If you are looking to pave the way for the success of your business, efficient HRM (human resource management) is required. One way this could be accomplished is by employing a PEO. However, with the existence of so many PEOs in the U.S., the question is: which PEO should a business owner employ?
The aim of this article is 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
Understanding what a certified PEO is will assist in understanding its importance in the modern world of business. A PEO, or Professional Employer Organization, is, in essence, a company that outsources a plethora of HR functions. To do so, the PEO enters a co-employment partnership with the business for general access to provide the 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 services depend on the specific company; for clarity, take a look at this guide to the best PEO companies in the market.
A certified PEO has applied for and been accepted by the IRS (Internal Revenue Service), meeting all the necessary requirements. This certification enhances the reliability and viability of a PEO because it has met the strict requirements of the IRS.
A certified PEO stands out as a reliable partner for businesses, offering its HR services with the insurance of the highest standards of service. Selecting a CPEO means that you get 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 is stringent to ensure that they meet specific standards and criteria:
Eligibility
To be eligible, a PEO must meet the following criteria: 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; and 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
Evaluation of a PEO’s financial stability and ethical practices ensures that they have the capabilities to handle client’s payroll, benefits, and other HR functions. A PEO’s ethical practices are equally as important as their financial capabilities.
The IRS values ethical practices to ensure that customers receive the highest standard of service, eliminating any fraudulent activities from the PEO.
Compliance with regulatory requirements
A PEO must provide proof of their ability to maintain compliance with federal, state, and local tax regulations on behalf of their customers. Additionally, individuals with experience in employment tax compliance are required to manage the PEO in question.
This is paramount to the IRS, as it ensures that customers can confidently entrust their respective PEO co-employers with several HR functions such as tax obligations, workers’ compensation insurance, and employment laws, knowing that they are in full compliance 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. They provide a team of experts to guide customers, respond to inquiries, and resolve complex issues related to employment laws, compliance risks, HR strategies, and more. With a CPEO, the knowledge of a full HR department is available without the substantial costs associated with employing a team.
Risk mitigation
The whole nature of a CPEO is one that has met the requirements of the IRS, and one of those requirements is proof of historical adherence to tax regulations. A CPEO is extremely proficient in employment tax compliance, benefiting their clients through creating, filing, and regularly updating customer tax requirements.
This expertise offers risk mitigation and strict compliance, preventing customers from paying any penalties or fines. Additionally, CPEOs are held responsible by the IRS if their customer’s taxes are not paid, increasing the pressure on a CPEO to be compliant.
Cost savings
In general, Professional Employer Organizations (PEOs) greatly reduce costs for customers by providing comprehensive employee benefits and ensuring compliance with regulatory requirements. Costs are significantly saved because of their access to high-quality employee benefits at competitive rates. This saves businesses money and frees up valuable resources that can be allocated elsewhere.
However, additional costs are saved through CPEOs because no double taxation occurs when switching or canceling their services mid-year. This means that if a customer opts to end the relationship with a CPEO, they are not required to restart federal wage payroll bases, preventing them from paying double the taxes.
Choosing the Right Certified PEO
There are many PEOs on the market, but only a few CPEOs, and choosing the right one requires patience and 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 important to recognize that each one is unique. A diligent evaluation becomes imperative for a comprehensive assessment of 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. Contacting those references and inquiring about their experience with the CPEO provides valuable insights into their performance and reliability, further allowing you to determine if they are right for your business.
Conclusion
A PEO’s extensive services, such as payroll management, benefits administration, legal compliance, and so much more, benefit customers in so 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 reliability of the provider.
Expert support, risk mitigation, and cost savings through the prevention of double taxation are only a short list of the benefits of a CPEO.
When deciding to employ a CPEO, it is important to understand how to choose the right one. The process begins by checking the accreditation, as many PEOs falsely advertise that they are certified. Next is researching and comparing the different providers, ensuring that they align with your business goals. Finally, contacting references helps you determine whether a CPEO is going to benefit you by inquiring about past customer’s experiences.
The Significance of Certified PEOs in Modern Business: A Comprehensive Guide
