Efficient HRM (human resource management) is crucial for the success of any business. One effective way to achieve this is by hiring a PEO. However, with so many PEOs operating in the US, the question arises: which PEO should a business owner choose to work with?
This article aims to provide a deeper understanding of the importance of a certified PEO, the certification process, the benefits, and how to choose the right one.
Defining a Certified PEO & Its Importance
A Professional Employer Organization (PEO) is a company that outsources many HR functions by entering a co-employment partnership with a business to provide these services.
The services provided by a PEO include payroll processing and management, benefits administration, HR consulting, legal compliance, and employee training and development.
Although these are standard services, no two PEOs are created equal. The added benefits depend on the company; for clarity, look at this guide to the best PEO companies in the market.
A certified PEO has met all the requirements set by the IRS (Internal Revenue Service). This certification enhances the reliability and viability of a PEO because it has completed the strict requirements of the IRS.
A certified PEO stands out as a reliable partner for businesses, offering its HR services with the highest service standards. Selecting a CPEO means getting a partner that has passed rigorous financial, reporting, and background checks by the IRS.
Certification Process for PEOs
Understanding the importance of a certified PEO requires knowledge of the certification process. This process includes:
Eligibility
- Be a business entity with at least one location in the United States.
- Have a history of adhering to federal, state, and local regulations.
- Be financially responsible.
- Have organizational integrity.
- Be managed by individuals with experience in federal and state employment tax compliance.
It is a strict evaluation to determine which companies qualify or not.
Evaluation of financial stability and ethical practices
Assessing a PEO’s financial strength and ethics ensures they can handle payroll, benefits, and other functions. A PEO’s ethical practices are equally as important as their financial capabilities.
The IRS values ethical practices to ensure customers receive the highest service standard, eliminating fraudulent activities.
Compliance with regulatory requirements
A PEO must prove they can maintain compliance with federal, state, and local tax regulations for their customers. Additionally, individuals with experience in employment tax compliance are required to manage the PEO in question.
This way, the IRS ensures that customers can confidently entrust PEOs with several HR functions, such as tax obligations, workers’ compensation insurance, and employment laws, knowing they are fully compliant with any regulations.
Benefits of Certification
CPEOs provide several benefits that make them an asset to businesses:
Expertise and support
Certified PEOs have unwavering expertise in HR. Experts guide customers, respond to inquiries, and resolve complex issues related to employment laws, compliance risks, HR strategies, etc. With a CPEO, the knowledge of an HR department is available without the substantial costs associated with employing a team.
Risk mitigation
A CPEO has met the requirements of the IRS, and one requirement is proof of historical adherence to tax regulations. A CPEO is proficient in employment tax compliance, benefiting clients through creating, filing, and regularly updating customer tax requirements.
This expertise offers risk mitigation and strict compliance, preventing customers from paying penalties or fines. Additionally, the IRS holds CPEOs responsible if their customers’ taxes are unpaid, increasing the pressure to comply.
Cost savings
Generally, Professional Employer Organizations (PEOs) significantly reduce customer costs by providing comprehensive employee benefits and ensuring compliance with regulatory requirements. Costs are saved considerably because of their access to high-quality employee benefits at competitive rates. Consequently, competitive rates save businesses money and allow valuable resources to be allocated elsewhere.
However, additional costs are saved through CPEOs because no double taxation occurs when switching or canceling their services mid-year. Customers who end the relationship are not required to restart federal wage payroll bases, preventing payment of double taxes.
Choosing the Right Certified PEO
Many PEOs are in the market, but only a few CPEOs, and choosing the right one requires attention to detail.
Check accreditation
It is essential to know whether a PEO is accredited or not. A PEO may advertise that it is certified, but it could only be a false advertisement. Luckily, the IRS provides a public list of all certified PEOs, reducing the chances of choosing a non-certified PEO.
Researching and comparing certified PEO providers
Although the roster of CPEOs may be limited, it’s essential to recognize that each is unique. A diligent evaluation becomes imperative for comprehensively assessing the providers’ suitability to your organization’s objectives and requirements.
Contact References
If a CPEO is reliable, they will provide a list of references upon request. Inquiring about reference experiences offers valuable insights into the CPEO’s performance and reliability, further allowing you to determine if it is suitable.
Conclusion
A PEO’s services, such as payroll management, benefits administration, legal compliance, and so much more, benefit customers in many ways. However, something more enhanced than a standard PEO is a certified PEO. A CPEO is a PEO that has met the strict requirements of the IRS, increasing the provider’s reliability.
Expert support, risk mitigation, and cost savings are only a short list of the benefits of a CPEO.
When deciding to employ a CPEO, it is vital to understand how to choose the right one. The process begins by checking the accreditation, as many PEOs falsely advertise they are certified. Next is researching and comparing the different providers, ensuring they align with your business goals. Finally, contacting references helps you determine whether a CPEO will benefit you by inquiring about past customer’s experiences.