PEOs vs. Payroll providers

Although PEOs and payroll providers both oversee your payroll, they’ll do so in different ways game judi slot. These differences include additional services, varying prices and different contractual obligations. Here’s how it breaks down:

Services provided
As your co-employer, your PEO can oversee significantly more tasks than a PSP can daftar slot online. Your PEO will likely obtain and administer your workers’ compensation insurance, and it can also run your hiring and termination processes. Your PEO can also sponsor your company’s health insurance plans and offer you high-quality large-employer plans you might not otherwise have access to. Some PSPs offer health insurance, but PEO plans are typically far superior.

A PSP is focused on processing your payroll and ensuring you meet your payroll tax responsibilities. However, more payroll providers are offering additional HR services such as employee retirement plans and HR consulting.

Cost
PEOs are often more expensive than PSPs, but in looking at the bigger picture and longer term, PEOs may cost less. For starters, the superior health insurance plans available to you through PEOs can cost you less than the insurance plans you might obtain through an insurance broker. Additionally, your PEO won’t charge you more as you add services.

PEOs typically charge you up to 15% of your gross wages per pay period or a flat but high per-employee fee each month. You may also pay a setup fee that can cost thousands of dollars.

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By comparison, a PSP will likely cost no more than $200 per employee per year, but these fees come with none of the cost-saving HR services for which PEOs are known.

Contractual obligation
If you hire a PEO, the large-employer rules that apply to your PEO apply to you. You’ll have additional Americans with Disabilities Act (ADA), Affordable Care Act (ACA) and employee handbook formalities with which to comply. However, alongside these added rules come tremendous time savings, since the PEO can oversee a large portion of your HR needs.

If you choose a PSP, you’ll face few regulatory and contract-based changes, since your PSP is not your co-employer. It’s also important to note that with neither a PSP nor a PEO do you lose control over your employees. You’ll still control day-to-day operations such as employee tasks, assignments and required locations.

Risk and compliance
Like any third-party firm that you hire to outsource certain services, a PSP does not share legal culpability for compliance errors that it may make. In other words, if your PSP messes up your payroll taxes, only you bear the legal burden. As such, hiring a PSP doesn’t do all that much to minimize your business risks and alleviate any compliance concerns.

PEOs are a different story. They’re an excellent choice for managing risk and compliance, since, as your co-employer, they share legal responsibility with you. PEOs have an incentive to minimize risks. They can help obtain top-tier workers’ comp plans for your company. They’ll also handle your workers’ comp claims investigation, representation and management. PEOs address several additional small business risks and compliance concerns such as drug testing, hiring and firing, and workplace security.

Employer of record
A PEO acts as your employer of record (EOR), which means it sets the rules around your benefits. Although this arrangement changes little about your day-to-day affairs, it may limit your benefits plan and carrier options.

That said, the benefits of a PEO serving as your EOR generally outweigh the cons. As the EOR, your PEO – which is a much larger company than yours – has access to benefits with higher quality and lower premiums than you would likely find on your own. Your EOR arrangement also delegates tax filing and remitting to the PEO under its EIN instead of yours, which can lower your SUTA and FUTA tax burdens.

A PSP, on the other hand, is neither your EOR nor your co-employer. Hiring a PSP only changes how you process your payroll and perhaps any additional HR services your PSP offers. You remain the employer of record, and all taxes are filed and remitted under your EIN.