PEO Buyer's Guide

The PEO co-employer agreement

If you feel that you'll lose control of your company with a PEO vendor, you're not alone. Many companies get confused by the co-employer relationship. It's important to recognize that you always run the show. You have control over all business operations and the work that your employees do. You are simply contracting PEO companies to take over administrative duties, employer responsibilities and liabilities. The terms to remember are that the PEO vendor is the "administrative employer," while your company is the "worksite employer."

A common concern for companies who are hesitant to employ PEO companies is whether they can trust an outsider with full responsibility for their employees. You may also worry that that PEO companies could lease your staff to another company. However these concerns are unfounded: PEO vendors work very hard to avoid conflicts of interest and keep your business practices confidential.

For many, giving up official employment of staff is a difficult conceptual hurdle to overcome. If you can't look past it, PEO services may not be for you. Remember, too, that if you ever feel that a PEO vendor is challenging your position of power, you can simply give 30 days notice and look for another option.

If a PEO vendor gives you advice on how to handle a situation - dismissing a disgruntled employee, for example - and you choose to ignore it, the vendor can give elect to end your working relationship. The PEO vendor complies with various regulations and knows how to approach delicate situations to prevent a lawsuit. Without their expertise, you'll be on your own to defend the claim using your own resources.

How will employees be affected?
From an employee perspective, PEO services are seamless. Your staffers' day-to-day reporting requirements don't change - they would perform their same job functions, but they'd see the PEO vendor's name on their paychecks. If an employee has a question about benefits, they can call the PEO directly and talk with staffers assigned to understand your needs.

If you hire a PEO vendor, it's best that you explain the co-employer agreement with your staff right away. A common misconception employees have is that their jobs are in jeopardy for cheaper labor, which can make them understandably nervous. Many PEO companies will schedule a brief introductory seminar to explain the PEO vendor's role and to help with the benefits transfer paperwork.

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