PEO services: How does Employee Leasing Work?

If you’re not familiar with employee leasing/ PEO services, it may seem difficult to understand how it works or – will it work for your business? Below are a number of commonly asked questions and answers. Please call or send us an email if you don’t find the answer to your question.

What services are provided through an employee leasing company?
What is an employee leasing quote based on?
What’s involved to get quotes?
How would I begin services once I’m approved?
How do I receive employee checks (payroll)?
How do I get the payroll information to the employee leasing company?
How quickly can I expect to receive payroll from the employee leasing company?
Whose bank account is payroll drawn from?
How does the employee leasing company receive payment for the payroll? What do I receive with my payroll?
Are there advantages for my business in regards to workers’ compensation?
What are the benefits of a pay-as-you-go general liability policy?
What role does human resources play in my business and how does employee leasing help me?
Why does the employee leasing concept work?
We have a unique payroll system, can the employee leasing company adapt?
Who is responsible for the employees' wages and employment taxes?
How are PEOs recognized at the state and federal levels?
Who is responsible for state unemployment taxes?

What services are provided through an employee leasing company?
Payroll, workers’ compensation, benefits and human resource management serve as the core services provided by an employee leasing company.

What is an employee leasing quote based on?
An employee leasing proposal is based on the five employee-related cost factors you currently have- nothing more, nothing less. They include:

FICA – Your matching social security and Medicare
FUTA – Federal Unemployment Tax
SUTA – State Unemployment Tax
W/C – Workers’ Compensation rates for different risks (ex: painting, sales, clerical) involved with your company
Administration – All of the internal employee personnel work involved in running your business. These services include payroll management, workers’ compensation or risk management, government compliance, human resource and benefit administration.

Regardless of the method used, these are five cost factors you’re obligated to address.

What’s involved to get quotes?
For a quick quote, simply fill out the form on our “receive a quote” page. Ultimately, your business will need to be approved for workers’ compensation coverage which involves completing our new client profile form. This information provides a view into what your business does, how you do it, what the employees do daily, etc.

When you’re ready to move forward, just let us know. We’ll immediately e-mail, fax or overnight an enrollment packet. The employee applications are highlighted and consist of your basic I-9 and W-4 information. Once you’ve completed and returned the information, a payroll manager quickly uploads your company’s information into a secure file for payroll to begin.

How do I receive employee checks (payroll)?
You and your employees have options for receiving payroll. Most companies offer free direct deposit for employees. Many offer remote printing, so that you can print checks right at your office. A majority of business owners choose to have checks sent via courier, where checks are secured in individual envelopes.

How do I get the payroll information to the employee leasing company?
Reporting payroll can be done in a variety of ways, depending on which is most convenient to you. Options include online (through a secured network), faxing or calling in. You’ll have a payroll tech designated to your account that you can contact anytime with employee or pay rate changes or other questions you might have.

How quickly can I expect to receive payroll from the employee leasing company?
If you choose remote printing, payroll can be done almost immediately. Otherwise, many companies offer a 24 hour turnaround courier service if payroll is reported by noon the day before payday. You decide what’s most convenient for your business.

Whose bank account is payroll drawn from?
Depending on the PEO, the payroll and checks can be drawn off the employee leasing company’s account or yours. In most cases, the payroll is drawn off the PEO company’s account giving the employer less administrative work by writing one check to cover everything (payroll checks, employer related taxes, workers’ comp premiums and administrative fees) avoiding check reconciliation.
However, some employers prefer some extra “float”, by just having the payroll taxes, workers’ compensation and administrative charges taken out. In this scenario, the payroll checks clear as the employees make their deposits off your account.

How does the employee leasing company receive payment for the payroll?
Depending on the PEO and your preference, there are number of ways payment can be made. They include: cashier’s check, company check, automatic withdrawal (ACH) from your account and wire transfer.

What do I receive with my payroll?
Besides paychecks, you can expect an invoice with all the payroll expenses in detail, a payroll register and an input sheet for your upcoming payroll if needed. Depending on your business, you may require special reports for departments or job costing as well.

Are there advantages for my business in regards to workers’ compensation?
Yes, there are a number of ways to save on workers’ comp with an employee leasing company. Unlike traditional “stand alone” policies, you don’t have the large down payments or annual state expense fees. Many times there are no deposits required at all! Most businesses also receive discounted rates that aren’t accessible with traditional policies. And because workers’ comp is based on payroll, premiums are withdrawn with your pay cycle– saving you time and the frustration of audits.

What are the benefits of a pay-as-you go general liability policy?
The benefits of our General Liability include:

No audits
Pay-as-you-go
No money down
No financing fees
Reduced premium rate due to the employee leasing model
No more risk of overpaying on general liability and not getting your money back
Reduced premium paid because in most cases, premium is based on a percentage rate of payroll per hundred and not on gross sales
General liability and workers’ comp are on the same certificate of insurance.

What role does human resources play in my business and how does employee leasing help me?
Unfortunately, we live in lawsuit happy world, so having professional guidance pertaining to hiring and firing employees can be a valuable resource for your business. An employee leasing company provides a number of beneficial HR services from unemployment claims to I-9 immigration compliance.

Why does the employee leasing concept work?
Simple – it allows you to concentrate on work that affects your bottom line. The small business administration (SBA) estimates that employers spend up to 40% of their time dealing with non-income producing administrative tasks. Consider what you could accomplish if all of your time, energy and focus evolved around ways to create more profits?

We have a unique payroll system, can the employee leasing company adapt?
Employee leasing companies work with business owners who employ from 1 to over 1,000 employees in different industries, states and professions. Not every employee leasing company is equipped to handle unique payrolls, but we know the ones that are.

Who is responsible for the employees' wages and employment taxes?
The employee leasing company assumes responsibility and liability for payment of wages and compliance with the rules and regulations governing the reporting and payment of federal and state taxes on wages paid to employees.

How are PEOs recognized at the state and federal levels?
PEOs operate in all 50 states. Many states provide some form of specific licensing, registration or regulation for PEOs. These states statutorily recognize PEOs as the employer or co-employer of worksite employees for many purposes, including workers' compensation and state unemployment insurance taxes. The IRS has accepted the right of a PEO to withhold and remit federal income and unemployment taxes for worksite employees.

Who is responsible for state unemployment taxes?
As the employer for employment tax and employee benefits, PEOs assume responsibility and liability for payment of state unemployment taxes, and most states recognize the PEO as the responsible entity. In those states that require the PEO to report unemployment tax liability under its clients' account numbers, the PEO can still manage this responsibility.

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