With a constant influx of new acronyms, it’s hard to keep up. Especially if you’re a business owner juggling many business roles. While it may sound like a droid, CPEOs are certified professional employer organizations that help small to mid-sized companies with their immediate, daily and long-term HR needs. PEOs that have earned their certification through the IRS provide clients additional protections.
First, it helps to understand the PEO business model. Companies outsource their human resources functions to PEOs. From on-boarding, payroll and benefits (including 401K), PEOs have a broad range of HR experts on staff to help clients. It gives companies access to a broader array of HR services with a lower administrative cost. By working with a PEO, HR related tasks are administered by your PEO and you can stay focused on growing business. Research shows this provides companies with important advantages:
“PEO clients grow faster, have lower rates of employee turnover, and have higher rates of business survival than other comparable small businesses.”
Bassi, Laurie and McMurrer, Dan. National Association of Professional Employer Organizations (NAPEO). The State of the PEO Industry 2016: Markets, Value, and Trends. Alexandria, VA: 2016. Print.
Next, let’s explain the additional protections offered to CPEO clients:
- IRS “Seal of Approval” – CPEO status means it has been fully vetted by the IRS. That process includes: background verification, tax compliance history, audited financial statements, independent surety bond for federal employment tax liabilities and quarterly assertions showing compliance with federal employment tax payments.
- Full accountability – Once employers remit employees’ tax withholdings, CPEOs are solely responsible for payroll taxes and penalties because they are designated the “agent” for your company.
- Avoid penalties – If you switch to a CPEO mid-year, the tax wage base no longer gets “restarted” because the CPEO is considered a “successor employer” as it relates to Social Security, Medicare and Federal unemployment.
HR rules and regulations are constantly changing. Partnering with a CPEO is a smart, cost effective option to consider. It offers peace of mind knowing your greatest assets are being taken care of: your employees! MidwestHR is honored to be one of the first Certified Professional Employer Organizations (CPEOs) in the country.* It represents our ongoing commitment to being the best HR partner to our clients. Give us a call 630-836-3000 to learn more.
*The IRS does not endorse specific Certified Professional Employer Organizations. For more information, please visit www.irs.gov or our website at midwesthr.com.