What is a Certified PEO & Why Does it Matter?

Your time and attention as a business owner is precious, wouldn't you prefer to spend on growing your business rather than tedious admin? It’s common for employers to rely on an HR partner to help navigate employer compliance. But have you considered the benefits of a CPEO? 

A CPEO, or certified professional employer organization, is a modern solution that can help business owners streamline the management of multiple areas of their business. And when you have a comprehensive tool like this, the time you save is just one of the upsides. Curious about all the ways a CPEO can benefit your business? Read on.

What is a Certified PEO?

As we noted above, a CPEO is a certified professional employer organization. But did you know that not all PEOs are certified? Let’s break down a certified PEO vs. a non-certified PEO.

First, it’s important to understand what a PEO is and what they do. A professional employer organization helps business owners manage certain aspects of running a business. Things like payroll, onboarding, HR tasks, and compliance can all be handled by a PEO, typically using user-friendly software. PEOs can also help small businesses access health insurance plans that are typically reserved for larger companies.

With a PEO, business owners still maintain control of things like hiring, employee management, and day-to-day operations. But PEOs remove much of the administrative burden from an employer’s shoulders, leaving them with more time to focus on other tasks.

When a PEO is certified (like Justworks PEO), it means that the IRS has ensured the company meets extremely strict requirements. If you want to get technical, the IRS explicitly states that, “to become and remain certified under the CPEO Program, CPEOs must meet tax status, background, experience, business location, financial reporting, bonding, and other requirements described in the statute and regulations.”

In simpler terms, a certified PEO is held to the highest standards by the federal government to help ensure security for its customers.

Why is it Important for a PEO to be Certified?

While a PEO can help its customers simplify the administrative headaches of running a business, there’s something to be said for a PEO that also meets the high standards of the IRS. But what are these standards exactly? In order to be eligible for certification by the IRS, a PEO:

• Must be a business entity

• Must have at least one physical business location within the United States

• Should have a history of financial responsibility, organizational integrity, and tax compliance (federal, state, and local)

• Should be managed by individuals (a majority of whom are U.S. citizens or residents) who have knowledge or experience regarding federal and state employment tax compliance and business practices relating to those compliance requirements

One of the key aspects here is the PEO’s financial responsibility. Because a CPEO is solely liable for paying their customers’ employment taxes, filing returns, and making deposits and payments for the taxes reported, a PEO has to submit proof of a bond.

What does this mean? A certified PEO must be able to cover the tax liabilities of its customers (and often state unemployment taxes and workers’ compensation premiums, too).

PEOs are also subject to ongoing audits and IRS reporting and review. With these added layers of financial security and consistent evaluation, small business owners don’t have to worry about the fees and penalties that can come from late or unpaid employment taxes. A certified PEO has your back when it comes to tax compliance.

Justworks PEO is a Certified PEO

As a CPEO, Justworks PEO offers the security of working with a partner who meets the highest standards. Included on the IRS’ list of certified professional employer organizations, Justworks PEO provides the peace of mind that small business owners need in a partner.

Along with employment tax compliance, Justworks PEO offers an easy-to-use platform that streamlines many other aspects of running a business. Automated payroll, onboarding, and benefits administration means less time spent on HR and more time focused on business growth and employee engagement. Plus, Justworks PEO offers access to quality health plans and mental health benefits that attract great talent. And with certified HR consultants and 24/7 human support, you’ll have the expertise to help you solve any issues that arise. If you’re looking to partner with a certified PEO that offers multiple solutions in one, Justworks PEO is ready to help you and your small business thrive. Get started today!