PEO & Employee Leasing: How Employee Care Can Help Small Businesses Navigate Payroll Compliance Changes

PEO & Employee Leasing: How Employee Care Can Help Small Businesses Navigate Payroll Compliance Changes

Staying compliant with payroll regulations is a challenge for small businesses, especially when laws and guidelines frequently change. The recent suspension of the 80/20/30 rule, which governed tip credit calculations, is a prime example of how shifting regulations can create uncertainty for business owners. This is where Employee Care, a leading provider of PEO leasing, employee leasing, and payroll services, can help businesses stay compliant and focus on growth. While Employee Care is an employee leasing company, this sometimes leads to misconceptions about co-employment relationships, while choosing our certified PEO service offers clear benefits for small businesses, including better compliance and support, and access to improved health insurance.

What Is Professional Employer Organization (PEO) Leasing?

Professional Employer Organizations (PEOs) provide businesses with HR support, payroll processing, benefits administration, and compliance assistance. A PEO partnership can benefit businesses by providing comprehensive HR support and compliance assistance. Through employee leasing, a PEO like Employee Care becomes the employer of record for tax and administrative purposes, allowing business owners to focus on operations while the leasing company handles payroll, tax filings, and regulatory compliance.

Understanding Employee Leasing and Co-Employment

What is employee leasing?

Employee leasing is a strategic business arrangement where a staffing agency provides employees to another company, typically on a temporary or project-specific basis. In this setup, the staffing agency takes on the responsibility of handling the employees’ paychecks, benefits, taxes, and administrative fees. This allows the client company to focus on its core operations without the burden of managing these HR tasks. Employee leasing is particularly beneficial for businesses that need to supplement their workforce during peak periods or require specialized skills for specific projects. By leveraging the expertise of a staffing agency, companies can efficiently manage their workforce needs without the long-term commitment of hiring permanent staff.

What is co-employment?

Co-employment is a contractual arrangement between a Professional Employer Organization (PEO) and a client company, where the PEO becomes the employer of record for the client’s employees. In a co-employment relationship, the PEO handles critical HR functions such as benefits administration, payroll processing, and compliance with labor laws. Meanwhile, the client company maintains control over the day-to-day management and supervision of its workforce. This co-employment model allows businesses to outsource their HR functions to a PEO, gaining access to competitive benefits and HR expertise, while still retaining control over their employees’ work and performance. This arrangement is ideal for businesses looking to streamline their HR processes and focus on their core business goals.

Key differences between employee leasing and co-employment

The key differences between employee leasing and co-employment lie in the level of control and responsibility each party holds. In an employee leasing arrangement, the staffing agency is the employer of record, and the client company has limited control over the leased employees. This setup is often used for short-term or project-specific needs. On the other hand, in a co-employment relationship, the PEO and the client company act as joint employers. The PEO handles HR functions such as payroll and benefits administration, while the client company maintains control over the management and supervision of its workforce. Co-employment typically involves a longer-term partnership, providing businesses with ongoing HR support and access to competitive benefits. This distinction allows companies to choose the arrangement that best fits their operational needs and business goals.

The Impact of Changing Payroll Laws

The Department of Labor’s (DOL) decision to withdraw the 80/20/30 rule in December 2024 has left many business owners unsure of how to properly classify and pay their tipped employees. This rule was originally designed to limit the time an employee could spend on non-tipped work while still receiving a tipped minimum wage. With this change, businesses must reassess their payroll strategies to ensure compliance with federal and state labor laws.

Additionally, PEOs manage workers compensation, ensuring businesses comply with safety regulations and employee protection laws.

For business owners struggling to stay updated on these shifts, Employee Care offers expert payroll services that keep companies ahead of regulatory changes, minimizing risk and ensuring compliance.

How Employee Care Simplifies Compliance Through Co Employment Relationship

Small business owners benefit significantly from PEOs as they take on the burden of monitoring and implementing payroll regulation changes. With Employee Care’s payroll solutions, businesses don’t have to worry about tracking complex wage laws, employee classifications, and overtime calculations. Instead of spending valuable time trying to keep up with evolving laws, Employee Care’s team ensures payroll accuracy and compliance, reducing the risk of penalties or fines.

Employee Care’s Payroll Services for Tipped and Leased Employees

Industries that rely on tipped employees, such as restaurants and hospitality, often face unique payroll challenges. The withdrawal of the 80/20/30 rule is just one example of how regulations can shift overnight, making it difficult for business owners to adjust quickly. Employee Care provides automated payroll services that correctly account for tip credits, minimum wage adjustments, and overtime pay, helping businesses remain compliant and avoid costly errors.

PEOs can also assist businesses in recruiting new employees, ensuring they are properly classified and compensated.

Employee Care will provide workers to businesses for specific projects or timeframes, alleviating businesses from HR and administrative responsibilities while managing the employees’ employment logistics. This allows companies to focus on their core operations without the burden of handling employment logistics.

The Role of a Staffing Agency in Employee Leasing

How staffing agencies work with PEOs

Staffing agencies often collaborate with Professional Employer Organizations (PEOs) like Employee Care to provide temporary workers to client companies. In this arrangement, the staffing agency is responsible for recruiting and hiring the temporary workers, while Employee Care, the PEO, manages HR functions such as payroll, benefits, and compliance. This partnership allows the client company to focus on its core operations while ensuring that the temporary workers are properly managed and compensated. Additionally, staffing agencies may work with PEOs to offer co-employment services, where the PEO becomes the employer of record for the temporary workers. This co-employment arrangement enables the client company to maintain control over the day-to-day management of its workforce, while outsourcing HR tasks to the PEO. By leveraging the expertise of both staffing agencies and Employee Care , businesses can efficiently manage their workforce needs and ensure compliance with labor laws.

The Competitive Benefits of Employee Leasing with Employee Care

By partnering with Employee Care, businesses gain access to streamlined HR solutions, compliance support, and accurate, worry-free payroll processing. Leasing employees can provide significant benefits, particularly for companies with fluctuating workforce needs, such as seasonal demands or specific projects, while also presenting certain risks. Employee leasing allows companies to offer competitive benefits, reduce HR workload, and avoid payroll tax risks. With the increasing complexity of employment laws, outsourcing payroll and compliance to a PEO like Employee Care is an effective way to mitigate risks and ensure smooth operations.

Final Thoughts

A strong PEO relationship can help businesses navigate payroll compliance changes effectively. Employee Care provides a reliable and efficient solution. With experts handling payroll and HR administration, businesses can focus on growth while Employee Care ensures compliance. If your company is looking for a trusted PEO partner to simplify payroll management and handle regulatory changes with ease, Employee Care is here to help.