Updated: Jun 14, 2021
One of the many challenges facing small and medium businesses is more often than not related to human resources. And at the core of some other issues that a lot of small businesses grapple with, is something that can be traced back to staffing solutions or a lack of a dedicated in-house HR team. Fortunately, these issues can be averted or better handled by partnering with a Professional Employer Organization (PEO).
Unlike large corporations and big firms that have a well-structured HR team and employee management system, small and medium-sized businesses either cannot afford to run a full-time HR team or just do not have the framework to incorporate one yet. However, working with a certified PEO or CPEO allows SMEs to scale their businesses and focus on other important things without worrying about employee management or other HR-related issues. So what is a PEO?
What is a PEO?
For companies that aren't ready to hire a dedicated in-house HR team or a qualified HR professional, managing growth can be a complicated or overwhelming process. In such a situation, partnering with a PEO can be of immense help to the company. Essentially, a Professional Employer Organization takes away the burden and worry typically associated with staffing, payroll, workers` benefits, and compensations. And with those out of the way, your business can focus on the one thing that matters the most — your clients!
A PEO is an outsourced HR solution, which typically covers payroll, staffing, staff compliance to company policies, insurance, and other benefits. And guess what? Working with a PEO is often considered more economical and beneficial, especially for small businesses. At least, until your business grows enough muscles to hire a professional HR person, partnering with a PEO remains an excellent idea. PEO services generally cover the following:
All human resource consulting
Safety and risk mitigation services
Access to 401K plan
Employer payroll tax filing
Implementing or enforcing company policies related to employment
But one important fact worthy of note here is that not all PEOs will give you the best HR solutions. The question now is, how then do you know which PEO offers services that align best with your HR needs? Or how can you tell a PEO vendor or option that's right for you from the one which isn`t? Well, the answer is quite simple; you should be on the lookout for a certified PEO or CPEO.
What is a CPEO and How is it Different from a PEO?
A certified PEO is a PEO that has undergone the voluntary certification process and has been designated certified by the IRS, meaning they're qualified to offer PEO services to clients. In other words, when a PEO becomes certified, it means that they satisfy all necessary requirements and guidelines stipulated by the U.S government. This concept came into existence in late 2014 when the Small Business Efficiency Act was passed into law and facilitated federal recognition of PEO services in the United States.
Later on in 2017, the IRS designated a little over 30 Professional Employer Organizations as Certified Employer Organizations (CPEO), having affirmed that they met the strictest guidelines set by the U.S. government. Since then, several other PEOs have also received the CPEO designation. But you'd be surprised to know that not many PEOs in the U.S are certified by the IRS. The obvious question is, what does this mean for your business?
Considering the implications of partnering with a non-certified PEO, think of it like this: CPEOs provide you peace of mind; most of all, they help you bring down liabilities to a bearable minimum. You can as well say that your HR department is on auto-pilot when you work with one of those. Therefore, with minimal intervention, you can be sure of getting the best outsourced HR and payroll solutions from a CPEO.
On the other hand, when partnering with a non-certified PEO, you can't always be sure that issues like payroll management and staffing will not escalate to the point that they begin to impact your business. In fact, the IRS considers both your company and partnering PEO to be jointly liable for the payment of payroll taxes.
In simple terms, if your PEO falls short in the payment of payroll taxes, the IRS can come after you to pay up the taxes owed. The unprecedented nature of this kind of financial risk can impact your business negatively, as most times the clients of a PEO may not be aware of any unpaid taxes until the IRS sends over a notice and a bill to the client. However, within the framework of working with a CPEO, payment of payroll taxes is solely a responsibility of the PEO in the eyes of the federal government.
Your business stands the best chance of growing with minimal hassles when you partner with a certified PEO. So, if you`re looking to switch things up for good, you should consider enlisting the services of a CPEO. In essence, beyond the services that you'd normally get from a non-certified PEO, there's also the added benefit of some sort of insured partnership when your business partners with a certified PEO (considering that CEOs operate under strict regulations).
Choosing a PEO that Suits Your Exact Company Needs
Your small business needs the best support it can get, which is why it makes perfect sense to seek out the best PEO company and partner with them. But that also can sometimes be a real headache for small or medium-sized businesses. It's either you do not have the time to compare between many PEOs or you just do not know what to look out for.
At The Mission HR, we can take that concern off you by helping you secure a beneficial partnership with a certified PEO. We are a leading partner in the PEO, HR, payroll, and benefits outsourcing marketplace. We provide result-oriented services for small and medium-sized organizations and government contractors, serving as a trusted partner in integrated human resource compliance, risk management, employee benefits, employment practices liability insurance (EPLI), and payroll processing.