PEO vs. Basic Payroll Services

[boisemarketer]

Does anyone have insight on why a small business would use a Professional Employer Organization vs. having a basic payroll service through an accountant?

While my accountant has offered several times to provide payroll services for our small business, it seems far more beneficial to engage with a PEO. The two biggest reasons are:

1 - All liability falls on the PEO in the event of an error or mistake in payroll or reporting to IRS
2 - The access to low cost health care benefits.

Any opinions would be greatly appreciated. Thank you in advance!

[Steve B]

Where are you from? I've never heard of a PEO.

My accountant does our payroll and also takes all the liability for errors and IRS reporting.

[boisemarketer]

Steve,

I am from Idaho. The PEO I'm looking to engage with is A Plus Benefits:
A Plus Benefits ++ PEO - Payroll and Human Resources Outsourcing ++ Home (http://aplusbenefits.com/)

The fees are low for the benefits provided:
1) Certified Payrolls
2) Human Resources - Drug Screening, Hiring, Firing
3) Health Benefits
4) Retirement Plans

[jamesray50]

With a PEO the client's employee's become co-employee's of the PEO. The PEO assumes all responsibility for human resourse, payroll, tax liability, and all insurances. The client still directs the employees daily activities, but the PEO handles the administrative end of the payment to the employee. A payroll company that you would outsource your payroll to will perform your payroll and pay your tax liabilities and depending on your contract with them perform other functions, but the employees are your employees and everything is filed under your Tax ID number. With the PEO, all forms are filed under the PEO's tax ID number. I have attached a Wiki article that explains it in detail. Hope this helps.

Professional employer organization - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Professional_employer_organization)

[boisemarketer]

Is there a compelling reason to NOT engage with a PEO? It sounds like a great thing, and the fees are low relative to what they offer: Roughly $250/month for service + $20 per paycheck created.

(Those fees listed above would cover up to 8-10 employees. They don't base there fees off the gross amount of payrolll - only the number of checks being created.)

[jamesray50]

I personally have never known a company who used a PEO, but if their fees fall within your company's budget for their services then there would be no reason not to choose them over a payroll provider. Just do your research on this company first. Check their BBB rating, references, Google their company to see what other employers have to say about them. See if other companies in your area use them and if you can get a reference, etc. Good luck.

[jonestrend]

I came across this thread and wanted to let you know that I work for a PEO out of Utah and am very familiar with A-Plus Benefits. They are a decent company and generally service their clients well.

There main drawback is their so called Health Plan. It is not normal health insurance but a self funded limited liability plan that has caused issues with some of its participants.

If you are not intending to use them for their health plan then they are as good as many PEO's. The company I work for can provide the same service and may be even less expensive.

I would be glad to give you more information if you need it.

[clintd]

Can you tell us more about the PEO option? I'm in the process of starting a new business and don't want the HR/Payroll headaches. Will a PEO work with a new company that has a single employee?

Is the fee structure discussed earlier pretty standard?

Thank you,

Clint

[jamesray50]

Clintd - if you only have one employee you may want to check into just using a payroll service rather than a peo. You may not get all the HR benefits to offer the employee, but as a new business starting out you will want to weigh the costs of offering benefits. Maybe you could pay a higher salary to offset no insurance for example. Just a thought.

[businessfarmer]

Hello I am new to this. I am in the process of changing my family farm into a LLC business. I am just starting some research about paycor. I am looking to employee around 10-15 employees starting out. Would this be a wise suggestion, or maybe some of the other comments like a PEO be better. Thanks

[michelle.anderson]

Hello I am new to this. I am in the process of changing my family farm into a LLC business. I am just starting some research about paycor. I am looking to employee around 10-15 employees starting out. Would this be a wise suggestion, or maybe some of the other comments like a PEO be better. Thanks


It all depends on what you are looking for and the growing needs of your business. PEO's are typically a best fit for businesses with 10+ employees who are looking to grow and hire more employees as time goes on.

Perfect for the employer who wants to attract and retain quality employees as well as reduce turnover. As someone mentioned earlier, PEO's provide outstanding employee benefits packages, similar to larger corporations, but at a more affordable price. They allow a small business to remain competitive in their particular industry.

Additionally, a PEO assumes full tax-liability and ensures businesses remain compliant throughout the year with all government agencies and the Department of Labor.

Have you looked into using ADP (Automatic Data Processing)?

[MichaelJ]

The decision to go with a PEO or hire in-house must take into account company size, state(s) you operate in, projected growth, cash on hand, in-house talent, how scalable you want to be and other factors.

You can do it all or yourself, or what I have found is that you can outsource the administrative burden to a scalable small business payroll service. By working with an expert service, you reduce compliance exposure and are able to devote your time to more profitable marketing and business building activities.

Outsourcing reduces the complexity and risk of running your own human resources and payroll, while helping ensure compliance and continuity, with up-to-date tax rates, insurance policies and regulatory information that can be lacking in a software solution.

The benefits of outsourcing to payroll and human resources services should include:
Up-to-date compliance with government regulations
Online solutions
Data security
On-site or Online Management Options
Additional human resource services

There are several services out there, and you can go local or national. Just make sure you are working with a company who closely follows the tax laws for, and understands the needs of the size company you have.

Paychex, for example is a long established brand, specializing in and trusted by over 500,000 small businesses. You can get a customized quote at 888-924-1776. (Last time I checked they were offering the first 30 days free.)

For the peace of mind with the opportunity to spend more time running your business, it’s easy to see why over 85 percent of CPAs recommend that small businesses partner with a professional payroll provider.

Hope you find this helpful – best of luck in your business!

[charles lillis]

Does anyone have insight on why a small business would use a Professional Employer Organization vs. having a basic payroll service through an accountant?

While my accountant has offered several times to provide payroll services for our small business, it seems far more beneficial to engage with a PEO. The two biggest reasons are:

1 - All liability falls on the PEO in the event of an error or mistake in payroll or reporting to IRS
2 - The access to low cost health care benefits.

Any opinions would be greatly appreciated. Thank you in advance!

Depending on the type of work you perform you can also get discounted worker's compensation insurance. The PEO will also manage unemployment and worker's comp claims. If you are already using a payroll company you might as well go with a PEO.

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