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How Does Payroll Work With a PEO?

May 4, 2022

business owners discussing how payroll works with a PEO

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Let’s start by acknowledging that this is a common question we’re asked. If you’re a business owner, you know how incredibly time-consuming and tedious payroll administration can be! It’s labor-intensive, but still a necessary task.

And the reality is that if payroll is taking you hours a month, you’re not alone. It’s estimated that small business owners can spend up to five hours per pay period on payroll taxes. In addition, a full one-third of business owners say they’re not comfortable with the payroll process, which is not surprising considering how complicated it is. If you’re handling payroll on your own, you need to understand all the ins and outs of tax laws and make sure it's collected correctly for federal, state, and local governments.

Have you considered outsourcing payroll but are worried it might be too expensive? Professional Employee Organizations (PEOs) will take this time-intensive task off your hands. By allowing businesses to bundle services together, such as payroll and workers' compensation, a PEO can save you time and reduce your expenses. 

The Payroll Process And PEOs: What To Expect

What is a PEO and how do PEOs help businesses with payroll? Here is what to expect. A PEO is an expert, strategic partner for companies that need core administrative support, including complete payroll solutions. PEOs are true partners to the businesses they serve, offering comprehensive services. While some other PEOs also provide HR services, here at SouthEast Personnel Leasing (SPLI), we intentionally focus on the four essentials you need to thrive. Here are the PEO services we provide:

And of course…

Our services reduce stress by allowing you to make one simple payment per payroll cycle. When you partner with us, you won’t have to deal with complicated deductions or withholdings or wonder if you’re compliant.

Even more importantly, administering payroll yourself takes time away from what you do best – growing your business and serving your customers! Partnering with a knowledgeable PEO allows you to focus on scaling your business, maintaining exceptional customer service, and caring for your valuable team members. 

Curious to hear more about the payroll process with a PEO? Here are four things you should know:

#1: Why Do Other Payroll Options Fall Short of A PEO?

Like PEOs, Payroll service providers (PSPs) also administer payroll services. Unfortunately for business owners, that is where most similarities between PEOs and PSPs end. 

While some business owners turn to software or in-house staff for payroll administration with some success, this approach requires mastering software and related tools and doesn’t include the extensive services that the PEO model affords. If you’re running short on time, capacity, or find yourself in need of strategic expertise, most payroll platforms don’t offer the same kind of support you’ll find with PEOs such as on-call experts or a dedicated account executive to serve your business. 

Plus, bundling payroll with other services like workers’ compensation coverage for leased employees reduces redundancy and is more cost-effective in the long run. It’s a complete payroll solution. 

PEOs act as co-employers. In the PEO model, we share legal responsibility. This incentivizes us to avoid errors and minimize risk. A PSP doesn’t share any legal risk when it comes to compliance errors. If a PSP makes a mistake, only you will deal with the legal fallout.

Transparently, the right contracted payroll administrators or software programs can serve you well, but they don’t have the same vested interest in your success, which limits their effectiveness.

#2 The Repercussions of Not Administering Payroll Correctly

Because payroll can be so convoluted, it is easy to make honest mistakes. One of the consequences is a loss of trust with your employees. Your team relies on you to pay them correctly and on time. A recent study found that 30% of small business owners made a payroll mistake at least once — usually underpaying an employee — and it took 56% of those owners longer than 24 hours to fix it.  

Other serious repercussions include paying thousands of dollars in fines for noncompliance. PEOs, on the other hand, have your back. They employ experts who stay on top of government regulations, so you don’t have to. They’ll also complete quarterly filings, W-2 administration and all the necessary paperwork come tax time to ensure compliance.  

#3: The Additional Services PEOs Provide Alongside A Proven Payroll Process

Each professional employer organization is unique—and we do not speak for every PEO out there. However, we can confidently say that PEOs bundle core administrative services for your benefit. At SPLI, as part of our payroll process, we also handle court-ordered deductions, garnishments, job costing, certified payroll for federally-funded projects, benefit deductions, and more.

And as mentioned above, our payroll process for small business owners pairs perfectly with your workers’ compensation insurance, benefits administration, and safety and risk management.

#4 How To Choose The Right PEO Partner To Administer Your Payroll Processes

When evaluating a PEO, certain important criteria can help you decide whether it is the right partner for your business. For example: 

  • How long have they been in business? If the PEO has been around for decades, chances are that they’re doing something right! 

  • Can they accommodate your business's needs as it grows?

  • Do they have in-house experts that are highly knowledgeable when it comes to federal, state, and local tax laws? 

  • Can they customize services to suit your needs? 

  • Does the service agreement clearly explain their liabilities and responsibilities as well as yours? 

SouthEast Personnel Leasing: A Payroll Process That Delivers Peace of Mind

At SouthEast Personnel Leasing, we provide your business with much more than payroll services. Payroll, and the rest of our services, deliver confidence and peace of mind. Over the last 30 plus years, we have provided business leaders like you with workers' compensation solutions and payroll administration. Unlike some providers (or even contractors and software) who only offer one or the other, we help you mitigate risk with a complete payroll solution because we have a vested interest in your success. With more than 6,000 current satisfied clients, we realize the importance of maintaining your trust.  

Recently, a company that provides services to large complexes and military bases had a few claims and their workers’ comp policy was not renewed. The company owner was sick, while the spouse, who generally wasn’t involved in running the business, struggled to find coverage. The spouse contacted SPLI on a Thursday needing coverage for their employees in place by Monday in order for them to keep working.  

On that same day, their staff experienced an unexpected tragedy when the owner passed away. This left their team not only grief-stricken, but scrambling to fill the other day-to-day responsibilities he handled. We cannot imagine the pain they must have been feeling, but there was one thing we could do — ensure they were covered and compliant. 

In short order, we got them enrolled, their workers covered , certificates of insurance delivered to meet their rapidly-approaching deadline and took the burden of payroll administration off their plate. The spouse was adamant that we saved their company and they are really happy with our services.

If you find your team in need of help processing your payroll or on a deadline to obtain workers’ compensation coverage for your employees, we’re here to help. Start by requesting a quote

Interested in seeing the 5 benefits to bundling workers' compensation coverage and payroll administration?

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