:: PEO, it's all in the contract!

There is a growing trend which is changing the employer/employee relationship. This is occurring by the decision of employers to contract with professional employer organizations. A professional employer organization or PEO is an organization that leases employees to an employer in a long-term relationship.

The state of Florida define a PEO / "employee leasing" as, "an arrangement whereby, a leasing company assigns its employees to a client and allocates the direction of and control over the leased employees between leasing companies and a client." A professional employer organization is different from a temporary agency. The relationship with a PEO is a contractual relationship between the leasing company and its client company.

The contractual relationships vary widely. The PEO usually assumes the responsibility of an employer for specific purposes on a long-term basis. The specific purposes are carefully defined in the contract. Since the contracts are not standard, care needs to be exercised. There are contracts with retroactive cancellation, indemnification and hold harmless clauses in favor of the PEO, and specifically indicate that the business owner is the responsible party certain types of claims. In most cases, the employer is responsible for daily operations, the implementation of work place safety, and / or daily employment issues.

The right of direction and control is found in the agreement for services contract between the client and the PEO. The term "co-employment" best fits the relationship. In almost all the contracts the responsibilities are shared between the client and the PEO with the PEO taking the "administrative employer role," and the client remaining in charge of the product or service of the business. In 15 states this relationship, is defined by statute, eliminating many of the problems inherent in determining who the correct employer is. Both the PEO and the client are considered the employer.

Mark J. Burger, CPA/PFS is CEO of PEO Solution Advisors LLC, providing companies with outsourced human resource solutions. Mark can be reached by telephone at 561-889-3503.