Welcome back to the ARC PEO underwriting series where we are breaking down the what, why, and how of the PEO underwriting process and removing the doom and gloom of the daunting submission process. As a quick recap, when requesting PEO proposals for your company, data is required from your company in 4 categories for a complete PEO submission: Payroll, Workers Compensation, Benefits, and HR. Each category provides insight into the potential needs (and costs) of your company joining the PEO. To read up on how to understand the underwriting process, click here. 

It’s time for Payroll.

Payroll is frequently the gateway to the PEO industry. It can be an incredibly time-consuming and costly task to complete in-house and oftentimes, is one of the first services to be outsourced.  

How does Payroll fit into the core services of a PEO? 

The defining characteristic of the PEO relationship, rather than other providers, is that the PEO becomes a co-employer of your employees. This is called Co-Employment 

What is Co-Employment and How Does It Impact My Business? 

While you maintain your status as “Worksite Employer” for your employees, the PEO becomes the Administrative Employer and the “Employer of Record”. The division of labor is pretty straightforward: you continue to be responsible for the training, workload, hiring, and firing while the PEO becomes responsible for the limited purposes of payroll, tax, and benefit administration. Check out our FAQs for more insight into the client-PEO relationship. 

Through co-employment, your company gains access to the vast network of services and tools of the PEO at the most affordable rates – essentially providing your business with the most bang for its buck. Without handing over payroll, you won’t be able to co-employ with a PEO. If you are really not sold on the co-employment model, some PEOs do offer an HRO model where they will provide payroll and the support of the PEO without the co-employment relationship (take this quiz to find out whether a PEO or HRO is right for you). Co-employment doesn’t mean you lose control; what it does mean is that the PEO will be the employer named on your employees’ checks and W-2s. 

The underwriting process for Payroll is straightforward.  

The PEO will need to know: 

  • Who your company is and what service it provides 
  • Where your company does business (The states in which you operate will impact taxes) 
  • Your current SUTA rate in all states in which you operate 
  • How much and how frequently employees get paid 
  • Your Time & Attendance and other technology needs 
  • Your gross annual payroll 

To get to know your company, the PEO will review the ARC RFP that you filled out when you began your submission process. This includes general information about your company that informs them of what you do, what payroll looks like on a high level, and how many employees you have. 

In addition, the PEO may do some research on your company and its executives online. If you don’t have an online presence yet, they’ll usually ask for an Owner’s Bio – something that provides insight into the company background and history. Learn more about writing an owner’s bio here. 

Lastly, the PEO will review your Employee Census and most recent payroll. Included in the employee census will be basic payroll information such as salaries and job descriptions. Your most recent payroll will allow the PEO to verify payroll as well as the various statutory insurances that you pay and what your rates are, including SUTA. Depending on the state, the PEO may be able to provide you with savings on SUTA, so getting your current rates is just another way that working with a PEO can benefit your company. 

Once the PEO has all of this information in hand, they’re going to be almost fully equipped to make the decision: Does your group match their desired demographic and risk type? 

Check back in next week for the last (and one of the most helpful!) pieces that the PEO steps in on… HR! 

Hit the comments or schedule a call to learn more! 

Not sure if a PEO is right for your company? Take the “Is A PEO Right For You?” quiz to find out!

Published On: April 6th, 2022 / Categories: PEO /