Payroll duties and responsibilities are definitely among the less exciting aspects of owning and running a business. However, payroll administration is necessary: it means happy employees, and it is legally required by the IRS.

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In a PEO relationship, payroll administration becomes one of the responsibilities of the PEO. It’s often the driving factor in determining how and when to forge a relationship with a PEO. In order for the PEO to do its job properly, the hiring company must transfer payroll liability to the PEO. This transfer of liability is achieved by having the client company make a significant shift: its employees will be, after the transfer, paid under the PEO’s federal ID number rather than under its own ID number. Once this shift is done, the PEO is responsible and liable for all the functions that make PEOs so useful to companies.

The PEO, after transfer of liability, becomes responsible for the following:

• Employer FICA payments
• Employee FICA payments
• 941 Quarterly returns
• Quarterly State Unemployment returns
• W-2s
• W-3s
• Yearly 940 forms

In essence, the PEO is taking over more than just payroll processing. They become liable for payroll and all payroll-related issues; the client company therefore is no longer responsible for payroll or related issues. For as long as the client company is working with a PEO, the client company does not have to worry about, and has no liability relating to, payroll. This means, naturally, that whichever PEO a company contracts with, it must be financially sound, and able to handle whatever tax reporting and paperwork is necessary for the client company. While the client company is indemnified from the liability, it’s still necessary that the liability be met.

For a small business, payroll is not just a liability; it’s also one of the major sources for unproductive time. Even today, when so many elements of payroll are automated, matters like direct deposit, tax deposits, the handling of IRS inquiries, and the handling of unemployment claims are all real burdens. Any one of these problems can be a huge drain on a company’s time. Outsourcing this non-productive task goes a long way toward streamlining in-house operations, allowing a company to focus on its original business mission. A company shouldn’t be bogged down in secondary responsibilities that don’t result in income and profit. Let professionals handle those problems.Tailored Solutions, acting as your payroll broker and working with your company’s interests in mind, will find the PEO that maximizes your company’s commitment to your clients – and its commitment to itself.

To calculate how much it costs you to administer your companies payroll please go here to downoad the administrator calculator excel sheet.