Q: What is a PEO?
A: A Professional Employer Organization (PEO) is a company which contractually assumes and manages critical human resource and personnel responsibilities and employer risks for small to mid-sized businesses by establishing and maintaining an employer relationship with worksite employees. (NAPEO)
Q: How does the U.S. Department of Labor view the PEO relationship?
A: "The contractual relationship between a PEO and the Client Company creates a joint employment relationship." Section 825.106(b).
Q: How does the Internal Revenue Service acknowledge the PEO relationship?
A: The Internal Revenue Service acknowledges that a PEO may be the employer for federal income and unemployment taxes. Moreover, many states statutorily recognize PEOs as the employer or co-employer of worksite employees for purposes of workers’compensation and state unemployment insurance taxes.
Q: How do State Departments of Labor View the PEO relationship?
A: Depending on the state of operation, one of three models is traditionally exercised: 1) all worksite employees are filed under the PEO master account & rate 2) all worksite employees are filed under the worksite employer’s account & rate, or 3) worksite employees may be filed under either the PEO or worksite employer on a client specific basis.
Q: How does PMI’s PEO program benefit a client?
A: Clients traditionally receive an immediate reduction of cost associated with workforce administration. Through the co-employer relationship, we combine client company workforces into one company (PMI), which creates economies of scale for benefits, insurance, human resource and personnel administration. The Client retains control and direction of worksite employees while PMI is recognized as the co-employer for workforce administrative responsibilities. Workforce cost reductions average between 2 to 5 percent of one’s gross wages.
Q: Who controls the direction and supervision of worksite employees?
A: The client, through the co-employer relationship, controls all direction and activities of worksite employees. PMI may not redirect the activities or direction of worksite employees.
Q: How does PMI combine client company worksite employees?
A: Employees will be filed under PMI’s Employer Identification Number, and PMI bears responsibility for all payroll and tax obligations. Once worksite employees are filed under PMI, PMI offers traditional employee benefits (i.e., group health, 401(k), direct deposit, etc.) and statutory insurance (i.e., workers’ compensation, general liability, etc.) Through our co-employer partnership, clients pool their workforces and receive the benefits of economies of scale.
Q: How does "economy of scale" benefit PMI’s clients?
A: If two prospective clients enter your business to purchase products, and if the 1st prospective client orders 10 products and the 2nd prospective client orders 100 products, the prospective client with the larger order will traditionally receive a discount. This analysis transfers to the purchase of benefits and insurance for a company. If we pool your 10-worksite employees with 100-worksite employees we have produced a mass buying power or an "economy of scale." As PMI grows, our pool of worksite employees produces a greater mass or "economy of scale" which benefits all clients of PMI through savings in benefits, insurance and services.