Who's in Charge?  The Issue of Control

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A common question regarding the utilization of PEO services is: who's in charge?

Many business owners and managers wonder if employee-related decisions will be affected by the presence of the PEO as the employer of the record.

In a PEO relationship, a PEO and the business owner share certain responsibilities in the co-employment relationship. The customer continues to manage the day-to-day activities of the employees.  And the PEO assumes other agreed upon responsibilities and liabilities.

In short, the customer is always in charge and retains the right to exit the PEO relationship with 30 days notice. 

However, the PEO's contractual relationship must include language giving it sufficient scope of control in order to be considered the employer of record.

Examples of language within many PEO agreements:

• assigns workers to client locations, and thereby assumes responsibility as an employer for specified purposes of the workers assigned to the client locations;

• reserves a right of direction and control of the employees and may share such responsibility with the client, consistent with the client's responsibility for its product or service;

• pays wages and employment taxes of the employee out of its own accounts;

• reports, collects, and deposits employment taxes with state and federal authorities;

• establishes and maintains an employment relationship with its employees which is intended to be long-term and not temporary; and

• retains a right to hire, reassign, and fire the employees.

Each of these tasks will continue to be accomplished by your existing management staff because the staff will become designated worksite supervisors for the PEO.

PEO-                       

Professional Employer Organizations, also known as employee leasing companies.