Using a PEO Company to Keep Your Business Legal

A Professional Employer Organization (PEO) is an outsourced solution for human resources, payroll, benefits, workers’ compensation, and compliance. By partnering with a PEO company, you can focus on day-to-day work while the PEO oversees your employees and back-end office tasks.

Is a PEO Right for Your Business?

A good PEO company provides ongoing counsel to a small business so that employees can be provided with the best possible benefits packages that are cost-effective. The main thing about working with a PEO company, is you enter a contract of co-employment. Co-employment is when a PEO company becomes your employer of record, and takes on the responsibility for your company’s human resources, and the associated liabilities.

It works by:

  • Running your payroll under the PEO’s tax ID numbers
  • The PEO takes on risks associated with being an employer
  • PEOs require you to adopt their policies, procedures, and employee handbook wording

Why Would You Use a PEO Company?

There are many reasons why entering into a co-employment agreement would be beneficial to a PEO company. Small or medium-sized businesses usually consider PEOs because they find themselves over-stressed and understaffed with having to manage items such as HR tasks and compliance.

If you are considering using a PEO company, here are some examples of how they keep your business legal:

Shared Liability

By using a PEO company, you can lease your employees and co-employ employees with the PEO, which means your employees will be incorporated under the PEOs tax ID.

The PEO will share in risk and liability issues and will help manage tasks such as workers’ compensation reporting and state unemployment.

The PEO company shares risks with your business and helps with important payroll and HR tasks, but this means you relinquish some of your control over your business.

Lower Benefit Rates

Since a Professional Employer organization company will manage multiple small businesses and have a larger pool of employees and access to better benefit options than a small company shopping for health insurance on its own.

PEO companies can negotiate lower group rates for health and dental benefits and unemployment insurance rates.

Outsourced Payroll Processing

PEOs offer payroll processing services that can help eliminate manual administrative processes that can overwhelm human resources or payroll managers so they can use their time more effectively.

The majority of PEO companies help with processing payroll with tax compliance, to avoid failing to file taxes properly.

Access to Human Resource Services

Working with PEO companies gives your business access to HR services that, on your own, you might not be able to afford, like training, onboarding, and recruiting.

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The law of employment is always changing and can be very complex to navigate. Not being up to date regularly on employment laws, rules, and regulations can mean huge fines and costs to your business.

A good PEO company is up to date on compliance, practices, and management and can guide you to help avoid costly mistakes.

Also, with human resource services, a PEO company will help you deal with insurance premiums and claims management when it comes to worker’s compensation.

A PEO company, as your co-employer, provides your employees and business workers benefits and handles compliance, audits, paperwork, and certificates associated with the insurance.

Offer Support with Lawsuits

Since PEO services are your co-employer, they share liabilities that are associated with employment-related claims, like wrongful termination.

PEO firms can be an excellent resource, with their experts who can help alleviate the stress of a costly settlement.

Final Thoughts

If you’re a small business or start-up, a peo firm can help make sure you are keeping everything in your business legal, and that you are following the laws and regulations. Make sure to research good PEO companies in your state. You can compare the PEO companies at

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