National Professional Employer Organizations (PEOs) offer excellent HR services irrespective of the business’s size and goals.
However, as an employer, you must choose your PEO partner based on your business plans and ambitions to scale. This is especially important now that remote work is primarily the norm because employers are starting to dismiss borders as hiring barriers.
In these circumstances, a national PEO can effectively support you to scale your business’s workforce across state borders while ensuring employment and compensation laws compliance.
Here, we help you understand national PEO companies and how they can help hire and manage employees spread country-wide.
What Is a National PEO?
As the name suggests, national PEO companies offer HR services to businesses looking to hire and employ talent across different states in a country.
These PEOs have the HR resources, legal experts, and technological infrastructure to help you source talent from wherever they live within a particular country. Traditionally, all PEOs, local or national, offer a comprehensive suite of employment solutions encompassing:
- Employer of Record
- Benefits administration
- Employee leasing
A national PEO offers all these services at a scale enabling businesses to fulfill their transnational objectives.
Local PEO vs. National PEO vs. Global PEO: What is the Difference?
The difference between a national PEO and a local PEO lies in their ability to offer services.
A local PEO would be popular in a particular community (city, state, economic, or politically defined region) as it will cater to the needs and demands of the businesses in the same community. Therefore, the PEO would have experts and resources to ensure companies comply with the jurisdiction’s HR and employment laws.
However, their knowledge and services would be unsuitable for companies outside the region they cater to.
In contrast, a national PEO possesses the infrastructure to be aware of laws and regulations and changes at the national level. Many PEOs advertising themselves as national PEOs often partner with local PEOs to acquire specialized compliance knowledge and offer a better client experience.
On the other hand, a global PEO strives to provide a seamless HR administration experience to employers with globally distributed teams.
Similar to how each state’s employment laws pose compliance challenges, employers would face equal, if not more significant, hurdles when employing talent globally. These would raise permanent establishment risks and the questions of employer contributions, salary deductions, 13th-month pay, etc.
A global PEO would have legal experts and expansion managers to eliminate these hassles. If a global PEO offers EOR services, you can use their legal entities abroad to onboard employees for your global workforce.
How Does a National PEO Work?
Traditionally, all national PEOs follow the co-employment model; they share responsibilities and liabilities with the parent company. In practice, this occurs as the employer manages the daily affairs of the employee while the PEO manages onboarding, payroll, benefits, and the like.
Apart from the abovementioned activities on engaging with your business, a national PEO does the following as well:
Understands your strategic objectives
Over the past few years, many companies realized that HR shouldn’t be a supporting function. The pandemic accelerated this comprehension, and thus, HR has now become a strategic function of businesses in the new world order.
Consequently, when you work with National PEO companies, they would strive to gain an understanding of your larger objectives as opposed to a regional PEO. With enough comprehension, they would be able to tailor appropriate solutions that benefit your employees and help you fulfill your strategic objectives.
Signs a client service agreement
A national PEO signs an agreement with the client, often called a client service agreement. The agreement dictates terms surrounding:
- Date of the start of the agreement
- Service fees
- Liability insurance
- Limitation of services
- Terms of termination
- Terms concerning mass layoffs in the client company
- Client obligation and rights
Once you agree to this contract, you acknowledge the scope of services, liabilities, and risks with the national PEO.
Once you enter the co-employment model, the national PEO would offload all HR administration from you while leaving you to manage the employee’s day-to-day affairs.
One important step is employee onboarding. This includes sending employment contracts, offering benefits, and collecting tax and social security information.
This further ensures that your employees comply with the jurisdiction’s labor laws.
Moreover, when setting up remote teams, onboarding becomes remote as well. When your team is distributed across different states, you must prepare employment contracts based on the laws in the jurisdiction.
National PEOs effectively manage this with in-house experts aware of employment laws across the country. They prepare contracts that are compliant with each employee’s locality.
Moreover, when managing remote teams, employers need to be aware of laws that suggest how to tax remote employees. Although governments do this to maximize the collection of taxes in their locality, keeping up with changing rules is a huge deal for business leaders like you.
A national PEO can effectively manage this and ensure your business complies with tax and payroll laws across the country.
Payroll errors can cost an employer, contributing to employee dissatisfaction and higher turnover. Almost half of the businesses in the USA outsource their payroll. They use a payroll company or a national PEO’s payroll to pay their employees.
When you do payroll in-house, you must define employer contributions for your employees distributed nationally according to state laws. You also have to deduct taxes accurately for the benefits such as incentives and bonuses you offer and deduct taxes.
However, with a national PEO, you acknowledge that you offload payroll to the PEO in your client service agreement. You also accept the payroll date, fees, and the risks you share. The national PEO takes this up and ensures payroll is processed accurately.
Continuous HR management
Client companies receive ongoing HR management from the national PEO. Along with personal issues, such as resolving employment disputes and terminating employees, contract renewals and terminations also belong to this category.
In the case of leased employees, the terms of HR management will vary. Generally, employers manage the hiring and termination of employees. Unless the PEO explicitly mentions recruitment in the client service agreement, they also take care of recruitment.
However, a national PEO will have more control over the hiring and termination of leased employees.
Benefits of National PEO Companies
The fact that national PEOs help you build nationally distributed teams without worrying too much about federal and state laws is a given. You can gain other benefits by partnering with a national PEO company.
Knowledge of state and federal Laws
In the USA, for example, the Department of Labor stipulates over 180+ laws to safeguard its workforce and ensure the power balance is not tilted towards its employers. You need to be aware of these laws to make the way you onboard and pay employees compliantly.
In addition, each state has laws around minimum wages, working hours, employee classification and tax filings, and returns. Employers need to comply with this subset of laws as well.
Here’s where a PEO can help and alleviate your compliance worries. Although a local PEO ensures compliance, it is constrained by its resources and can cater only to the state or the region in which it is based.
However, a national PEO has a vast team of experts on each state’s employment laws. Your business also benefits from a dedicated client manager who facilitates employee onboarding. This ensures each of your employees complies with the jurisdiction’s laws.
In cases where the national PEO doesn’t have a solid legal understanding, it partners with a local PEO. Local PEOs benefit from the strong relationships they develop with local regulatory authorities over time.
This enables the national PEO to strengthen its co-employment relationship with you and ensure your business is safe from back taxes, penalties, unpaid social contributions, and (when non-compliance results in serious debts) potential insolvency.
Recruitment from all over the country
Most companies do not take recruitment services from a PEO. However, national PEOs will have the resources to oversee your recruitment and supply their usual onboarding, compliance, and payrolling services.
When you acquire the expertise of a national PEO for its recruiting services, you gain their economies of scale to hire remote workers easily. Your national PEO partner can help you here.
Solving challenges when non-compliance arises
If payroll or compliance problems arise, a national PEO with local offices can provide greater convenience and accessibility.
When a national PEO operates in more than one state in the US, its staff will be based in the state in question to handle issues as they arise. This advantage is that a national firm representative won’t have to fly out to deal with every issue.
More employee benefits at lower costs
One of the most significant benefits of using a national PEO is offering your employee benefits that are at par with more prominent companies.
With more employees on its payroll, a national PEO can leverage the sheer number of employees it manages to secure group buy-ins. This enables you to acquire employee benefits by tying up with a multitude of insurance vendors. National PEOs can also lower costs in this process while passing down the benefits to your employees.
One partner or platform to pay your widely distributed teams
If not for a national PEO, you may have to partner with multiple local payroll partners to disburse salaries to your employees in each state. Managing invoices from different partners and ensuring they pay salaries to all of your employees is hectic. High opportunity costs are involved as you might be better off spending time on your core business activities.
Partnering with a national PEO company removes these obstacles, enabling you to pay all your employees through a single partner. Multiplier, for instance, offers a SaaS-based platform to manage and pay your distributed teams using a single dashboard.
When should you choose a local PEO over a national PEO?
Local PEOs can offset many operational costs that a national PEO incurs.
For example, national PEO companies often compete against local PEOs. They advertise themselves as national PEOs with local enterprises to bite into the market share of local PEOs. The PEO passes this advertising cost onto the client.
Local PEOs cater to small communities and thus, do not have such expansion plans. Therefore, for businesses with no trans-national expansion goals and are on a tight budget, local PEOs can be a better choice.
How Multiplier’s PEO Services Can Help You?
Depending on your ambitions—regional or national—or the size of your business1 employee or several 100 employees—Multiplier’s SaaS-based solution can help you with employing, payrolling, and benefits administration.
Our platform aggregates all the infrastructure of an EOR, PEO, and payroll solution for you to build world-class distributed teams. Employers can generate compliant employment contracts, onboard employees, and manage timesheets and expenses in a few clicks.
Speak to our experts today.