The employee leasing or co-employment model has been popular since the mid 1980s. The term “Professional Employer Organization” or PEO for short was introduced during the 1990s. Today PEOs are a common solution for small businesses all around the U.S. In a nutshell, PEOs contractually hire everyone in your firm, from owner to janitor, put them on their payroll, pay taxes through their FEIN (tax ID number), and may secure benefits and workers compensation through their FEIN. They then contractually “lease” your employees back to you. In the early days, business owners were concerned they would lose some element of control over the workplace. This was and still is not the case. PEOs handle back office administration and compliance; you run your business as you did the day before the PEO contract was signed.

The following description is from the National Association of Professional Employer Organizations (NAPEO)’s Web site.

"Professional employer organizations (PEOs) enable clients to cost-effectively outsource the management of human resources, employee benefits, payroll and workers' compensation. PEO clients focus on their core competencies to maintain and grow their bottom line.

Businesses today need help managing increasingly complex employee related matters such as health benefits, workers' compensation claims, payroll, payroll tax compliance, and unemployment insurance claims. They contract with a PEO to assume these responsibilities and provide expertise in human resources management. This allows the PEO client to concentrate on the operational and revenue-producing side of its operations.

A PEO provides integrated services to effectively manage critical human resource responsibilities and employer risks for clients. A PEO delivers these services by establishing and maintaining an employer relationship with the employees at the client's worksite and by contractually assuming certain employer rights, responsibilities, and risk.

Businesses across America have discovered the incredible value of PEOs because they provide:

• Relief from the burden of employment administration.
• A wide range of personnel management solutions through a team of professionals.
• Improved employment practices, compliance and risk management to reduce liabilities.
• Access to a comprehensive employee benefits package, allowing clients to be competitive in the labor market.
• Assistance to improve productivity and profitability.

While all PEOs share common traits as described above, there are significant differences. For example, fees can range from $75 to $250 per employee per month ($900 to $3,000 per employee per year). This does not necessarily mean that one PEO offers three times more service than the next. Anyone considering a PEO should make sure they really need all of the services in the package.

What makes XcelHR different is, while we offer an excellent PEO option, otherwise known as employee leasing, we also offer ASO and other options that do not involve co-employment. We are always happy to take a look at your current PEO and provide you with a free analysis as, more often than not, PEO clients don’t know the real cost of the service.

Click here to learn more about employee leasing.