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- In a PEO arrangement, the PEO is the Employer of Record for tax purposes and handles payroll, benefits, workers’ compensation, and other HR functions on behalf of its clients.
- The client company (sometimes known as the ‘operational employer’ or ‘worksite employer’) generally maintains supervision over the day-to-day activities of the relevant employee. Consequently, the supervisor in a PEO agreement becomes the client company.
- The PEO is ultimately responsible for contracted employees and maintains control over such duties as payroll, training, HR, and regulatory compliance.
- Generally speaking, PEOs are not liable for cases involving their clients’ employees, such as wrongful termination or discrimination. However, a PEO can be held liable for its own negligence, such as failing to provide adequate health insurance coverage.
When a company chooses to engage the service of a PEO (Professional Employer Organization) two questions often arise. The first is “who is the employer in a PEO?” The second is “who is the supervisor in a PEO arrangement?” This article will answer those questions and also identify the roles and responsibilities of the PEO and the client company in a PEO arrangement.
In a PEO agreement, the PEO becomes the ‘Employer of Record’ (more on this below), while the client company generally maintains supervision over the day-to-day activities of the relevant employee.
The PEO agreement sets forth the terms and conditions of the relationship between the employer and the PEO, including the responsibilities of each party. The agreement also includes provisions for how the PEO will be compensated for its services.
Typically, the PEO will charge a fee based on a percentage of the payroll expenses of the employer. Or, they may pay a fixed amount per employee. The fees charged by the PEO will vary depending on the size and complexity of the business.
Who is the employer in a PEO arrangement?
In a PEO arrangement, the PEO becomes the ‘Employer of Record’ meaning they become the employer for tax purposes and handles payroll, benefits, workers’ compensation, and other HR functions on behalf of its clients.
PEOs allow businesses to outsource HR tasks and tap into a pool of talent and resources that they might not otherwise have access to. PEOs are especially appealing to businesses that may be too small to justify an in-house HR department but too large to manage without assistance.
When choosing a PEO, it’s important to partner with one that is reputable and has a positive track record. A good PEO will have a strong understanding of your industry and workforce and will be able to tailor its services to meet your specific needs. Furthermore, a good PEO will have a robust network of clients and resources, which can benefit your business in the long run. When done right, partnering with a PEO can be a wise strategic move for small businesses.
Who is the supervisor in a PEO agreement?
In a typical PEO arrangement, the client company oversees the day-to-day operations of the employee or employees. However, the client company contracts the PEO to provide a range of human resource management services. The PEO then becomes the co-employer of the client company’s employees, sharing responsibility for aspects such as payroll, benefits, and workers’ compensation.
While this arrangement can offer many advantages for both the employer and the employees, it is important to understand that the PEO is ultimately responsible for the employees. This means that if there are any problems with payroll or benefits, for example, it is the PEO that will be held accountable. As a result, it is essential to choose a reputable PEO company when entering into this type of arrangement.
Who is liable in cases involving employees?
One question that often comes up is whether or not a PEO is liable for cases involving employees. The answer to this question is complicated and depends on a number of factors. Generally speaking, PEOs are not liable for cases involving their clients’ employees such as wrongful termination or discrimination. Therefore, it is typically the client company (or supervisor) that becomes liable for said actions. However, a PEO can be held liable for its own negligence, such as failing to provide adequate health insurance coverage.
A PEO can help to limit an employer’s liability in a number of ways. First, a PEO can help to screen and vet job applicants, which can help to reduce the risk of hiring an employee who may engage in criminal or fraudulent activity. Second, a PEO can provide ongoing training and support to employees, which can help to reduce the risk of workplace accidents or injuries. Finally, a PEO can help to manage payroll and benefits, which can help to ensure that employees are properly compensated and that they have access to the health insurance and other benefits they need.
If you are considering using a PEO, it is important to understand the extent of the organization’s liability in order to protect your business.
Video — the difference between the supervisor and the Employer of Record (EOR)
Summary
A PEO becomes an employee’s employer of record while providing various HR services to a client company. These services can include payroll, benefits, workers’ compensation, and recruiting. In the case of a PEO agreement, a supervisor is an individual who oversees the work of others. Supervisors typically have direct reports, and they are responsible for ensuring that tasks are completed in a timely and efficient manner.
FAQ
When businesses use a PEO, the PEO becomes the employer of record. The PEO provides human resources, payroll, and benefits administration services to their client's employees. This arrangement is also called co-employment. The business owner and the PEO share certain responsibilities related to the employees. The PEO becomes responsible for HR compliance, payroll taxes, and workers compensation insurance. The business owner remains responsible for setting employee work hours, supervising employee work performance, and determining employee discipline and termination procedures.
There is a lot of confusion surrounding the term "co-employer," and whether or not a PEO can be classified as such. To clear things up, a co-employer is defined as an entity that shares responsibility for the employment of another individual. In most cases, this means that the co-employer has the ability to hire, fire, and set wages for the employee in question.
With that said, there are a few different ways that a PEO can be classified as a co-employer. For example, if the PEO provides workers' compensation insurance for the employees of its clients, then it would be considered a co-employer under federal law. Similarly, if the PEO acts as an agent for its clients when it comes to payroll or human resources, then it would also be considered a co-employer.
However, it's important to note that not all PEOs will be classified as co-employers. In order to make this determination, you'll need to look at the specific arrangement that you have with your PEO.
