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Understanding the Legal Implications of PEO Agreements

Understanding the Legal Implications of PEO Agreements

Why Payroll Is a Prime Target for Cyberattacks

 

The digital space is continuing to grow and evolve every day. With so much of life conducted online, it’s more important than ever to protect your personal information from vulnerability.

 

Payroll systems, however, have become a prime target for cyberattacks. They contain some of the most confidential employee information that a business manages—including Social Security Numbers, tax identification numbers, addresses, salaries, and direct deposit information. A single breach can expose hundreds of records—if not more—leading to financial fraud, identity theft, and compliance violations.

 

Cybercriminals may not even need to break into a company’s system to gain information. They may simply trick an employee into handing over credentials or clicking on a malicious link, making payroll fraud prevention crucial for any business. It’s essential for business owners, HR managers, and IT directors to know how to protect their employees and prevent data breaches.

 

Let’s dive into the types of threats facing payroll systems today, what businesses risk without proper security, and how PEOPayGo prioritizes cybersecurity in payroll services.

 

Types of Threats Facing Payroll Systems Today

 

There are many types of threats facing businesses that may not even require a hacker to gain access to their payroll system. Let’s take a look at some of the most common cybersecurity threats.

 

Phishing

 

Phishing scams occur when cybercriminals trick individuals into providing sensitive information. Many attackers will impersonate someone from the HR or IT department and send fake emails to employees to steal their login credentials.

 

Ransomware

 

Hackers may use malicious software to lock payroll systems until a ransom is paid. If the company chooses not to pay the ransom, the cybercriminals may leak the stolen data.

 

Insider Threats

 

Insider threats come from the organization itself rather than someone outside of it. Unhappy employees or contractors could misuse their access to payroll data.

 

Insecure Integrations

 

In some cases, attackers find poorly secured third-party apps connected to the payroll systems and take advantage of those vulnerabilities to get the information they want.

 

Weak Passwords

 

When employees create weak passwords or fail to use the multi-factor authentication, it makes it far easier for hackers to guess their credentials and break in.

 

What Businesses Risk Without Proper Security

 

A lack of security can have a major negative impact on a company. Here are some of the things that businesses risk when they don’t have proper security in place.

 

Financial Loss

 

Companies can face significant financial losses during an employee data breach. From incident response and legal fees to lost revenue and reputational damage, the impact of financial loss on a company can be drastic.

 

Employee Trust

When personal information is compromised, employees may lose confidence in their employer. When trust dwindles in the workplace, employees tend to walk away.

 

Operational Downtime

 

The financial loss and legal consequences that stem from compromised payroll systems could result in payroll delays and operational downtime.

 

How PEOPayGo Prioritizes Cybersecurity in Payroll Services

 

Professional employer organizations (PEOs) take on the administrative tasks of businesses like payroll, workers’ compensation, benefits administration, and risk management. Because they’re regularly handling sensitive employee information, cybersecurity is essential. Here’s how PEOPayGo prioritizes security in their payroll services.

 

End-to-End Encryption

 

This is a security method that ensures when messages are sent via their platform, only the sender and receiver can read them.

 

Multi-Factor Authentication

 

By requiring more than one form of identification, multi-factor authentication ensures only verified users can access payroll systems.

 

Regular Security Audits

 

Trusted PEOs want to make sure they’re in compliance with industry regulations and best practices. PEOPayGo undergoes third-party security audits in order to maintain that standard.

 

Role-Based Access Control

 

Ensuring permissions are granted based on user roles means a lower possibility of security threats from within the company.

 

Employee Training and Awareness

 

PEOPayGo implements training programs that help keep employees educated on how to spot phishing attacks and manage payroll securely.

 

Secure Your Payroll Data with PEOPayGo’s Trusted Protection

 

A payroll breach can be detrimental to your company. When you partner with a trusted PEO like PEOPayGo, you can rest assured that your systems are secure. If you’re ready to secure your payroll data with PEOPayGo, reach out to their team of experts today.

 

Contact us today to get the coverage and support you need!

If you’re a business owner, you likely have a lot on your plate—no matter how many employees you have. Not only are you in charge of brainstorming new ideas that align with the big picture of your company, but it’s also up to you to handle the day-to-day tasks that keep things running smoothly.

Professional employer organizations (PEOs) step in for small and medium-sized businesses to handle their administrative tasks. This can include anything from the initial onboarding process for new employees to payroll and workers’ compensation. Partnering with a PEO does have legal implications that are important for business owners to understand. Let’s take a look at the key legal considerations in PEO contracts as well as employer liability and PEO services.

 

Key Legal Considerations in PEO Contracts

Partnering with a PEO is considered a co-employment relationship. When your business works with a PEO, it’s crucial that you fully understand the contract you sign with them. Your PEO agreement will lay out who is responsible for what within the co-employment relationship.

Typically, a PEO agreement includes a client service agreement, which states exactly what the PEO will provide for your business, the responsibilities of your business within that agreement, and the expected costs. This should also include terms and conditions—both for the PEO to adhere to as well as your business—including the duration of the contract and any renewal conditions.

When entering into a contract with a PEO, it’s imperative that you understand where responsibility lies for things like payroll, taxes, workers’ compensation, and other benefits. What does the PEO need from you each month in order to maintain accuracy?

 

Employer Liability and PEO Services

Understanding liability within a PEO agreement can feel a little unclear or overwhelming as an employer. As a business owner, you want to feel confident that you are still in control of your company. Who is in charge of hiring and firing? Additionally, what happens if a PEO makes a mistake? Who is financially responsible for potential errors?

First and foremost, as an employer, you should have full control of your company. PEOs help with administrative tasks, but you should not be relinquishing control of your organization to them. Your company will likely remain in charge of daily operations that keep your business running smoothly. A PEO will typically administer pay, take care of taxes and benefits, and handle workers’ compensation claims.

Hiring and firing is left in the control of the client company as well. PEOs often offer recruitment services, however, to help businesses find people who fit well with the company culture and whose skills meet the needs of the organization. With that said, no decision is made to hire new employees without the approval of the client company itself.

Ultimately, your company is responsible for all taxes due to the government, which can feel a bit nerve-racking if you’ve partnered with a PEO. If they do make a mistake and fail to pay on your behalf, you may be held liable. Depending on the situation, however, the IRS may first reach out to the PEO for payment.

Partnering with an experienced PEO can help eliminate the possibility of error and ensure the process runs smoothly. While there are risks if a PEO makes a mistake, for many small and medium-sized businesses, the benefits of working with a PEO far outweigh those risks.

 

Navigate PEO Agreements with Confidence—PEOPayGo is Here to Help

Entering a PEO agreement means shared responsibility, making legal compliance essential. Understanding reporting requirements, exit strategies, and contract terms ensures a smooth partnership and protects your business.

PEOPayGo helps you streamline administrative tasks while ensuring compliance every step of the way. Contact us today for expert PEO support!

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