Please note: this article is about the Justworks Payroll product. Not sure which product you're using? Check out: How Do I Know Which Justworks Product I Have?
Moving from a Professional Employer Organization (PEO) to a Payroll Service Provider (PSP) can be a big transition. Check out the info below to learn exactly what switching to a payroll provider involves.
What is a PEO?
A PEO is a service that partners with businesses to complete various employee administration tasks, such as payroll and benefits administration, on behalf of the company. PEOs use a co-employment model with their customers, which means they process payments, file taxes, and provide certain insurance policies under the PEO’s EIN, rather than the customer’s own EIN.
What is a PSP?
A PSP, or, a payroll provider, is a third-party service that businesses use to process payroll and fulfill employer tax obligations. Using a PSP helps employers pay their employees and taxes both accurately and on time. PSPs do not co-employ their customers’ employees, so the payments and taxes are filed under the company’s own EIN and tax account
One key difference in switching to a payroll provider is filing under your company’s own EIN, not a PEO’s EIN.
What does switching to a Payroll provider impact?
Processing payroll under your company’s EIN affects some key areas, including state tax accounts, insurance policies and access to tax returns. Keep reading to find out more about these three categories.
State tax accounts
To move to a payroll provider you will need to register for applicable state tax accounts, such as withholding or state unemployment insurance accounts, under your company’s EIN and/or state tax ID. Payroll providers will generally request third-party access to your state tax accounts so that they can manage the accounts on your behalf.
Worker’s compensation insurance
PEOs typically offer workers’ compensation insurance as part of their services. Outside of a PEO, you will need to set up your own workers’ compensation insurance policy. Most states require workers’ compensation insurance and some have state-specific laws, such as requiring businesses to get coverage through a state-funded program, so it’s a good idea to check your state workers’ compensation laws before purchasing a policy.
PEOs sometimes include Employment Practices Liability Insurance (EPLI) as part of their services. PSP customers who wish to maintain EPLI coverage will need to obtain it independently.
Access to tax returns
Filing under your company’s own EIN means you will have direct access to your Forms 940 and 941, as well as state filings. On the other hand, PEOs file in the aggregate for all their clients, so you would not receive quarterly or annual filings specific to your company.
How is Justworks Payroll different from Justworks PEO?
In addition to the general payroll provider and PEO differences, business owners switching to Justworks Payroll from Justworks PEO will want to keep these details in mind:
- Payroll processing time: Like Justworks PEO, payments process according to a 4-business day timeline. However, the processing deadline for Justworks Payroll is 11am EST, so any payment changes need to be submitted by that time.
- Company debits: Justworks Payroll processes two debits for each payroll — one for the net payment amounts and one for the associated taxes.
Can my information be transferred from a PEO to a payroll provider?
Even when a payroll provider is associated with a PEO, a company’s information typically can’t be ported over from one platform to the other, since it is a separate product. You will need to provide your company’s details, state account information, employee profiles, etc. with your payroll service provider.
If you already have a Justworks PEO account, you can use the same login credentials for your Justworks Payroll account by logging into https://secure.justworks.com, then opening https://payroll.justworks.com/logn in a new tab.
Questions about how to successfully move from a PEO to a Payroll provider? We can help! Contact us at support@payroll.justworks.com for more details about switching to a payroll provider.
Disclaimer
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.