According to the National Association of Professional Employer Organizations (NAPEO), there are 487 PEOs in the United States. The PEO industry’s 173,000 clients represent 15.3 percent of all companies with between 10 and 99 employees.
How do you determine which PEO is best for your organization?
Look for Credentials
As in all areas of business, industry-recognized certification and accreditation carry a lot of weight when it comes to choosing a PEO.
The Small Business Efficiency Act (SBEA) created the voluntary IRS certification program for PEOs. This has become the minimum standard used by an increasing number of industry experts to confirm a PEO’s fiscal responsibility.
- Not all PEOs opt to participate. There’s a rigorous application process involved in earning IRS certification. But, the value and protection it provides far outweigh any related costs.
- Wage-benefit restarts are eliminated and federal tax credits are preserved for IRS-certified PEOs. In addition, these PEOs assume sole liability for the collection and remission of all federal payroll taxes. It’s true that all PEOs take on responsibility for their clients’ federal payroll taxes, but unless a PEO is IRS certified, their clients can still be held liable, in the event the PEO should default on payments.
What About Other Employer Liabilities?
Federal payroll taxes are only one employer liability. As a business leader, you also need to be concerned with state withholdings, benefits deduction garnishments, and more. To be assured that all these liabilities have been satisfied, look for a PEO that is accredited by the Employer Services Assurance Corporation (ESAC).
- ESAC is the official accreditation and financial assurance organization for the PEO industry. It was established by NAPEO in 1995. Accreditation gives PEO clients assurances for not only payroll-tax compliance, but also for a full range of other employer liabilities. This performance is backed by millions of dollars in surety bonds held in trust.
- To earn ESAC accreditation, a PEO must meet certain ethical, financial and operational standards. Maintaining this accreditation status requires a PEO to submit quarterly attestation to ESAC in compliance with audited agreed-upon procedures conducted by an independent CPA.
- ESAC accreditation standards are updated regularly by its Board of Directors. The board is made up of former state and federal regulators and experienced PEO operators, as well as highly experienced industry attorneys and CPAs. Earning accreditation means a PEO is financially stable, conducts all business ethically, and adheres to all operational standards and regulatory requirements.
- ESAC accreditation has long been considered the gold standard for PEO best practices and financial reliability. Fewer than five percent of all PEOs have earned this distinction.
Need More Information? We Can Help
So, while there are close to 500 PEOs to choose from nationwide, don’t make this decision lightly. To learn more about PEOS and the right direction for your growing company, contact Lyons HR today. Founded in 1995 in Florence, Alabama, we are a PEO with 10 operations centers serving hundred of clients and thousands of employees across the U.S We’re ESAC accredited, and we’re proud to be the first PEO to earn IRS certification. We provide comprehensive HR solutions and can help you make the right talent management and business partnership decisions – because We are HR.