Professional Employer Organization: PEO client service agreement and importance of a client service agreement 

Introduction

When you think about which PEO model is best suited for your company, at that time you come across many variety of topics through the evaluation process, including the PEO’s human resource delivery model, employee benefits, and PEO service costs. However, there is one significant problem that you will almost certainly overlook before making your decision: the PEO Service Agreement. The client service agreement is the legally binding contract that specifies each party’s responsibilities in this arrangement. This article will outline all the information on the Professional Employer Organization and Importance of PEO Client Service Agreement.

About PEO (Professional Employer Organization)

Professional Employer Organization (PEO), assists a client company in managing its employees’ payroll. A PEO also handles the organization’s compliance and human resources needs. A PEO, also known as a co-employer, is made up of individuals with experience in human resources, legal domains, taxation, client servicing, and accounting. Hiring a PEO can provide numerous advantages. A PEO enables businesses to grow at scale by lowering the cost of administration services and managing payroll complexities. Aside from these benefits, a PEO can assist businesses in expanding globally without the need to establish entities in multiple countries.

What is PEO Service Agreement?

A PEO (Professional Employer Organization) agreement (also known as a PEO client service agreement) is a legal document that specifies who is responsible for what in a co-employer relationship. In addition to defining each party’s responsibilities, the agreement specifies which employees are covered by the agreement.

Information contains in PEO Client Service Agreement

First part of an Agreement:

• A statement of the established relationship and liability limitations between PEO service provider and the client.
• List of the services may include in the agreement:
  • Payroll processing and tax administration
  • Employee benefits
  • HR Practices and Policies
  • Access to online HR information system
  • Employer compliance
  • Personnel records
  • Signatures are required for both the client and the PEO

Second part of an Agreement

• Conditions of use
• Payment terms and fees
• A list of employee benefit plans
• State-specific rules

The second part goes over each aspect of the PEO relationship from a legal standpoint, from payroll to insurance to tax remittance.

Importance of a PEO Client Service Agreement

• Reallocation of Resources

One unexpected benefit of a PEO agreement is that it may assist your company in identifying areas where administrative resources can be reassigned. Because the HR roles and responsibilities are clearly defined in the contract, you can clearly see what is being transferred to service provider; you can then use this as a template to identify areas that can be reassigned to other, more important roles within the business.

• Transparency

Everything in your PEO agreement should be crystal clear to you. It should explain your company’s expectations, the PEO’s expectations, and the cost of the services the PEO will provide in plain English. To maintain transparency between the service provider and the receiver.

• Establish clear expectations

Furthermore, the PEO agreement you sign should establish clear expectations for both the PEO and the PEO client. As with any legal document, it’s critical to read through your PEO agreement and understand what you are signing.

Final Thoughts

PEO Client Service Agreements will be an useful document for both the service provider and the service receiver. The terms may be negotiated from both ends, but once the contract is signed, both parties are obligated to fulfil their duties and abide by the contract.