SE Day 2: PEO and Co-employment Flashcards
(38 cards)
What is co-employment?
A contractual agreement between a company and a PEO that allocates and divides employer responsibilities between the two. This agreement is called a client service agreement (CSA)
In a PEO relationship, the business owner maintains control of:
All business decisions, operations, employees’ daily duties and core job functions
In a PEO relationship. the PEO manages which responsibilities?
Processing payroll, admin payroll deductions, issuing paychecks, preparing and filing payroll taxes, providing benefits to worksite employees, worker’s compensation coverage and claims management, providing HR advice to the client
What are the benefits of a co-employment relationship?
Access to big-business benefits, simplified payroll, workers’ compensation coverage and claim management, strategic HR support and planning
What are some misconceptions about co-employment relationships?
Losing control of the business, employees will revolt, co-employment is a way to replace existing HR professionals
What is a CPEO?
A PEO that has applied to the IRS to be certified and has received the CPEO designation. a CPEO takes on added responsibility related to payroll administration and federal employment tax reporting and payments
What is the Small Business Efficiency Act (SBEA)?
An act in 2014 that shows federal recognition of the PEO industry
What is the company’s role in a CPEO relationship?
The company remains an employer, maintains control of employees’ daily core job functions and leadership focuses on fulfilling their primary roles.
What is the CPEO’s role in a CPEO relationship?
The CPEO takes over employer obligations and provides benefits and handles functions such as payroll, tax remittance, and government filings and can take on more responsibility than a standard payroll company
What are some requirements to qualify as a CPEO?
Require an audit of financial statements, CPA documentation that employment taxes are paid in a timely manner, documentation of positive working capital, background reports of individuals responsible for employment tax payments
Why was the Small Business Efficiency Act important?
It gave structure to who is responsible for what and how eligibility for certain tax credits is defined.
What was the traditional IRS view on payroll tax liability?
The IRS traditionally took the view that both are separately liable for federal employment taxes. With a CPEO relationship, the CPEO is solely liable for payment of federal employment taxes
Name a few tax credits that the CPEO relationship allows
Credit for increasing research activity, credit for health insurance expenses, work opportunity credit, empowerment zone employment credit
What was the original problem with federal employment taxes before a CPEO was created?
If a company joined a PEO mid-year, their federal employment taxes would reset and they would pay double their taxes
What is it important to be with a PEO with financial strength?
Several PEO licensing laws require it and are recommended by the National Associaton of Professional Employer Organizations (NAPEO)
What is a PEO’s staff support ratio?
The number of corporate staff members employed compared to the number of worksite employees
What is the purpose of the Employer Services Assurance Corporation (ESAC)?
They review the ethical, financial, and operational practices of PEOs
How does a fully-insured health plan compare to a self-insured?
In fully-insured plans, the carrier charges a fixed premium and takes on all risk and is responsible for claims. In a self-insured plan, the employer takes on all the claims and therefore, all the risk
How does a PEO save a client on benefits?
The PEO handles administrative tasks with benefits (negotiating with carriers, enrolling employees, legal notices) and also helps better understand the benefits offered (such as having a contact center)
How does a PEO save a client on payroll?
The PEO reduces payroll processing and related accounting costs
How does a PEO benefit a client on retirement plans?
A PEO can offer a retirement plan such as a 401(k) and can manage the administrative responsibilities and regulatory requirements (such as compliance testing, distribution processing and required notices)
How does a PEO benefit a client on HR compliance?
A PEO can keep a business up to speed on several laws and regulations (such as paid sick time policies) for employees all over the country. Some other examples are preventing asking about criminal backgrounds and salary history.
How does a PEO benefit a client on workers’ compensation?
A PEO takes on both the WC coverage as well as the compliance, audits, paperwork, and certifications associated. In addition, they can offer safety consultants to mitigate risk and reduce claims
How does a PEO benefit in case of a business lawsuit?
PEOs typically have equal employment opportunity specialists who are well-versed in discrimination laws and can mitigate a costly settlement. They serve as a second set of eyes rather than legal counsel
