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Wrapping up the ABC’s of PEOs: H-Z of PEO Terms defined


By: Shraga Jacobowitz

We’re back (did you miss us?) with more PEO terms demystified!  But please take note, when writing up the list of words we wanted included for these two articles, we realized how many industry relevant words their actually are. So don’t see a word that got you stumped here or in our part I of this article (click HERE for a review)? Let us know and we’ll help demystify it for you.

As for now, keep reading for H-Z of the PEO terminology defined. 

  1. HIPAA- You’re probably familiar with HIPAA (could they get anymore letters into this acronym or what?), from the pile of papers you are always made to sign when visiting any doctor. But what you may not have known this multi-letter acronym standing for the Health Insurance Portability and Accountability Act can affect you as a business owner, because besides protecting your privacy at the doctor it also protect personal information and data collected and stored in company medical records. You never want your employees’ medical information being compromised.
  1. HRIS- HR has basically gone high-tech! HRIS is an online solution or software used for data entry, data tracking and the information requirements of a business’s HR management, payroll and bookkeeping operations. A HRIS will help your company process open enrollment, hiring and termination of employees, employment documents, benefit elections, and so much more….It’s basically HR at your fingertips, something any business owner can appreciate.
  1. I-9- The result of a hot button topic, the I-9 is a form required by the Immigration and Naturalization Services to verify your employee’s identity and eligibility to work. Your employees cannot be put on payroll until they’ve submitted this form. In simple English: no paper, no pay.
  1. Independent Contractor (1099 worker) – These workers may do work for you but don’t work FOR you, hence the term independent. They are not your employees and therefore, won’t be on your payroll. Because they are not on payroll, they will not have any income tax withheld from their paychecks, hence them also being known as 1099 workers, referring to the form they receive at the end of the year, instead of the good old W2. 
  1. Job Description – This is exactly what it sounds like – a description of a Seems simple enough, but don’t it let that fool you. You will need to have a clear specification for this term for all kinds of forms and applications. It should include all responsibilities and obligations, as well as the purpose, scope, and working conditions of an employee’s job, along with the job title and the name of the person to whom the employee reports.
  1. Loss Runs- These are reports provided by your insurance company that document the claim activity on each of your policies. Think of it as your scorecard of how much you could be losing if you weren’t insured. 
  1. Medicare Tax – This chunk of tax on every paycheck goes to fund Medicare – the health insurance program designed for people 65 years and older. You may not like it now, but we’re sure you’ll appreciate it at 65! 
  1. Onboarding/Implementation/Enrollment- These terms refer to the act of absorbing a new employee into your company. It includes all training, guidance, orientation, and the entire learning process involved in the employee’s new position.
  1. Open Enrollment- This is the only time of year for individuals to add, reduce or change health insurance coverage without any qualifying events (see the definition of Qualifying Event below).  Insurance rates will also usually change at this point. 
  1. OSHA- You probably think of OSHA as the people who come in to clean up the mess after any disaster, but in reality the Occupational Safety and Health Administration is a division of the DOL and was created to prevent all work-related injuries, illnesses, and death through enforced workplace safety rules. Gotta keep those workers safe at all cost! 
  1. Performance Management- This is the ongoing process of communication between a supervisor and an employee throughout the year. It helps keep employees in line with the company’s goals and vision, and it helps to keep you in touch with your workers. You can benefit greatly in this task by either partnering with a PEO which can provide performance management and crucial review technology. Alternatively, you can invest in a system that can do this for you, but then, you wouldn’t get all the other great advantages of a PEO, of course. 
  1. PTO- Paid Time Off is a policy that combines vacation and sick leave in one option. It basically gives your employees the choice of spending their days off nursing a cold or nursing a fruity umbrella drink while vacationing in Aruba. Again, a PEO’s HR representative can assist you in implementing your PTO and advising you on the best practices. 
  1. Qualifying Event- any change in an employee’s personal life that can impact their eligibility or their dependent’s eligibility for benefits outside of the open enrollment period (see the definition for open enrollment two words up).  This can include loss of health insurance for any reasons BESIDES not paying your premiums or any other voluntarily termination of benefits, change in household size (i.e., marriage, divorce, birth, adoption, of death), moving locations or changing or eligibility status. 
  1. Recruiting- You know what recruiting is – it means looking for the best candidate for a job. It includes analyzing the job requirements, working to attract employees, screening applicants, and then finally hiring new employees and training them in for their new role. What you may not know however, is that your PEO can actually help you with this.
  1. Social Security Tax- This tax funds social security benefits. The social security program is the government’s way of skimming off paychecks during the working years, and then putting that money back in the tax-payer’s pockets when they need it during their golden years. Again you may not like it now….but hopefully if the program is still around, you’ll enjoy it during your golden years.
  1. SUTA- The State Unemployment Tax Authority is a state tax paid by the employer to fund unemployment benefits. Your SUTA rate will be based on your business’ overall claims experience. 
  1. Tax Restart – A tax restart is kind of like setting back the clock. It happens when an employer is required to restart paying taxes mid-tax year, even though they’ve already made contributions for Social Security, Unemployment and more. Government regulations requires this when a new tax ID number is used under which wages and taxes are being filed. It can be a huge headache, but with a PEO handling the logistics, it’s just a mild annoyance. Plus partnering with a CPEO (see our article on that HERE) can actually the headache all together.
  1. Time and Attendance Systems- Also called TNA, time and attendance systems track and monitor the hours an employee begins and stops working. It lets you see who’s always slipping in twenty minutes late and who’s clocking out early every Wednesday. It can even help you cut costs incurred by overpaying employees for hours they don’t work. A TNA can be an old-fashioned timeclock or, any of the numerous apps or software programs designed for just this purpose.
  1. Unemployment Claims Administration – All administrative tasks involved in unemployment claims. A PEO will take care of all that tedious paperwork and will help you protest the claims whenever possible. Because that’s just what they do….make your job easier and save you money.
  1. Voluntary Benefits – Benefits that the employee elects to pay for on their own. Of course, while typically the employee pays for these benefits, the company will still need to full the administrative role which can be a huge HR burden. With a PEO, the PEO administers all the voluntary benefits relieving you from yet another HR burden. Plus, these benefits allow you to offer a more attractive package which in turn allows you to attract and retain top talent for your organization without putting a big dent in your budget.

Some voluntary benefits can include:

  • FSA/ Flexible Spending Account – an untaxed account used to pay for out-of-pocket health care costs.
  • Childcare FSA- This account also lets employees use tax-exempt funds for extra expenses. In this case, the money is used for childcare costs the employee incurs while at work, or for adult daycare expenses for elderly family members who live in their home. 
  • Commuter benefits– Hate your commute? Guess what so do most people but at least commuter benefits, AKA qualified transportation fringes, take off a little of the sting of sitting in traffic or hours on the subway. These benefits are basically a pretax benefit that allows employees to put aside pretax dollars to pay for the cost of commuting to and from work even including parking etc. Although like all good things, the IRS does put a limit on these benefits, so a helicopter commute is probably out of the question.
  • 401k- It’s always good to think about the future. With a 401k, an employee can choose to make contributions from his paycheck to a retirement fund. 
  • EAP/Employee Assistance Program- a work-based intervention program designed to help employees resolve personal issues that may be negatively impacting their performance at work.
  • Added Medical Benefits – while health insurance is great, anyone will tell you that having the extras covered is a huge benefit as well. This can include dental, vision, supplementary health insurance, long (LTD) or short (STD) disability insurance or prescription coverage.
  • Matters of Law – even the average law abiding citizen can need legal help or protection, and these benefits do exactly that. Whether you need protection against law suits (legalshield), identity theft protection or life insurance to protect the next generation, you can be covered by a voluntary benefit to fit your legal needs.
  • Employee Perks Program – any other benefits or perks an employee offers. It can include a flexible schedule, paid sick days, performance bonuses, gym membership and anything else your employees would be thrilled to have. I’m thinking a Froyo bar would be a nice addition, no?
  1. W-2 – The W-2 form is a Wage and Tax Statement used in the US tax system to report on wages paid to your employees and on taxes withheld from them. (See Independent Contractor above)
  1. W-4– We know, the tax forms don’t stop coming. The W-4 form is actually for the employer – it tells you exactly how much tax you should withhold from an employee’s paycheck. It bases this info on said employee’s marital status, the number of exemptions and dependents the employee has, and on several other factors. 
  1. Worksite Employee – Also called a WSE, a worksite employee is simply what a PEO will call your employees. Because the PEO will become the administrative employer for payroll, taxes and HR purposes, you become the worksite employer, as in the actual employer who is onsite making the day-to-day decisions and still maintaining control of your business. By default, your employees and therefore referred to as WSE’s. 

And that’s allllllllllll folks! I guess X,Y and Z are not such popular letters in the PEO world, and we’ve come to the end of our terms with a W. So with that I’ll leave you with one Y word, I’m sure you’ll all understand – YOU!

At the end of the day, you need to do business in a manner that is most effective for you and which makes the most sense to you.  Partnering with a PEO can help you tremendously, but if facing the prospect of wading through the confusion of this industry on your own has you more terrified than relieved, that’s where a PEO consultant or broker comes into play.  So feel free, memorize this list of relevant terms and definitions or contact ARC Consultants today and let them find the best solution for YOU!