How do you record wages when using a PEO

When using a PEO your workers are considered employees of the PEO and the PEO files all payroll tax returns. Since you have not directly paid wages and filed your own tax returns how do you record the payments made to the PEO on your books? It seems like you can not show wages and payroll tax expense since you are not considered the employer. Is the PEO payment shown as a one line item and if so how is it categorized. Also, how does impact budgeting and forecasting since you normally would have these costs detailed on ana item by item basis especially if they are also providing health insurance and workers compensation. Thank you.

Answers

Didier Jupillat Director / CFO Advisory • August 19, 2015

Your workers are considered leased employees for payroll tax purposes, but your company is still the one hiring and firing, and paying their salaries and benefits through the PEO. It makes no difference as to what you want to show on your P&L, which should be as detailed as you need it to be for budgeting and reporting purposes, just as if you were paying those employees directly. The only added expense is the fee paid to the PEO, and they should provide you with a detailed ledger of all expenses per employee for each payroll run.

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How do you record wages when using a PEO

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