PEO vs. Payroll Service: Which Do You Need?

Is a PEO or payroll service provider (PSP) better suited for your business, if you need help with your human resources services?

To determine which one is right for you, it’s important to identify what services each type of company provides. Armed with that knowledge, you can compare the pros and cons of each and compare them to your own business goals and objectives.

PEO or payroll service

You may be hoping to save time and avoid the hassle associated with calculating payroll, cutting checks and quarterly reporting – and a payroll service can certainly help with that. But what if you could also get out from under all the liability and hassle of recruiting, compliance and benefits administration?

What if you could accomplish those goals and cut your employee-related costs at the same time?

What Does a Payroll Service Provider (PSP) Do?

PSPs typically handle all the functions related to paying your employees and paying federal payroll taxes. The employer retains all liability.

Many PSPs also offer a more robust suite of services, usually under the title of administrative services organization or ASO. In an ASO scenario, the company provides ancillary services that might include safety training and general HR support. Some companies will provide benefits administration although, in that case, the PSP or ASO does not carry the policy themselves. That remains the responsibility of the employer.

What Services Does a PEO Provide?

Professional employer organizations (PEOs) do everything that PSPs do and much more. In fact, PEOs handle every aspect of human resource management.

In addition to handling every aspect of payroll and tax administration, PEOs take care of recruiting and hiring, employee benefits administration, and regulatory and government compliance. They also handle tasks such as onboarding and employment verifications. But PEOs do more than simply provide a suite of services.

PEOs act as co-employers. Although you retain full control of your staff and oversee their daily activities, the PEO takes on the liability and all human resources-related risks, including the handling of unemployment claims. They also provide all workers’ compensation insurance and health benefits, carrying the policy themselves.

PEOs can provide both workers’ comp and health benefits at a much lower rate than an individual employer can obtain – especially for small- to medium-sized businesses – because they have such a large pool of employees.

Will Your Business Benefit More from a PEO or PSP?

If you’re just starting out and have one or two employees, you might not need the full-service benefits that a PEO can offer. In that case, you can simply outsource your payroll processes and whatever other aspects of your human resources that make sense.

However, small businesses will derive substantial benefits from working with a PEO. Human resources administration requires a substantial amount of your time and effort, pulling you away from what should be your primary focus – growing your business. PEOs also provide professional advice and ensure that you’re in compliance with federal and state employment laws. You’ll save significantly on workers’ comp and health insurance too, allowing you to invest more into your business’s growth.

Throughout Utah and Nevada, WTA Inc. provides a full range of human resources administration and services, including payroll services, recruiting, hiring, onboarding, benefits administration, and compliance. We invite you to contact our Murray, Utah headquarters today to learn more about us and the substantial benefits of working with a PEO.