PEO Glossary
The Professional Employer Services industry can be a maze of terminology and acronyms. This glossary provides brief summaries of several frequently used terms. As always, if you don't find an answer to your question on this site, feel free to call or email us at Nextep. We're here to make doing business as simple as possible for you and your organization.
Americans with Disabilities Act (ADA)
The Americans with Disabilities Act is the world's first comprehensive civil rights law for people with disabilities. The Act prohibits discrimination against people with disabilities in employment (Title I), in public services (Title II), in public accommodations (Title III) and in telecommunications (Title IV). EEOC is responsible for enforcing Title I's prohibition against discrimination against people with disabilities in employment.
ASO (Administrative Service Organization)
An ASO oversees the administrative aspects of a company's payroll, workers' compensation insurance, health insurance, retirement plans, disability, state and federal unemployment insurance management, and government compliance issues. In this model, the ASO does not involve co-employment.
Co-Employment
The PEO - client relationship involves a contractual sharing of employer responsibilities between the PEO and the client. This shared employment relationship is called co-employment. As co-employers with their client companies, PEOs contractually assume substantial employer rights, responsibilities, and risk through the establishment and maintenance of an employer relationship with the workers assigned to its clients. The client maintains control of those employees at the worksite and retains the right to hire, reassign, and fire the employees.
Core competencies
A set of skills that an organization must perform well for the organization to be successful. Core competencies define the essence of "who the organization is."
Consolidated Omnibus Budget Reconciliation Act (COBRA)
Passed in 1986, the Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances. These circumstances can include voluntary or involuntary job loss, reduction in hours worked, transition between jobs, death, divorce, and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan.
Employee Turnover
The ratio of the number of employees whose employment was terminated to the average number of workers in a company.
Family and Medical Leave Act (FMLA)
The FMLA provides that all covered employers must provide eligible employees up to 12 weeks of unpaid leave during any 12 month period. The Family and Medical Leave Act was enacted in 1993. Since then, the FMLA has provided eligible workers with unpaid time off to meet family responsibilities such as caring for a new baby or an adopted child or for looking after a sick child, spouse, or parent. In addition, the employer must give the employee’s job back or give them another job with equivalent pay and benefits when the employee is able to return to work.
Risk Management
Risk management is the process of evaluating risks to an organization such as worker’s compensation, general liability, and financial risk with the goal of avoiding or controlling risk by the most economical means. While it is not possible or desirable to eliminate all risks, the objective is to implement cost effective processes that reduce risks to an acceptable level, reject unacceptable risks, and transfer other risks through insurance and other means.
Human Resource Outsourcing (HRO)
An Human Resource Outsourcing firm offers clients the specific knowledge, tools, and expertise that remove the burden of managing back-office functions such as payroll, benefits, tax administration, risk management, recruiting and training, etc. so that owners can focus on leveraging employee performance and supporting strategic initiatives.
Occupational Safety and Health Administration (OSHA)
OSHA is the department of the U.S. government with the responsibility of ensuring the safety and health of work environments. It’s mission is, “to assure the safety and health of America's workers by setting and enforcing standards; providing training, outreach, and education; establishing partnerships; and encouraging continual improvement in workplace safety and health.”
Outsourcing
Outsourcing is the procedure of contracting with an outside company in order to provide a service or product that otherwise might be too expensive, complicated, or time-consuming for a firm to do internally.
Professional Employer Organization (PEO)
Businesses contract with a PEO to assume responsibilities for such matters as health benefits, workers' compensation claims, payroll, payroll tax compliance, and unemployment insurance claims. This contract allows the client to focus on their core competencies while the PEO manages the administrative functions as well as assuming certain employer rights, responsibilities, and risk.
National Association of Professional Employer Organizations (NAPEO)
Established in 1984, NAPEO is the recognized national trade association of the PEO industry. NAPEO currently has 380 PEO members with employees in all 50 states.
Section 125 Plan
Cafeteria Plans come from Section 125 of the IRS Code. These plans allow employees to pay for certain eligible expenses such as medical, dental, and vision premiums as well as qualified expenses on a pre-tax basis. This code allows for greater tax savings for both the employer and the employee.
Worksite Employees
Those employees that physically work on the site of the client company. The client retains the right to hire, reassign, and fire the worksite employee. The PEO assumes and establishes an employment relationship with the worksite employee and provides a complete human resource and employee benefit package.