The pros and cons of using PEO


If you’re an owner of a small to medium size business and looking for a PEO company to grow your business, you’re on the right track. Outsourcing your HR responsibilities through a PEO company helps you save valuable time and money, and you can focus on your core mission. A PEO frees you from HR tasks such as employee onboarding, payroll, benefits administration, and compliance with employer-related regulations. Also, you can take advantage of Fortune 500-level employee benefits through a PEO that you could not access by using their network. Offering appealing employee benefits is crucial for attracting and retain skilled workers.

However, before jumping into a co-employment relationship with a PEO company, we recommend you go through the pros and cons of using a PEO to see if this is the best option for your company.

What is co-employment?

When your company enters into a contract with PEO, you are participating in a "co-employment" relationship with the PEO company. By doing so, you will convert your custody to them. Technically, your employees are hired by two different business entities; your company and the PEO company. While you can still maintain the control over day-to-day operations and business decision at a worksite, the PEO company manages human resource responsibilities and employer risks such as payroll and payroll tax compliance, benefits administration, workers’ compensation, processing unemployment claims, and other HR-related administrative tasks.

Cons of using PEO

A lot of people believe that they can eliminate risks by joining PEO relationship. However, even though you and a PEO company share responsibilities associated with employment, you are still responsible for employment-related fines, penalties, and lawsuits attributed to both you and the PEO company. For example, if the PEO company fails to file taxes correctly for your employees, you may get fined as well, which might cause severe damage to your business.

Secondly, once you join a PEO, you do not have control over your employee benefits and workers' comp. You have to follow the policies that the PEO company have since your employees technically belong to them. While you may get better plans through the PEO, you are not allowed to opt out of them even if you already have preferred benefits or workers' comp plan.

An alternative solution: EMS (Employment Management Solution)

Throughout more than 25 years of experience in HR management industry, we've recognized our clients' needs for an HR solution that doesn't require co-employment, and we developed industry-leading service called "Employment Management Solution (EMS)." EMS provides you with the same functions as you can get from PEO, yet you can keep your employees under your EIN and State ID, which means your employees exclusively belong to you, and maintain your employee benefits and workers' compensation insurance. You can feel free to shop around for employee benefits and workers' compensation insurance that would work best for you, or you can get one from us since we do offer cost-effective plans through our partners.

The only difference between PEO and EMS is whether or not joining co-employment relationship. It's up to you to choose which one is the best usage for you. PEO might work better for you, but it might not for other companies. We are more than happy to help you find the best HR solutions for your business. For more information about our PEO and EMS services, feel free to contact us.


Written by Cinthia Garza - Sales executive

Updated on May 8, 2017 11:48