Helping businesses to reduce risk isn’t just an extra side service that PEOs offer to their clients, they need to do it because the PEO could be held liable in some of these lawsuits. PEOs operate by co-employing their clients’ employees; the PEO is the employer of record. If an employee sues over a labor dispute, they will most likely sue both employers: the PEO (the employer of record) and the client (the worksite employer.) The PEO needs to protect themselves, so by sharing your business’ risks with them, you’ll have a partner in reducing the risks.
The PEO has many tactics to reduce the risks associated with being an employer. They make it their business to stay on top of changing labor laws and can provide an up-to-date employee handbook. A great employee handbook is crucial for preventing lawsuits and issues in the workplace. The PEO may also provide training or training materials to onboard new employees and train them on corporate and safety policies. PEOs usually handle worker’s compensation claims to ensure that they are done properly. In case of a situation where there is a problem employee who needs to be let go, the PEO may be able to help to ensure that the client company and the PEO are protected from wrongful dismissal lawsuits.
PEOs also have legal resources that they make available to their clients. Many small businesses may have trouble affording legal resources and could be bankrupt by one lawsuit. Some PEOs may even have ways and procedures to resolve conflict before it turns into a lawsuit.
When a PEO provides payroll services, it usually pays and reports employment taxes. This means that your company will stay in compliance, reducing the risk of fines and penalties if a new requirement is overlooked or if an error is made. As the company making the tax payments, the PEO will be responsible for any errors or penalties.
When a company shares its risks with a PEO, it reduces its risks. That, plus the PEO will perform services that can help their client companies run smoothly, making partnering with a PEO very worthwhile.