Small business owners — especially those focused on their company’s fast growth — may not give much consideration to the Family and Medical Leave Act (FMLA). The law is quite complicated, can be hard to understand and may be difficult to remain in compliance with on your own. This post will provide a guide to help you understand FMLA compliance and how joining a Professional Employer Organization (PEO) can help.
Are you interested in learning more about PEOs and how partnering with one can help your small business grow? Take our free PEO test.
What Is the Family and Medical Leave Act?
FMLA guarantees up to 12 weeks of unpaid leave per year to eligible employees without the threat of losing their job. FMLA also obligates employers covered by the law to maintain the same health benefits for eligible employees on leave as if they were working. The law comes in handy as protection when employees fall ill, are expecting a new baby, and any other family and medical issues pop up. The law applies to all public employers with more than 50 employees for at least 20 work weeks annually.
What Is a PEO?
More and more small businesses are turning to Professional Employer Organizations, or PEOs, to outsource HR-related tasks and compliance so they can focus on meeting client needs and growing their businesses from the ground up.
Read more about what PEOs help with the benefits of partnering with one.
How Does Joining a PEO Affect FMLA Compliance?
As we mentioned above, FMLA applies to public employers with over 50 employees for the majority of the year — this means that most small businesses don’t have to worry about following FMLA rules.
But, when a business partners with a PEO, the PEO co-employs the businesses’ employees, which in turn makes the PEO the employer of record. See how this can make FMLA compliance a bit more confusing for employers working with PEOs? You may be wondering, “if I join a PEO, which means my employees will technically work for an organization with more than 50 employees, will I then be required to comply with FMLA?” The answer is no. Even when a small business partners with a PEO, they will always remain the common law employer. This is why if you partner with a PEO, you don’t have to worry about FMLA compliance.
FMLA gives employees up to 12 weeks of unpaid leave to deal with a personal or family illness, bond with a new baby or adopted child, and so forth. Although this time is unarguably important, it can become complicated for small businesses to work around.
At larger companies, there are more employees to fill in the gaps left by the employee on leave and more resources to cross-train other employees to fill the absence. A lot of small businesses also find it hard to navigate offering good benefits to employees that are affordable to the company — the main reason organizations partner with PEOs. Although there are many benefits associated with PEOs, some employers may shy away from them in fear it will complicate their benefits and tax requirements. The truth is, PEOs are HR and compliance experts, and joining one will simplify operations, not complicate them. Although the PEO will become the employer of record, the business owner is still in charge of all hiring and firing decisions. Also, if an employer has fewer than 50 employees, even if they join a PEO, they will still not be required to follow FMLA obligations.
Working with a PEO is all about developing processes and strategies that work best for your business. Some small businesses choose to offer family and medical leave even if the law does not require them to. But, the most important thing is that businesses make their own decisions. PEOs can help make things easier for small businesses, from human resources to payroll and benefits, to allow business owners to make the big decisions and moves.
How America’s Back Office Can Help
America’s Back Office is an IRS-certified PEO — this distinction sets up apart from 96 percent of other PEO companies. It’s that extra commitment and dedication that we bring to our clients every day. By handling all aspects of employee administration, our clients can maximize employee productivity, reduce time spent handling transactional HR tasks, and reduce employment liability — ultimately lowering labor costs and increasing corporate profitability by outsourcing these business functions.
Contact us today to learn more about how you can start reaping these benefits today.
