Of the many paramount things for any business owner, the most essential is that their employees are well and timely paid. It may become difficult to handle when one has a lot of work to do by oneself. This is where the need to get some external help arises.
There are two common options that people turn to for payroll-related tasks: a Professional Employer Organization and a Payroll Service Provider. Although both services deal with the management of payroll, they differ in many ways.
Through this article, we will explore more about what exactly these services are all about, their features, and the key differences between them. We will also guide you on whether you should go for PEO payroll or traditional payroll service provider for your business.
What do you mean by the term PEO?
A PEO stands for a professional employer organization and is defined in its simplest terms as a business organization that enters into business partnerships with other businesses to offer all-around human resource services. In a layman’s language, when your company enters into a PEO, this basically implies—what is referred to as co-employment. It delegates some tasks, mostly to a PEO, regarding human resources and people management.
This means that PEO assumes legal liability on taxation and compliance, thus making payroll, employee benefits, and compensation to workers easier to manage. The business, however, still holds a bit of authority over its workers and the flow of events in the operation.
Features of PEO
PEO offers numerous services that can assist in managing various aspects of your business:
- Payroll Management: PEOs are involved in the management of employees’ remunerations, tax regimes, and related regulations.
- Employee Benefits: They offer perks such as medical coverage, pensions, and other privileges to the employees.
- Human Resources Support: The services PEOs provide in HR include recruitment services, employee manuals, and performance evaluation.
- Compliance Assistance: They assist you in avoiding violation of employment laws and regulations by your business.
- Risk Management: PEOs help in workers compensation, safety programs and liability insurance.
What is a Payroll Service Provider?
A payroll service provider is a company that specializes in managing part or the whole of the business payroll processing. They compute wages, perform withholding, prepare paychecks, initiate direct deposits, file government reports, manage employee benefits, and often provide HR support.
If one allows providers to do payroll, it would save time, reduce errors, and ensure compliance with labor laws. Most providers also have advanced features like online portals and mobile apps that provide better payroll management options.
Features of Payroll Service Provider
A Payroll Service Provider is primarily concerned with particular dutiHere’sating to payroll processing. Here’s a short list of their key features:
- Payroll Processing: PSPs determine the amount to be paid to an employee and deliver the check.
- Tax Filing: It operates the filings of payroll taxes and the adherence to the legal requirements of taxation.
- Direct Deposits: PSPs perform the categories of direct deposit services for employees.
- Record Keeping: They keep records of payroll details for tax and legal proceeding.
- Basic Compliance: PSPs make sure that the company’s payroll complies with the standards set by the state and federal laws.
What makes the two different from each other?
While both PEOs and payroll service providers help run a payroll, there are important differences between them. Here are three major points of difference:
- Scope of Services: This is where a PEO differs from a payroll service provider. It has far more extended services than those offered by a payroll service provider. Apart from payroll, a PEO will help with a lot of other HR-related services, including employee benefits, compliance, risk management, and others. A payroll service vendor, however, almost exclusively concerns itself only with payroll processing and peripheral tasks.
- Co-Employment Relationship: When using a PEO, you form a co-employment relationship; hence, it partially assumes the role of an employer alongside your business. Co-employment enables a PEO to take charge of larger and more comprehensive HR tasks. In contrast, a Payroll Service Provider is only a third-party service provider and holds no kind of co-employment relationship.
- Employee Benefits: Because of their ability to pool resources from multiple clients, Professional Employer Organizations can afford to offer employees an extensive benefits package, including such things as health insurance and retirement plans. Services in Payroll Services Providers usually do not offer many extensive packages since they concentrate instead on the administrative legwork of preparing payrolls.
Which one should a business choose?
A PEO means professional employer organization, and in simple terms, it refers to a business organization designed to partner with other businesses to provide all-around human resources services.
When your company enters a PEO payroll system, this essentially means that it is entering into what is referred to as co-employment. It outsources some tasks, mostly with a PEO regarding human resources and people management.
This means that PEO assumes legal liability on taxation and compliance, thus making payroll, employee benefits, and compensation to workers easier to manage. The business, however, still holds a bit of authority over its workers and the flow of events in the operation.
Conclusion
Despite the advantages of both PEO payroll and traditional Payroll Services providers, a PEO is a more flexible solution. It can also provide you with a full range of human resource solutions to help your business in ways that a PSP simply cannot. If you are looking for someone to assume responsibility for your employee management, ensuring that all the laws and regulations regarding employment are complied with, then the PEO will better suit your needs.