Professional employer organizations are shadow businesses.
That is, they are the actual employer of record of people who ostensibly are
working for another company. This sounds a little crazy, but actually is quite
sensible.
WHAT IS A PEO COMPANY?
It works this way: A professional employer organization, or
PEO, lets a company outsource to it such management tasks as recruiting
employees, training and paying them, and offering them benefits. In short, for
a fee, the PEO becomes a co-employer of a person for tax and insurance purposes,
thus relieving a usually small company of many management responsibilities.
There are various models for doing this, but essentially the
PEO handles all the auxiliary overhead issues with an employee while the host
company directs the employee’s actual day-to-day work routine. Broadly
speaking, the services provided by a PEO fall under the rubric of human
resources, the area of employment that can give small companies fits.
In Florida, more than 760,000 employees of more than 56,000
companies receive pay and benefits through PEO organizations, according to the
Florida Association of Professional Employer Organizations. The total payroll
involved is just over $24 billion.
The relationships between PEOs and host companies tend to be
long-lasting, with 86 percent of the PEO-client unions retained at the end of a
contract period. The system is a stable one because it seems to work well for
everyone involved, beginning with employees who have access to greater benefits
than the host company could provide, receive more thorough training and
orientation, and are able to carry benefit packages from one host company to
another under the PEO umbrella.
PROFESSIONAL EMPLOYMENT ORGANIZATIONS
Host companies benefit from not having the hassles of human
resources work, as well as from being able to attract more qualified employees
because of the attractive benefit packages offered through the PEO. Federal and
state governments like the PEOs because they are able to bundle tax collections
and broaden insurance coverage to more workers.
To avoid chicanery in an employment process that opens the
door to abuse—having two employers for the same job invites sleight-of-hand
management—the industry self-regulates its ethics and practices through its
professional trade association and federal regulators also monitor it. After
all, the industry has grown to about 700 professional employer organizations across
the country covering between two and three million workers.
