What a PEO is
The arrangement is called co-employment. The client employer and the PEO both have a role. That is different from a payroll company that only issues checks, and different from a broker who only places a health plan or a workers’ compensation policy.
You keep direction of the work
You still decide who is hired, what they do, and whether they stay. Co-employment does not hand those decisions to the PEO.
The contract divides the rest
Payroll, benefits, workers’ compensation, and HR tasks are split in a client service agreement. Two PEOs can use the same word and divide the work differently. The agreement is the document that matters.
What usually comes with it
The list below is what employers are usually buying. The depth of each piece depends on the PEO, and on the agreement.
Payroll and employment taxes
Pay, tax deposits, and the filings that go with them. Some PEOs are certified by the IRS as certified professional employer organizations. That certification is about how federal employment taxes are handled. It is not a rating of the health plan.
Benefits
Many PEOs offer medical, dental, vision, and other group benefits on a plan sponsored at the PEO level. A smaller employer sometimes gets a broader plan that way. The plan is only as good as its network, its cost, and what it covers.
Workers’ compensation
Workers’ compensation is often written through the PEO rather than as a policy in the employer’s own name. That changes the claim, the audit, and what happens if you leave. It deserves the same reading as any other workers’ compensation placement.
HR support
Handbooks, hiring questions, and a place to call when an employment issue comes up. A login and a call center are not the same thing as a person who knows the organization. Ask which one you are getting.
Why an employer looks at one
None of these results is guaranteed. A PEO charges an administrative fee on top of wages, taxes, benefits, and workers’ compensation. The medical rate is likely to be lower than what the same group would pay on the open market.
The HR work has outgrown the staff
Payroll, enrollment, and employment questions are taking time the organization would rather spend on the business.
Benefits are hard to buy alone
A smaller or mid-sized group can struggle to hold a stable medical plan, or to offer one that helps keep employees. A PEO’s plan is one way to approach that obstacle.
The current PEO no longer fits
The fee went up, the health plan got thinner, or the service got quiet. Staying is a decision. It should not be the default just because the payroll already runs there.
What it does not do
It is not automatically cheaper
Compare the whole cost: the administrative fee, the benefits, the workers’ compensation, and the time you still spend managing people. A quote that shows only the medical rate is incomplete.
It does not replace the rest of the insurance
Property, general liability, auto, and other lines usually stay outside the PEO. The benefits and workers’ compensation inside it still have to be read, not assumed.
It does not remove responsibility for the workplace
Day-to-day management stays with the employer. A PEO can advise. It does not stand in for supervision, and it does not make an employment claim disappear.
Three ways the conversation starts
Comparing PEOs
If a PEO is on the table, set more than one next to the program you have now. Look at the fee, the medical plan, the workers’ compensation, and the service that is actually included.
Already in a PEO
The question is whether the current arrangement still earns its fee. Sometimes that means a different PEO. Sometimes a traditional benefits plan and a workers’ compensation policy in your own name is the cleaner program.
Leaving
An exit works only if payroll, benefits, and workers’ compensation are ready somewhere else on the day you leave. Those three are what employees feel if there is a gap. The transition is the work.
How we can help
South Texas Risk Management is a brokerage and consulting firm. We are not a PEO. We do not run your payroll, and we do not co-employ your staff.
What we can do is read a PEO next to the insurance you already buy. We look at benefits, workers’ compensation, and the coverage that would stay outside the arrangement, and we talk through whether a PEO, a different PEO, or no PEO fits the organization and the budget. If you want proposals, we help you compare them. The decision stays yours.