Implementing from a PEO/CPEO

Can Check support clients migrating from Professional Employer Organization (PEO) and Certified Professional Employer Organization (CPEOs)? The short answer is yes and no. Here's a breakdown of what is possible and what to watch out for.

A professional employer organization (PEO) is a company that provides human resources (HR) and payroll services to other businesses. PEOs typically handle tasks such as employee benefits, payroll taxes, and workers' compensation. This allows businesses to focus on their core operations and reduces the risk of HR-related errors.

Check is not able to support migration from PEOs in all cases. For example, Check is not able to support clients on PEOs in states that require client-reporting. Client-reporting states are states where the PEO is not allowed to file unemployment insurance (UI) returns on behalf of the client. In these states, the client is responsible for filing UI returns for their employees.

Check is also not able to support clients migrating from PEOs in states that allow wage carryover for state unemployment. Wage carryover is a provision that allows employees to carry over their unused wages from one year to the next. This can be beneficial for employees who have a seasonal work schedule. However, Check is not able to support wage carryover for state unemployment.

However, if the client is using a PEO with no reporting or wage carryover, the client can be onboarded the same way a new business is implemented.

A certified professional employer organization (CPEO) is a PEO that has been certified by the Internal Revenue Service (IRS). CPEOs must meet certain requirements, such as having a bond of at least $1 million and having a history of financial responsibility. CPEOs are required to pay federal employment taxes, which can provide peace of mind for businesses that use their services.

CPEOs require a wage base carryover, which we do not currently support. In a PEO situation, an employee who earns $168,600 in a year would meet the Social Security wage base and would no longer be taxed for Social Security. However, if the employee's company leaves the PEO, their wage base resets to zero. They would restart paying into Social Security within the calendar year.

In a CPEO situation, the wage base carries over to the new payroll provider. For example, this means that the employee would no longer be taxed for Social Security, even if they earn more than $168,600 in a year. This is something that we are unable to support at this time.

If you are  considering onboarding a PEO client, you should be clear in what can and cannot be supported. Please feel free to contact Check to discuss the specific needs. Check can help determine if we are able to support the business.