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PEO vs Payroll Service

By definition, a payroll service typically administers only the payroll functions of your business. The legal liabilities and obligations remain solely with the client. A payroll service is considered a contractor retained to perform a specific task.

A PEO administers payroll functions and assumes responsibility for payroll taxes, unemployment taxes, procuring and administering employee benefits, workers' compensation, and other services. A PEO is a partner that provides a comprehensive set of service designed to make business easier and more profitable.

Frees Up Time


Payroll Service

Process payroll, prints and distributes checks Yes Yes
Calculates and deposits Federal, FICA, FUTA, SUTA and local taxes Yes Yes
Helps administer workers' compensation claims Yes No
Procures and administers benefit plans, including 401(K) Yes No

Provides Employee Benefits

Administers group health insurance, dental coverage, life insurance Yes No
Provides a 401(K) plan Yes No
Provides other supplemental voluntary insurance products Yes No

Manages Risks

Assumes liability for timely payment of all payroll taxes Yes No
Maintains employee personnel files for improved government compliance Yes No
Provides I-9 and W-4 verification and maintenance under government guidelines Yes No

Stabilizes Cash Flow

Eliminates penalties associated with late tax payments and non-compliance Yes No
Reduces accounting costs Yes No

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