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What is Certified PEO (CPEO)?

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Certified PEO (CPEO)

A Certified Professional Employer Organization (CPEO) is a type of PEO company meeting specific standards established by the Internal Revenue Service (IRS). Introduced under the Small Business Efficiency Act (SBEA), this certification signifies that a PEO is financially reliable and complies with extensive tax-related requirements.

CPEOs assume responsibility for paying federal employment taxes, ensuring that companies are not liable for unpaid taxes, late penalties, or interest if the PEO fails to fulfill its obligations.

The certification program mandates that a CPEO must post an annual bond of up to $1 million to guarantee the payment of its federal employment tax liabilities.

Clients of CPEOs retain the right to claim specified tax credits to which they are entitled, even while in a PEO relationship. Additionally, certification eliminates the need for a wage-based restart when clients join or leave a CPEO during the year. This flexibility allows companies to make changes at any time without waiting until January, potentially saving thousands of dollars in taxes.

CPEOs offer additional legal protections to clients, particularly concerning federal employment taxes, by ensuring strict compliance with IRS regulations and reducing the risk of tax-related issues and penalties.

Working with a CPEO

Partnering with a CPEO enables companies to manage their employment taxes effectively, providing assurance and reducing potential risks.

For instance, a small business expanding into a new state may find handling payroll taxes increasingly complex.

By engaging a CPEO, the company can rely on experts to manage tax compliance, allowing the owners to focus on strategic growth initiatives.

CPEO vs. Accredited PEO

A CPEO is an IRS-certified PEO that meets rigorous requirements, including tax compliance, financial reporting, bonding, and reliably handling employment tax responsibilities. Certification by the IRS assures businesses that the CPEO adheres to high standards of professionalism and compliance.

An accredited PEO, often associated with organizations like the Employer Services Assurance Corporation (ESAC), emphasizes the PEO’s operational and financial standards. Accreditation involves validating key areas such as financial solvency, ethical business conduct, and adherence to operational standards and regulatory requirements.

While not directly linked to specific tax benefits like IRS certification, accreditation assures the PEO’s financial reliability and overall operational quality.

Difference Between PEO and CPEO

A standard PEO offers payroll processing, benefits administration, and human resources support. A CPEO provides these services but has also met the IRS’s stringent certification criteria, offering additional tax compliance and financial stability assurances. 

Difference between PEO vs CPEO
CPEO vs PEO

Choosing a CPEO can give businesses greater confidence in the PEO’s ability to manage employment tax responsibilities effectively.

How to Verify a PEO's Certification Status

Verifying a PEO’s certification status ensures you work with a reputable organization. The IRS maintains a public listing of Certified Professional Employer Organizations (CPEOs), which can be accessed online. Existing and potential customers can review this list to confirm a PEO’s certification status. CPEOs must maintain tax compliance, meet rigorous financial standards, and undergo routine background checks to retain their certification.

It is important to note that certification is voluntary, and non-certified PEOs may still offer valuable services. However, working with a certified PEO provides additional assurance regarding the organization’s financial stability, ethical business practices, and regulatory compliance.

Some PEOs may display an “IRS Certified” badge on their website to highlight their certification status. However, it’s important to note that this badge is not an official designation issued by the IRS.

The IRS does not provide any official badges for Certified PEOs, so businesses should always verify a PEO’s certification by checking the IRS’s publicly available list of Certified Professional Employer Organizations.

To ensure you are working with a legitimate CPEO, it’s crucial to confirm their status directly from the official IRS listing, rather than relying solely on website claims.

CPEO IRS Certified Badge
Example of a non-official CPEO badge.

Criteria for a PEO to Become Certified

To become a CPEO, a PEO must meet specific criteria set by the IRS:

  • Financial Reporting: Provide audited financial statements annually to demonstrate financial stability.
  • Tax Status: Be in good standing regarding federal employment taxes, ensuring compliance with tax regulations.
  • Bonding and Insurance: Hold a bond or letter of credit ranging from $50,000 up to $1 million, depending on federal employment tax liabilities, to ensure financial protection for clients.
  • Background Checks: Key personnel must undergo rigorous background checks to ensure trustworthiness and reliability.
  • Client Service Agreements: Service agreements must adhere to IRS requirements and clearly define each party’s responsibilities.

Pros and Cons of Partnering with a CPEO

Compliance with employment laws

CPEOs stay updated on employment laws, which is crucial for businesses operating in multiple countries or considering expansion. This ensures adherence to legal standards and reduces the risk of non-compliance.

Efficiency in payroll management

CPEOs streamline payroll processes, handling complexities of taxation and employee compensation efficiently, which is crucial for businesses with an international workforce.

HR management expertise

CPEOs offer professional expertise in human resources (HR), aiding businesses in everything from recruitment to performance management. This is essential in maintaining a competent workforce.

Cost savings

By consolidating various HR services, businesses can often reduce costs, as CPEOs can provide these services more efficiently than if they were handled internally or separately.

Risk management

CPEOs help manage and mitigate risks related to employment, offering support in areas like workers’ compensation and employee benefits.

Dependence on external provider

Relying on a CPEO for crucial HR functions can create dependence, potentially leading to challenges if the partnership is disrupted.

Cost considerations

While overall cost savings are a pro, the initial investment or fees for a CPEO service can be a consideration for some businesses.

Limited customization

Some businesses may find that the one-size-fits-all approach of some CPEOs doesn’t perfectly align with their specific needs or company culture.

Control over HR functions

Delegating significant HR responsibilities to a CPEO means less direct control over these functions, which may not align with the preferences of all businesses.

How Certification Impacts PEO Services: Payroll, Benefits, and Compliance

Certification significantly impacts the services provided by a PEO, notably in payroll, benefits administration, and HR compliance.

When a PEO is certified, it assures a higher standard of service and reliability. This certification, recognized by government bodies, means the PEO adheres to stringent financial reporting and performance standards.

  • Payroll: A certified PEO ensures accuracy and compliance with local and international tax laws, reduces the risk of penalties, and ensures employees are paid correctly and on time.
  • Benefits Administration: Certified PEOs typically have better access to high-quality benefits at competitive rates and offer more attractive packages to employees.
  • HR Compliance: They stay updated with the latest employment laws and practices, ensuring the business remains compliant in different jurisdictions, which is particularly important for international expansion.

Costs of Working with a Certified PEO

The costs of partnering with a CPEO can vary based on the business size, the complexity of HR needs, and the specific services required.

  • Initial Setup Fees: Some CPEOs charge an initial setup fee to integrate the business with their systems, set up payroll, and initiate employee benefits programs.
  • Monthly Service Fee: The primary cost is often a monthly service fee, calculated as a percentage of payroll or a flat employee fee. According to the National Association of Professional Employer Organizations (NAPEO), the average cost ranges from 2% to 11% of payroll, depending on the services provided.
  • Employee Benefits Costs: Partnering with a CPEO often provides access to better employee benefits rates, but costs vary based on the benefits offered, such as health insurance and retirement plans.
  • Tax Administration Fees: CPEOs handle payroll taxes and ensure compliance with tax regulations, which may involve additional fees, typically included in the monthly service fee.
  • Compliance and Legal Fees: Compliance with local employment laws is critical, especially for international businesses. CPEOs may charge for legal expertise and compliance services when dealing with employment laws in different countries.
  • Termination Costs: Some CPEOs include termination fees in their contracts, covering the process of unwinding the co-employment arrangement if the partnership ends.
  • Additional Services: Specialized services, such as recruitment assistance, custom HR software, or specific legal advice, may incur additional costs.

Certified PEOs List

Below is a list of Certified Professional Employer Organizations. By choosing a CPEO from this list, businesses can be confident in their compliance with federal employment regulations and the secure management of their HR functions.

Certified PEO NameAddressCityStateZip CodeEffective Date
Inc2 Corporate DriveCRANBURYNew Jersey851210/1/2018
Abel HR III Inc2 Corporate DriveCRANBURYNew Jersey851210/1/2018
Abel HR inc.2 Corporate DriveCRANBURYNew Jersey851210/1/2018
Abel HR IV, Inc.2 Corporate DriveCRANBURYNew Jersey851210/1/2018
Abel HR V Inc2 Corporate DriveCRANBURYNew Jersey851210/1/2018
ABO Co-Employment Services, Inc.16010 19 Mile RoadCLINTON TOWNSHIPMichigan480381/1/2021
ABO Employer HR Services, Inc.16010 19 Mile RoadCLINTON TOWNSHIPMichigan480381/1/2021
ADP TotalSource CO XXI, Inc.10200 Sunset DriveMIAMIFlorida331731/1/2017
ADP TotalSource CO XXII, Inc.10200 Sunset DriveMIAMIFlorida331731/1/2017
ADP TotalSource DE IV, Inc.10200 Sunset DriveMIAMIFlorida331731/1/2017
ADP TotalSource FL XI, Inc.10200 Sunset DriveMIAMIFlorida331731/1/2017
ADP TotalSource FL XIX, Inc.10200 Sunset DriveMIAMIFlorida331731/1/2017
ADP TotalSource FL XVI, Inc.10200 Sunset DriveMIAMIFlorida331731/1/2017
ADP TotalSource FL XVII, Inc.10200 Sunset DriveMIAMIFlorida331731/1/2017
ADP TotalSource FL XVIII, Inc.10200 Sunset DriveMIAMIFlorida331731/1/2017
ADP TotalSource FL XXIX, Inc.10200 Sunset DriveMIAMIFlorida331731/1/2017
ADP TotalSource I, Inc.10200 Sunset Drive Attn: Legal DepaMIAMIFlorida331731/1/2017
ADP TotalSource II, Inc.10200 Sunset DriveMIAMIFlorida331731/1/2017
ADP TotalSource III, Inc.10200 Sunset DriveMIAMIFlorida331731/1/2017
ADP TotalSource MI VI, LLC10200 Sunset DriveMIAMIFlorida331731/1/2017
ADP TotalSource MI VII, LLC10200 Sunset DriveMIAMIFlorida331731/1/2017
ADP TotalSource MI XXX, Inc.10200 Sunset DriveMIAMIFlorida331731/1/2017
ADP TotalSource NH XXVIII, Inc.10200 Sunset DriveMIAMIFlorida331731/1/2017
ADP TotalSource of CO XXIII, Inc.10200 Sunset DriveMIAMIFlorida331731/1/2017
ADP TotalSource, Inc10200 Sunset DriveMIAMIFlorida331731/1/2017
Alabama Staff, Inc.1608 13th Avenue South Suite 220BIRMINGHAMAlabama352057/1/2020
Alcott HR Group I LLC71 Executive Blvd.FARMINGDALENew York117354/1/2019
Alcott HR Group LLC71 Executive BlvdFARMINGDALENew York117351/1/2017
ALT-SOURCE XI LLC480 WILDWOOD FOREST DR STE 500THE WOODLANDSTexas7738010/1/2018
AMERICAN ONE SOURCE SOUTHWEST, INC.900 AUSTIN AVENUE SUITE 600WACOTexas7670110/1/2021
AMERICAN ONE SOURCE, INC900 Austin Ave Ste 600WACOTexas7670110/1/2021
America’s Back Office, Inc.16010 19 Mile RoadCLINTON TWPMichigan480384/1/2023
America’s Back Office, Inc. – CA16010 19 Mile RoadCLINTON TOWNSHIPMichigan480381/1/2021
America’s Back Office, Inc. – Midwest16010 19 Mile RoadCLINTON TOWNSHIPMichigan480381/1/2021
America’s Back Office, Inc. – US16010 19 Mile RoadCLINTON TOWNSHIPMichigan480387/1/2019
Armhr, LLC5015 CAMPUSWOOD DR SUITE 204EAST SYRACUSENew York130574/1/2020
Avalon HR 2 LLC100 S Pace BlvdPENSACOLAFlorida325021/1/2017
Avalon HR LLC9685 Soldier Creek RDLILLIANAlabama365491/1/2017
Axcet HR Solutions10975 Grandview Drive Suite 200OVERLAND PARKKansas662101/1/2017
Choice Employer Solutions III Inc9007 BRITTANY WAYTAMPAFlorida336191/1/2017
Choice Employer Solutions Inc9007 BRITTANY WAYTAMPAFlorida336191/1/2017
CLEAR PEO III INC2080 Cabot Blvd W STE 202LANGHORNPennsylvania190477/1/2024
Concurrent HRO LLC11811 Upham St Unit ABROOMFIELDColorado80020-000010/1/2023
DecisionHR 65, Inc.9455 Koger Blvd Suite 110ST PETERSBURGFlorida337021/1/2017
DecisionHR 92, Inc.9455 Koger Blvd N Suite 110ST PETERSBURGFlorida337021/1/2017
DecisionHR PEO, Inc.9455 Koger Blvd N Suite 110ST PETERSBURGFlorida337021/1/2017
EMERGENT IV LLC480 WILDWOOD FOREST DR STE 500THE WOODLANDSTexas7738010/1/2018
EMERGENT XIII LLC480 WILDWOOD FOREST DR STE 500THE WOODLANDSTexas7738010/1/2018
EMERGENT XIV LLC480 WILDWOOD FOREST DR STE 500THE WOODLANDSTexas773804/1/2021
EMERGENT XV LLC480 WILDWOOD FOREST DR STE 500THE WOODLANDSTexas773804/1/2021
EMPOWER HR, LLC1475 S. Price RoadCHANDLERArizona852861/1/2018
Engage PEO, LLC3001 Executive Drive Suite 340CLEARWATERFlorida337621/1/2017
Erigo, Inc.211 Grandview Drive Ste 206FT. MITCHELLKentucky410171/1/2017
ESC Choice, Inc.20 Pineview DriveAMHERSTNew York142281/1/2017
Extensis II Inc.900 Route 9 North Third FloorWOODBRIDGENew Jersey70951/1/2017
Extensis III, Inc.900 Route 9 North Third FloorWOODBRIDGENew Jersey70951/1/2017
Extensis Inc.900 Route 9 North Third FloorWOODBRIDGENew Jersey70951/1/2017
Extensis IV, Inc.900 Route 9 NorthWOODBRIDGENew Jersey70951/1/2017
Extensis VI LLC900 Route 9 NorthWOODBRIDGENew Jersey70951/1/2017
Extensis VIII Inc.900 Route 9 NorthWOODBRIDGENew Jersey70951/1/2017
G&A Outsourcing VII, LLC17220 Katy Freeway Suite 350HOUSTONTexas7709410/1/2020
Genesis HR Solutions, Inc.30 CORPORATE DRIVE SUITE 100BURLINGTONMassachusetts18031/1/2017
Group Management Services Inc3750 Timberlake DrRICHFIELDOhio442861/1/2018
HAWAII EMPLOYEE LEASING PROFESSIONALS LLC75-5591 PALANI ROAD SUITE 3008KAILUA KONAHawaii967401/1/2018
HR Hawaii Inc75-5591 Palani Road Suite 3008KAILUA-KONAHawaii967401/1/2020
HR Resourcing LLC10303 E Dry Creek Rd Suite 400ENGLEWOODColorado801121/1/2017
HR Service Group LLC3905 National Drive Suite 400BURTONSVILLEMaryland208667/1/2020
HUMAN CAPITAL CONCEPTS LLC9002 N Purdue Road Suite 301INDIANAPOLISIndiana462681/1/2017
INFINITI HR, LLC3905 National Drive Suite 400BURTONSVILLEMaryland2086610/1/2018
Insperity PEO Services, L.P.19001 Crescent Springs DriveKINGWOODTexas773391/1/2017
InTandem Human Resources, LLC650 S Cherry St. Suite 1221DENVERColorado802461/1/2017
INTELLIPRO SERVICE INC.3120 SCOTT BLVD STE 301SANTA CLARACalifornia950547/1/2023
Justworks Employment Group LLC55 Water St 29th FloorNEW YORKNew York100411/1/2017
Landrum Professional Employer Services, Inc. III219 E Garden Street Suite 500PENSACOLAFlorida325021/1/2017
LBMC Employment Partners, LLC201 Franklin Road Suite 200BRENTWOODTennessee370271/1/2017
Lever1, LLC5200 Metcalf Ave Suite 300OVERLAND PARKKansas662024/1/2022
LYONS HR, LLC201 South Court Street Suite 700FLORENCEAlabama356301/1/2017
Midwest Ventures, LLC2400 Wolf Road Suite 100WESTCHESTERIllinois601541/1/2017
MidwestHR, LLC2400 Wolf Road Suite 100WESTCHESTERIllinois601541/1/2017
Nextep Business Solutions III Inc.1800 N. Interstate DriveNORMANOK730721/1/2017
Nextep Business Solutions IV Inc.1800 N. Interstate DriveNORMANOK730721/1/2017
Nextep Business Solutions V Inc.1800 N. Interstate DriveNORMANOK730721/1/2017
Nextep Business Solutions VI Inc.1800 N. Interstate DriveNORMANOK730721/1/2017
Nextep Business Solutions VII, Inc.1800 N. Interstate DriveNORMANOK730721/1/2017
Nextep Business Solutions, Inc.1800 N. Interstate DriveNORMANOK730721/1/2017
Nextep, Inc.1800 N. Interstate DriveNORMANOK730721/1/2017
Oasis HR Solutions III, LLC2054 Vista Parkway Suite 300WEST PALM BEACHFL334111/1/2017
OnePoint HRO LLC10303 E Dry Creek Rd Suite 400ENGLEWOODCO801121/1/2017
Optimum Employer Solutions, LLC.2530 RED HILL AVENUE SUITE 200SANTA ANACA927054/1/2022
Paychex PEO VI LLC911 Panorama Trail SouthROCHESTERNY146251/1/2017
Paychex PEO VII, LLC911 Panorama Trail SouthROCHESTERNY146251/1/2017
Prestige Employee Administrators II, LLC.538 Broadhollow Road Suite 311MELVILLENY117471/1/2017
Prestige Employee Administrators, LLC538 Broadhollow Road Suite 311MELVILLENY117471/1/2017
Prestige PEO III LLC538 Broadhollow Road Suite 311MELVILLENY117471/1/2022
Professional Employer Resources, Inc.500 N. Maitland Avenue Suite 201MAITLANDFL327511/1/2020
Professional Employer Services II, LLC2400 Wolf Rd. Ste. 100WESTCHESTERIL601541/1/2017
Professional Employer Services, LLC2400 Wolf Rd. Ste. 100WESTCHESTERIL601541/1/2017
Propel PEO, Inc.669 N. Academy StreetGREENVILLESC296011/1/2017
Resourcing Edge 2, LLC1309 Ridge Road Suite 200ROCKWALLTX7508710/1/2017
Resourcing Edge 3, LLC1309 Ridge Road Suite 200ROCKWALLTX7508710/1/2017
Resourcing Edge I, LLC1309 Ridge Road Suite 200ROCKWALLTX750871/1/2017
S2 HR Solutions 1A, LLC3001 Executive Drive Suite 340CLEARWATERFL337621/1/2017
S2 HR Solutions 1B, LLC3001 Executive Drive Suite 340CLEARWATERFL337621/1/2017
S2 HR Solutions 1C, LLC3001 Executive Drive Suite 340CLEARWATERFL337621/1/2017
S2 HR Solutions 1D, LLC3001 Executive Drive Suite 340CLEARWATERFL337621/1/2017
S2 HR Solutions 2A, LLC3001 Executive Drive Suite 340SAINT PETERSBURGFL337627/1/2021
S2 HR Solutions 2B, LLC3001 Executive Drive Suite 340SAINT PETERSBURGFL337627/1/2021
S2 HR Solutions 2C, LLC3001 Executive Drive Suite 340SAINT PETERSBURGFL337627/1/2021
S2 HR Solutions 2D, LLC3001 Executive Drive Suite 340CLEARWATERFL337621/1/2017
S2 HR Solutions Group 1, LLC3001 Executive Drive Suite 340CLEARWATERFL337621/1/2017
Sequoia One PEO, LLC350 W Washington St Suite 301TEMPEAZ852881/1/2018
Staff Management, Inc.5919 Spring Creek RoadROCKFORDIL611141/1/2017
Staff-Line, Inc.53 Academy StreetPOUGHKEEPSIENY126011/1/2020
Staffpay, LLC9851 IRVINE CENTER DRIVE #200IRVINECA926184/1/2019
SWBC Professional Employer Services I LLC30815 US Hwy 281 NBULVERDETX781631/1/2017
SWBC Professional Employer Services II LLC30815 US Hwy 281 NBULVERDETX781631/1/2017
SWBC Professional Employer Services III LLC30815 US Hwy 281 NBULVERDETX781631/1/2017
Syndeo Outsourcing II, LLC3504 N. Great Plains Dr. Ste. 200WICHITAKS672204/1/2023
Syndeo Outsourcing, LLC3504 N Great Plains Dr Ste. 200WICHITAKS672301/1/2017
Tandem Professional Employer Services II, LLC2400 Wolf Rd. Ste. 100WESTCHESTERIL601541/1/2017
Tandem Professional Employer Services III, LLC2400 Wolf Rd. Ste. 100WESTCHESTERIL601541/1/2017
Tandem Professional Employer Services IV, LLC2400 Wolf Rd. Ste. 100WESTCHESTERIL601541/1/2017
Tandem Professional Employer Services V, LLC2400 Wolf Rd. Ste. 100WESTCHESTERIL601541/1/2017
Tandem Professional Employer Services VII, LLC2400 Wolf Rd. Ste. 100WESTCHESTERIL601541/1/2017
Tandem Professional Employer Services VIII, LLC2400 Wolf Rd. Ste. 100WESTCHESTERIL601541/1/2017
Tandem Professional Employer Services, LLC2400 Wolf Rd. Ste. 100WESTCHESTERIL601541/1/2017
The Employer Advantage, LLC3131 Ten Pin LnJOPLINMO648011/1/2018
The Labor Source, Inc.6160 Summit Drive N Suite 500BROOKLYN CENTERMN554307/1/2021
TRANSCOMP, INC.900 AUSTIN AVENUE SUITE 600WACOTX7670110/1/2021
TRANSPORT TAX CONSULTING INC.480 WILDWOOD FOREST DR Suite 500THE WOODLANDSTX773804/1/2021
TriNet HR III-B, Inc.One Park Place Suite 600DUBLINCA945687/1/2018
WorkSmart Systems, Inc8531 BASH STINDIANAPOLISIN462501/1/2019

How to Choose the Right CPEO

Selecting the best CPEO involves evaluating industry experience, service offerings, technology platforms, and customer service quality.

Businesses should conduct thorough due diligence, including requesting client references, reviewing service agreements carefully, and ensuring that the CPEO’s solutions align with their needs and company culture.

Additionally, you can refer to our guide about the Best PEO.

Charlotte Evans
Charlotte Evans

HRIS Implementation and Testing

Charlotte is an Human Resources Information Systems and Martech expect, Charlotte has worked for major brands in the industry including FactorialHR and Tooltester. Originally from Manchester, UK, with a Bachelor's degree from the Manchester Metropolitan University, Charlotte currently lives in Barcelona, Spain.

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