The Payroll Department is a Payroll Provider, Not a PEO

As a business owner, have you ever heard of a Professional Employer Organization, a PEO? If not, don’t worry, you aren’t alone.

According to, a PEO is an organization that provides integrated employee-related services to help business owners manage human resources responsibilities. The organization handles HR and employee-related matters such as:

  • Health insurance
  • Workers’ compensation
  • Payroll
  • Payroll taxes (collection, payment and compliance)
  • Unemployment insurance claims

Find the payroll services that fit your business best. It is explained that a PEO actually becomes the “employer of record” for IRS purposes and the business enters into an “employee leasing agreement” for the workers. This allows the PEO to assume the “risk and responsibility” for some of the payroll and HR-related issues in regard to employees.

The stated theory is that with a greater pool of workers, PEOs are able to take advantage of better unemployment and health insurance rates, increased efficiencies and reduced costs for things like unemployment tax, HR costs and employment processes.

With all the noted cost savings, it sounds like a great deal but, as Teresa Ray of The Payroll Department points out, you have to find the right providers for those services. Even points out that a PEO is not right for every business – or even right for every part of a business. And the costs vary from customer to customer.

As a payroll service, The Payroll Department processes the payroll, provides the information employers need and works to ensure that taxes are paid accurately and on time in accordance with the laws. They do not become the employer and the business is still ultimately responsible for matters relating to employees and payroll taxes. That also means the business owner has control over the service providers he chooses to use.

Entrepreneurs typically like to have a hand in most all aspects of their business. Knowing you have a professional, experienced and knowledgeable expert in your corner like The Payroll Department is very different from having someone else controlling your HR matters.

Of course, it’s your business so it’s your choice. Just be sure to weigh all the pros and cons before making a final decision for your workplace.

-Elaine of The Payroll Department Blog Team

Posted in: Payroll, Payroll Processing

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