Professional employer organizations (PEOs) make ongoing management of office-related tasks very easy for businesses in today’s world.
One particular area where these organizations are able to take the pressure off of their clients pertains to payroll and its accompanying management requirements.
That brings us to the topic of the article you’re reading right now – which concerns what PEO payroll is.
Let’s start by cutting right to the chase.
PEO payroll refers to payroll-related services offered by a professional employer organization. Professional employer organizations can help your business with payroll-related tasks such as setting up employee payroll information, distributing salaries, withholding taxes, and submitting the required amounts to the relevant authorities.
Which payroll services do PEOs offer businesses?
PEOs are organizations that offer a wide range of human resource services, including insurance management, HR compliance, and administration of payroll and benefits to both small businesses and those looking for international expansion.
They typically enter into co-employment relationships with their clients, meaning that the PEO becomes the employer of record for tax and regulatory purposes.
What that also means is a PEO could source and own employees in such an arrangement.
However, as a business, you’ll still have complete control and autonomy on hiring decisions, salaries, and day-to-day responsibilities.
This arrangement allows businesses to outsource many of their HR functions, freeing up time and resources that can be devoted to other business areas.
PEO payroll includes services such as:
- Making sure employees are accurately paid on time and in compliance with employment laws.
- Updating files and their pay rates.
- Calculating, cutting, and sending payroll checks.
- Calculating deductions and making sure they are up-to-date on the employee side.
- Making sure all ‘deductibles’ and withholdings are taken care of on the employer side.
How can a PEO help a business with its payroll?
A PEO can help a business with its payroll needs in a number of ways.
First of all, they ensure that employees are paid on time and in the correct amounts.
This will be done in compliance with all employment laws and tax regulations.
They can also help to resolve any payroll discrepancies that may arise.
Now, payroll discrepancies can arise for a variety of reasons.
Perhaps an employee was mistakenly paid for overtime hours they didn’t work, or maybe there was an error in calculating the amount of payroll taxes that needed to be deducted.
Whatever the cause, payroll discrepancies can be frustrating for both employees and employers.
Resolving payroll discrepancies can be time-consuming and tricky.
But that’s where PEOs can step in – helping to resolve such issues quickly and efficiently.
In doing so, a positive and productive workplace is maintained because staff are happy.
What are the benefits of using a PEO for payroll administration?
We have an article that comprehensively discusses the general pros and cons of using a PEO, but in this post we’re going to get a bit more granular.
You see, PEOs can massively help with payroll in a number of different ways which aren’t immediately obvious.
1. PEOs help in simplifying a complicated process
Payroll is often thought of as a process of issuing checks to employees – but it is actually a more complicated process.
In fact, payroll is an incredibly complicated operation because it involves many moving parts such as:
- Compliance laws;
- Paid leaves;
- Holiday pay; and
- Sick pay.
Payroll also involves a number of important payroll taxes withheld from employee wages.
These payroll taxes include federal and state income taxes, social security and Medicare, and unemployment insurance taxes.
Withholding these payroll taxes from employee wages can be a complex process, as different tax rates apply to different types of income.
In addition, payroll must also comply with several federal and state labor laws, which can further complicate matters.
This is where PEOs come in.
They simplify an incredibly complicated process and facilitate businesses to make simple payments per payroll cycle as all they have to do is provide a list of their employees, the hours they’ve worked, and the pay rate.
PEOs will then handle the rest.
2. They reduce liability costs
Any business owner can find payroll deductions and tax withholdings confusing and time-consuming.
But making mistakes can be costly in terms of fines and penalties from the revenue and tax collection authorities.
These are what we call liability costs.
Fortunately, a PEO can help take the hassle out of payroll deductions and tax withholdings, ensuring that your business complies with all federal, state, and local laws.
In addition, a PEO can help protect your business from liability in the event of any payroll mistakes.
By outsourcing your payroll to a PEO, you can focus on running your business, safely knowing that your payroll deductions are being handled by experts, significantly reducing the risk of liability costs.
This was also a point discussed in our article on who uses a PEO.
3. Reduces employee turnover and improves work quality
Employees are generally happier when they are paid on time and accurately.
And a happy employee is bound to be a productive employee too.
That’s why businesses must ensure their employees are paid on time and accurately.
But managing payroll can be a complex and time-consuming task, especially for small businesses.
Again, this is where PEOs come in.
They specialize in payroll and employee benefits management and by outsourcing these functions to a PEO, businesses can free up their time to focus on their core competencies.
Additionally, PEOs have the expertise and resources to ensure that employees are paid accurately and on time.
As a result, partnering with a PEO can help businesses boost employee morale and productivity.
4. They offer support and guidance
Businesses and organizations typically overlook one huge advantage of working with PEOs- constant support, guidance, and advice.
When you work with a PEO, you get more than just HR and payroll support.
You also get access to a wealth of knowledge and resources that can help your business thrive.
PEOs are experts in payroll, employee benefits, compliance, and risk management, and they can provide guidance and advice on a wide range of topics.
If you have questions about handling a difficult payroll situation, your PEO can offer advice and guidance.
They can also help you navigate the ever-changing landscape of employment law and ensure that you comply with all relevant regulations.
In short, working with a PEO gives you access to a team of experts who can help you manage your business more effectively.
And that is an invaluable advantage that too many businesses overlook.
5. They help businesses save time and resources
Finally, by outsourcing payroll, HR, and other administrative tasks to a PEO, businesses can free up valuable time that can be better spent on more strategic initiatives.
Not only that, but PEOs can help businesses save money and resources.
So, if you’re feeling overwhelmed by the day-to-day grind of running a business, consider enlisting the help of a PEO.
It could be just the thing you need to take your business to the next level.