What a professional employer organization can do for your business, Pt. 2Article added by Eric Snethkamp on February 25, 2011
Ranked: #526 (175 pts)
Part 2: Payroll and tax administration
In part one of this six part series of articles, we discussed the basics of what a professional employer organization is and a general overview of what it does. This article will begin to cover specific services offered by most PEOs and will focus on payroll and administration.
Tax regulations affecting small to medium sized businesses change frequently. These frequent changes are difficult for most businesses to keep up with. Errors on a business’ tax filings can result in penalties that can put an incredible strain on the bottom line. The IRS reports that one out of every three employers has been charged for payroll mistakes accumulating fines totaling billions of dollars.
Some employers avoid using HR personnel to handle payroll and tax duties and choose instead to hire the services of a CPA and a bookkeeping service. This is a step in the right direction but not only can this be expensive, it is only a partial solution to the cumulative problems and tasks associated with being an employer.
Most CPA’s or bookkeeping services do a great job at taking the pressure off of the business owner and are experts at keeping up with tax law. But that is generally the extent of their expertise. Some CPA’s choose to work with a PEO to provide their clients with the services they are not able to personally provide, such as human resources services, safety and risk management, and benefits management.
In many cases, a good PEO will be able to offer all of these services in a user friendly bundle at a cost savings to the employer. In addition, a good PEO will cover the costs of any penalties due to payroll tax mistakes on their part. This can be added peace of mind for an employer.
The avoidance of penalties and ease of use a PEO provides are only a portion of what a good PEO can offer when it comes to payroll and tax administration. Additional services can include, but are not limited to, the following:
Insurance and business deductions
Multi-location payroll distribution
Online document systems
State and federal tax remittance
Annual and quarterly tax reports
W2s, W3s and 1099s
Time clocks/time and attendance systems
Job cost reporting
The large amount of administrative work and costs to employers involved with providing all of these services and benefits can be overwhelming. Because a PEO employs a large staff of experts and effectively combines hundreds of employees into one company comprising thousands of employees, these services can be offered to each member business at a considerable cost savings.
- Payroll processing/direct deposit
- Certified payrolls
- Wage garnishment/child support
Some people relate the benefits of a PEO with that of a warehouse super club, where a large number of members allows for steep discounts on products and services because the club is buying in bulk for its members. Most people first think of this benefit when we start talking about health insurance costs.
You will begin to see several recurring themes throughout these articles. One of the more important themes is reducing the size and payroll of a large HR staff. A smaller, well-supported HR staff has many advantages. It allows the HR staff room to focus on business necessities which increase revenue rather than spending hours on nonrevenue producing tasks. A smaller, well-supported staff also reduces potential costly mistakes by HR staff members, and gives the HR staff a professional and competent support system.
Overall, the goal of working with a PEO is to provide all of the most important services plus additional bells and whistles all at a cost savings to the employer thus increasing profitability.
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