There is a lot going on within the inner workings of a company from managing its inventory to finances, operations and so much more. One of the major segments in managing a business is undoubtedly its employee relations. While a company usually has a robust human resources department, it can be a lot of work staying up on all of the latest employee trends and labor regulations.
This is why a lot of businesses outsource their HR departments by partnering with a Professional Employer Organization (PEO). A PEO can effectively provide a comprehensive plan in managing payroll, employee benefits, and most importantly manage labor regulatory compliance and unemployment insurance (UI).
In this co-employment relationship between the business and the PEO, the PEO shares certain responsibilities with the business. A lot of times, PEOs can pool all of their clients into one Federal Employer Identification Number (FDIN) which is a major benefit to the business.
Who Deals With the Unemployment Insurance?
One of the main questions in using a PEO is how the unemployment insurance is handled, but unfortunately, it’s not the same in every state. Some US states allow all PEO clients to stay under a single unemployment insurance account while others require each client to have their own UI number. The most common scenario in some states is for the PEO to move certain entities around in different pools to get the best tax breaks.
Since there are so many varying regulations regarding UI, you may be asking yourself why you would want to enter into a partnership with a PEO. Simply put, if you’re in one of those states where pooling is legal, then it is much easier to turn that over to a PEO that can mitigate payroll fluctuations and UI costs for smaller clients.
However, even if you are not in a state that allows pooling there are still some great advantages to using a PEO. Along with jumping on board for the opportunity to receive health benefits savings, deals on worker’s compensation, payroll advice, and more, a PEO usually has a lot of experience in managing UI claims. On top of that, PEOs lobby for their clients to get better UI tax rates, in turn lowering the company’s operating costs.
On the PEO’s end, they can keep the costs down for their clients by utilizing several best practices. PEOs will work closely with the clients in finding out the particulars of their employee relations to in turn save them money in their UI cost management program.
Best Practices of PEOs
A lot of times companies unknowingly do things in managing their staff that can come back to bite them in UI protests. Since PEOs deal with unemployment insurance claims so frequently, they can help recognize and correct any of these issues to keep the client’s costs down. A PEO’s solid expertise in proactively tracking UI claims, disputes, and costs can give a company a competitive advantage while keeping the business running smoothly.
A PEO manages a client’s UI program through its consistent reporting. Looking at the broad picture of all of their clients, the PEO can see who had the best protest win record and where other clients may be lacking. A PEO can step in and help a client that needs to get better at documenting employee infractions or situations for when it may come up in an UI protest. Getting the right policies in place and active management in correctly following them is paramount for a business that deals with a lot of employees.
PEOs can come in with a wealth of knowledge that may be missing in your company’s current operations. It’s worth it to take a look at what you are paying now and crunching the numbers to see if a PEO can help mitigate your costs.