Frequently Asked Questions

How does Employee Leasing or a PEO (Professional Employer Organization) work?

Employee Leasing companies and Professional Employer Organizations (PEOs) have revolutionized the delivery of employee management and human resource services to small and midsize companies across America. Under the terms of a co-employer agreement, the PEO acts as the employer of record, providing accounting, administration, benefits, compliance, HR, payroll, and risk management to thousands of companies and millions of employees on a daily basis.


What types of businesses use Employee Leasing or a Professional Employer Organization?

The PEO business arrangement will work for literally any type of business. Co-Employer relationships range from professional offices to high technology to retailing to manufacturing. In terms of size, PEO client companies can range from a five person professional office to a five hundred employee manufacturing firm.


What is the difference between Employee Leasing and a Professional Employer Organization?

Employee leasing is a way for businesses to staff their companies without dealing with the human resources department side of staff issues. PEOs are the companies that provide employee leasing services. The terms are often used interchangeably.


How would using an Employee Leasing Company/ PEO benefit me?

Business owners can take advantage of many benefits, including:

  • Significant cost savings on workers’ compensation and state unemployment tax;
  • Reductions in accounting & payroll costs, allowing you to devote more time to growing and managing your core business;
  • Time savings due to compliance with increasingly numerous and complex federal, state and local employment and payroll tax laws and regulations;
  • Reductions in employment-related liabilities;
  • Better insurance and retirement benefits to employees, often at less cost;
  • Secured workers compensation insurance and professional risk management services;
  • Access to an HR Professional who can provide resources and services;
  • No unemployment claims to process;
  • No workers’ compensation claims to process.


Can I save money using Employee Leasing or a PEO?

The pooling of resources enables Professional Employer Organizations to command significant purchasing power when negotiating for health, liability and workers compensation insurance, as well as consumer, financial, professional, and technical services. Everyone benefits. Business owners profit from the savings in administration, benefits, insurance and legal costs.


How will a PEO arrangement help me to control costs?

Client companies can maintain a simple in-house HR infrastructure or none at all by relying on the PEO. The HR professionals at the PEO will provide critical assistance with employer compliance, which helps protect against liability. The PEO provides significant technology, service infrastructure and platforms to assure accurate, confidential, and secure delivery of services. In addition, the PEO provides time-savings by handling routine and redundant tasks associated with Payroll and Payroll Taxes, Employee Benefits, Human Resources Management, Employment Practices, and Regulatory Compliance issues.


How will a PEO arrangement affect control of my employees?

Employees are under your direct control and supervision. You determine wage rates, hours worked, job responsibilities, etc. Additionally, you maintain control over your business operations.
As a co-employer, the Employee Leasing Company/ PEO becomes a partner in the employment of your workers. The Employee Leasing Company either shares or assumes employer responsibilities and liabilities. Those responsibilities include payroll and employment taxes, maintaining employee records, risk management, human resource compliance and personnel management. By partnering with an Employee Leasing Company, you give up the time-consuming administrative tasks and have more time to concentrate on making your business more profitable.


How will the change from my current system to a PEO arrangement take place?

The PEO will conduct an orientation for all staff. This is the time to answer questions and explain all the benefits and services the PEO business model provides. Employees will always feel more comfortable when they are involved with, and understand the reasons for the change.


How can Employee Leasing or Professional Employers make us more efficient?

Management and staff gain access to skilled professionals to assist and support them. Getting timely answers and resolving issues quickly increases efficiency and savings. Every employee and family member can enjoy the same high caliber “Fortune 500” benefits choices that only large companies and government agencies can offer. Robust HR Platforms and technology give employees access to personal data, benefits, compensation, vacation and PTO account information. Online benefits and new hire enrollment is fast and easy, and eliminates time consuming administration and costly mistakes.


Can Employee Leasing Companies and Professional Employers help a small business?

PEOs provide value for small and midsize firms that is difficult to measure, but impossible to ignore. They help a young firm succeed against more established competitors in the market for skilled and competent workers. They enhance your ability to attract, retain and staff your company with people whose abilities and skills were tested, and references verified. PEOs relieve employers of the time-consuming chores of managing employee administration and payroll, and ensuring that their firm is in compliance with the myriad of government and HR regulations.


Why should I work with a PEO expert like Employers Rx?

The National Association of Professional Employer Organizations (NAPEO), the industry trade group, estimates approximately 700 PEOs currently operating nationwide, with an annual growth rate of 20%. The problem for most companies is that each PEO offers a differing range of administrative services, employee benefit programs and support, at varying levels of quality and cost. Devoting the time, energy and expertise to accurately compare PEOs can be a daunting task for any employer. This is where a PEO expert like Employers Rx can help.

Just ask our clients how enlisting the services of Employers Rx to find the right employee leasing company or Professional Employee Organization, allowed them to focus their attention on running their company.


Are there any fees involved?

No, submitting a quote request is 100% free. You are under no obligation even after we have retrieved quotes for your company.


Why should I use an Employee Leasing Company/ PEO?

Small business owners want to focus their time and energy on the “business of their business” and not on the “business of employment”. As companies grow, most business owners don’t have the necessary human resource training, payroll and accounting skills, knowledge of regulatory compliance, or backgrounds in risk management, insurance and employee benefit programs to meet the demands of being an employer. In addition, Employee Leasing Companies give small to mid-size businesses access to many benefits and employment services that they would not have had otherwise.


How will this benefit my employees?

There are many benefits to your employees, including:

  • Professional claims management services for injured employees;
  • Better insurance and retirement benefits, often at less cost;
  • Special rates with local credit unions;
  • Discount tickets for theme parks and entertainment;
  • Free Direct Deposit service;
  • Access to Debit Paycards


Are PEOs recognized as employers at the state and federal levels?

Yes. PEOs operate in all 50 states. Many states have legislated specific licensing, registration, and regulation for PEOs, and statutorily recognizes PEOs as the employer or co-employer of employees for many purposes, including workers’ compensation and state unemployment insurance taxes. The IRS has accepted the right of a PEO to withhold and remit federal income and unemployment taxes for employees. The IRS has promulgated specific guidance confirming the authority of PEOs to provide retirement benefits to workers.


Who is responsible for the employee wages and state and federal employment taxes?

The Professional Employer Organization assumes responsibility and liability for payment of wages and compliance with the rules and regulations governing the reporting and payment of federal and state taxes on wages paid to its co-employees. PEOs have long established their role as reporting income and handling withholding, FICA, FUTA and SUTA. In 2002, the IRS issued guidance confirming the ability of PEOs to offer qualified retirement benefits.


Who is responsible for employment law and regulatory compliance?

As co-employers, both the client company and the Professional Employer Organization have compliance obligations. However, the PEO provides co-employees with coverage under many employment laws and regulations, including federal, state, and local discrimination laws, Title VII of the 1964 Civil Rights Act, Age Discrimination in Employment Act, ADA, FMLA, HIPAA, Equal Pay Act, and COBRA. The PEO employs a full-time staff of HR professionals who are responsible for monitoring and ensuring compliance with such laws and regulations.


Who is responsible for taxes and wages?

The Employee Leasing Company/ PEO assumes responsibility and liability for payment of wages and all federal, state and local regulatory reporting- including unemployment taxes.


What is NAPEO?

Formed in 1984, the National Association of Professional Employer Organizations is the national trade association for the PEO industry. NAPEO is known both as NAPEO The Voice of the PEO Industry for government affairs and as The Source for PEO Education due to the association’s education and training programs. NAPEO promotes a Code of Ethics and a number of best practices to its member companies. NAPEO has 350 members with employees in all 50 states, representing more than 70 percent of the industry’s revenues.The address for their web site is <>