experience claims.   

But let’s talk about cost.  By using a PEO service that has a strong workers compensation policy the client company can enjoy significant discounts on premiums due to the law of large numbers or economies of scale.  Instead of using a dozen to perhaps a few hundred employees of a client company to leverage pricing why not use thousands of other client’s employees as well?  Due to the size of many strong PEO services they enjoy significant premium discounts that they are able to pass along to their customers.  But wait, it doesn’t stop there.  According the State of Texas Professional Employer Organization Act the PEO may be required (based on the workers’ comp carrier’s interpretation of the law) to use the client companies experience modifier in the initial pricing component.  Therefore, if the client has a discount modifier that can be utilized by the PEO along with the discounted premiums of the PEO, then the client would be able to enjoy even greater savings through contracting with a PEO.  Many companies have taken advantage of this opportunity and to a PEO service to avoid anticipated future worker’s comp rate increases.

But what if you already have an ad-on modifier as a result of past claims?  Well, the Texas PEO Act also states that after a client has been in a PEO relationship after two years the PEO may then use its own modifier when developing the client company’s rates.  This gives the client company the ability to work his rates down faster and keep them down (keeping mind that the PEO’s rates typically remain much lower due to the PEO discounts to begin with than one would have dealing with the impact of those costs on their own stand alone policy.)

And finally, due to the fact that the PEO recognizes the liabilities it is taking on from each client company as a result of the co-employer relationship they have a vested interest in keeping your employee’s safe and healthy.  Therefore, a PEO service will provide safety and risk management services, customized safety manuals, regular training sessions and consulting when needed and/or requested.  Along with site inspections of job sites and facilities they will also provide relief from worker compensation claims management and the filing of first report of injury to the state.  Furthermore, the PEO’s defense of fraudulent workers’ comp claims is a significant advantage for client companies.

It is also important to note that there are PEO services that assist their clients in the development of the necessary safety programs to qualify for the ISNET World or Compliance Depot.  As you know this is paramount the oil industry to obtain contracts.

Keep in mind that this article has only covered one aspect of what a PEO provides its client companies.  We haven’t even mentioned the tremendous leverage used in the payroll side of the co-employer relationship.  Once again because the employee’s are on the FEIN of the PEO then PEO service is responsible for calculating, filing and remitting quarterly payroll 940 and 941 reports and deposits.   The client is relieved from having to deal with producing W-2’s and handling all the employee questions at the end of the year. They are also relieved from processing employee deductions and garnishments.  And probably one of the most powerful tools deals with SUTA (State Unemployment Tax) administration and claims management.  If a client’s former employee makes an unemployment claim it is counted against the PEO SUTA rate and not that of the client companies.  Once again a huge advantage and cost savings associated with using a PEO!

And now that the PEO has entered into this relationship with the client company and has taken on these employee administration liabilities and many more.  It behooves the PEO to provide the client company with a strong Human Resource support program.  The PEO’s HR Department, assist their client’s with everything from customized employee handbooks, process unemployment claims, to ongoing consultative support, training and workshops.  The PEO’s HR Professionals, work to make sure that the client company is in compliance with the multitude of state and federal governmental rules and regulations.  The PEO will also perform various background checks and drug testing programs when needed.  Additionally, the PEO’s HR experts will work with the client to establish well defined job descriptions, prepare for and conduct job candidate interviews, while also assisting with hiring, discipline, and termination decisions and issues.

And finally, a PEO can take advantage of its large number of combined client workforce to provide a very strong benefits package to its clients.  These services include Major medical insurance plans, voluntary or supplemental insurance products, and 401k retirement plans.  All of which provides more relief to the client from all the benefits administration of making payments to the record keeping.  Each of these services is handled by top experts in each field.  Keeping in mind that these various services and benefits are optional and typically do not require any contribution from the client company. 

It’s also important to note that although these PEO services provide the same four core service (Payroll, Workers Compensations, Benefits, and Human Resources), PEO’s do vary somewhat in the services and benefits that they provide.  Every PEO will have their own specialties and niches of industries that they serve.  So how does one find the right PEO service for their specific business needs?  Well, that’s where a PEO brokerage firm like StroudLink comes in.  StroudLink represents only the top PEO Service Providers in the industry and prides itself in providing the best fit for each business according to their needs and expectations.

So if your company is looking for ways to think out side of the box and to get leaner, significantly reduce liabilities, have better cost controls, and become more competitive.   Then a PEO service Provider might be your perfect solution.  The bottom line is that if you hire a PEO, they will take care of the non-revenue generating side of your business that is key and vital to its survival and success.  Allowing the business owner to get back to why he started in business to begin with.

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