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PEO Payroll or a
Standard Payroll Processor
Processing payroll is almost identical whether its a PEO or
payroll company. Both entities use similar software,
process paycheck, pay taxes, and create year end w-2's. However,
PEOs were designed to bundle payroll, HR, workers' compensation
insurance, and benefits administration into one seamless
package. Payroll companies are more likely to bill on an a
la carte basis and PEOs are more likely to bill an
administration fee as a percentage of gross payroll.
PEO's typically charge between 2% and 4% of their clients gross
payroll. This administration charge is supposed to include
payroll processing, HR services, insurance risk management
services, insurance premium, and other administration costs.
Payroll companies typically charge between $1.50 and $3.50 per
check. They will often have additional fees for employee
administration services such as HR, garnishments, tax reporting
and more.
While PEOs tend to be a more expensive option than payroll
services they may be a better overall value if they can offset
other costs such as insurance premium, unemployment taxes, and
HR administration. Employers need to consider the overall
PEO solution and measure it against all the employer related
costs in order to determine which is the better deal for their
business.
The lines between PEOs and Payroll providers continue to blur as
both industries mature and adapt to market demand. PEOs
have become more like payroll services with special insurance
programs and administrative services while payroll companies
continue to offer more PEO like services such as Pay As You Go
workers compensation and HR support.
Outsource Payroll- consider our payroll service.
Difference in Payroll
Taxes Between Payroll Companies and PEOs
While payroll companies process and report all employee and
employer matching taxes under the clients own FEIN, PEOs report
all taxes under their PEOs FEIN since they are the employer of
record. However, many states now have laws in place that
requires PEOs to report state unemployment tax under the client
state identification number and at the clients unemployment tax
rates as opposed to the PEOs.
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