The Business Glossary · Workforce

85% rule (CPEO): a worker is a CPEO's work site employee only at a site where at least 85% of the people performing services for the customer are covered by the CPEO contract (PEOs & Co-Employment).
Accumulator: a quarter-to-date or year-to-date total per worker, employer and key (a pay item, a tax, a jurisdiction), derived from paid statement lines and never the source of truth (The Workforce Business).
Administrative services only (ASO): a PEO vendor's payroll and HR service without co-employment; the client stays the only employer and files under its own EIN (Who Runs Payroll: Agents & Liability).
Agent's List: the list a reporting agent submits to the IRS of every taxpayer it will file or deposit for, each with its own Form 8655 (Who Runs Payroll: Agents & Liability).
Aggregate return: one Form 941 or 940 filed under a Section 3504 agent's, designated payer's or CPEO's own EIN for many clients, with Schedule R allocating it (Who Runs Payroll: Agents & Liability).
Certified professional employer organization (CPEO): a PEO certified by the IRS that is treated as the employer of its worksite employees for federal employment taxes and files aggregate returns under its own EIN (Who Runs Payroll: Agents & Liability).
Client service agreement: the written co-employment contract between a PEO and a client that allocates every employer duty between them (PEOs & Co-Employment).
Coemployer: a PEO or a client that is party to a co-employment relationship, each an employer of the same worker for different purposes (PEOs & Co-Employment).
Company: the provider's customer, one account and one contract, with one or more employers under it (The Workforce Business).
CPEO bond: the surety bond a CPEO keeps for each April-to-March period, the greater of 5% of its prior-year section 3511 liability (capped at $1 million) or $50,000 (PEOs & Co-Employment).
Deduction election: a worker's deduction, as an amount or percent with any goal, limit and arrears rule and the enrollment or order behind it, effective-dated (The Workforce Business).
Designated payer: a third party, typically a PEO without IRS certification, that pays a client's workers under a service agreement claiming to be their employer or co-employer, files under its own EIN and is jointly liable with the client (Treas. Reg. 31.3504-2) (Who Runs Payroll: Agents & Liability).
Duty allocation: the line in a client service agreement that assigns one employer duty (wages, a tax, workers' compensation, a plan, hiring and firing) to the PEO, the client or both (PEOs & Co-Employment).
Employer: a legal entity with an EIN that employs people and files returns; a company with three EINs is three employers (The Workforce Business).
Employment: one stint of a worker at an employer, from hire to termination; a rehire is a new employment on the same worker (The Workforce Business).
Filing arrangement: which IRS arrangement files an employer's federal employment tax returns for a period (in-house, payroll service provider, reporting agent, Section 3504 agent, designated payer or CPEO), deciding the EIN, signer, deposit schedule and liability (Who Runs Payroll: Agents & Liability).
Float: interest a provider earns on client funds between collecting a payroll and paying it out, the average balance times the yield (How Payroll Providers Make Money).
Float revenue: Dayforce's name for investment income earned on customer funds before they are remitted (How Payroll Providers Make Money).
Form 2678: the employer's and agent's application for IRS approval of a Section 3504 agent (Who Runs Payroll: Agents & Liability).
Form 8655: the reporting agent authorization that lets an agent sign and file returns, make deposits and receive notices under a client's EIN (Who Runs Payroll: Agents & Liability).
Form 8821: a tax information authorization that lets a designee inspect and receive a taxpayer's information, without representing it or signing for it (Who Runs Payroll: Agents & Liability).
Form 8973: a CPEO's notice to the IRS, within 30 days, that a service contract with a customer started or ended (Who Runs Payroll: Agents & Liability).
Form M-1: the annual report a MEWA's administrator files with the DOL by March 1, with registration 30 days before operating in a state (PEOs & Co-Employment).
Gross billings: everything a PEO bills its clients, wages, payroll taxes, benefits, workers' compensation and its fee, of which only the markup over payroll cost is revenue (How Payroll Providers Make Money).
Insurance service revenues: TriNet's revenue line for insurance-related billings and fees collected from PEO clients and withheld from worksite employees, reported with insurance costs as an expense (How Payroll Providers Make Money).
Job assignment: what an employment is over time: title, department, manager, work location, FLSA status, pay basis and standard hours, effective-dated (The Workforce Business).
Liability (payroll): an amount a pay run owes a third party (an agency, carrier, plan, order payee or employee), with its due date computed from a rule (The Workforce Business).
Markup (PEO): the part of a PEO's gross billings above worksite employees' payroll cost, covering estimated taxes, benefits, workers' compensation and the service fee; Insperity's revenue consists solely of it (How Payroll Providers Make Money).
Master plan: a benefit plan sponsored by a PEO that its clients' worksite employees join, a MEWA under ERISA when it covers two or more employers (PEOs & Co-Employment).
Money movement: one movement of funds on one rail (a client debit, a net pay credit, a tax payment, a garnishment, a benefit remittance, a refund), with its status, return code and trace number (The Workforce Business).
Multiple employer welfare arrangement (MEWA): a plan or arrangement providing welfare benefits to the employees of two or more employers, which includes a PEO health plan covering two or more clients (PEOs & Co-Employment).
Pay item type: an entry in the volume's catalog of what a pay item is (regular pay, overtime, tips, imputed income, a pre-tax deferral, a garnishment), to which every company code maps and from which taxability is decided (The Workforce Business).
Pay run: one run of one employer's payroll for one period and type (regular, off-cycle, bonus, correction, void, reversal), from draft to paid (The Workforce Business).
Pay statement: one worker's statement for one pay run, with gross, net and its lines; never edited once paid, only reversed or adjusted by a new statement (The Workforce Business).
Pay statement line: one earning, deduction, employee tax, employer tax, reimbursement or memo on a pay statement, with its hours, rate, amount and subject and taxable wages (The Workforce Business).
Payroll reporting agent (California): an agent registered with the EDD that files returns under each client's employer account, keeping a DE 972 memorandum on file in place of a power of attorney per client (Who Runs Payroll: Agents & Liability).
Payroll service provider (PSP): a third party that prepares payroll, returns and deposits under the client's EIN without an IRS authorization form and without liability for the client's taxes (Who Runs Payroll: Agents & Liability).
Pays per control: ADP's measure of employees paid per client, the per-worker meter on its existing base (How Payroll Providers Make Money).
Per employee per month (PEPM): pricing by the number of workers each month, the base of most payroll and HR software fees (How Payroll Providers Make Money).
Principal versus agent: the ASC 606 judgment of whether an entity controls a good or service before it reaches the customer and reports the gross amount, or arranges for another party to provide it and reports its fee; for a PEO it decides which parts of gross billings are revenue (How Payroll Providers Make Money; for goods, Commerce Accounting).
Professional employer organization (PEO): a firm that co-employs a client's workers, running payroll, benefits and HR under its own plans and allocating employer duties by contract (PEOs & Co-Employment).
Quarterly assertion (CPEO): a responsible individual's statement under penalties of perjury, with a CPA's examination-level attestation, that a CPEO withheld and deposited federal employment taxes and kept positive working capital, due by the end of the second month after each quarter (PEOs & Co-Employment).
Remittance: a payment to an agency, carrier, plan or order payee that satisfies one or more liabilities, with its method, confirmation number and settlement date (The Workforce Business).
Reporting agent: a payroll service provider authorized on Form 8655 to sign and e-file a client's employment tax returns and deposit through EFTPS under the client's EIN, with the client still liable (Who Runs Payroll: Agents & Liability).
Revenue retention: the share of revenue a provider keeps from existing clients year over year, distinct from client retention, the share of clients kept (The Payroll & HR Landscape).
Schedule R: the allocation schedule an aggregate filer attaches to Form 941, 943 or 940, splitting wages and taxes among the employers it filed for (Who Runs Payroll: Agents & Liability).
Section 3504 agent: an agent approved on Form 2678 that files aggregate returns and deposits under its own EIN for the employers it serves, jointly liable with them (Who Runs Payroll: Agents & Liability).
Tax registration: an employer's account with one jurisdiction for one tax, with its account number, rate, deposit frequency, dates and status (The Workforce Business).
Taxability rule: whether a pay item type is subject to, exempt from or only reported for one tax in one jurisdiction, effective-dated; the heart of gross-to-net (The Workforce Business).
Trust fund taxes: income tax withheld and the employee's share of Social Security and Medicare, held by the employer for the government (Who Runs Payroll: Agents & Liability).
Wage base restart: a worker's Social Security and FUTA wage bases starting again at zero when wages move to a new employer without a successor rule, such as a PEO without certification (PEOs & Co-Employment).
Worker: a person working for one employer, as an employee or a contractor (The Workforce Business).
Worksite employee (WSE, WSEE): a worker co-employed by a PEO at a client's worksite, the unit PEOs count and price; TriNet counts co-employees and others receiving PEO services, Insperity averages those paid per month (PEOs & Co-Employment).
Zero-margin benefits pass-through: benefit costs a PEO bills its clients at cost and reports in revenue and in cost at the same amount, earning nothing on them, as ADP reports for ADP TotalSource (How Payroll Providers Make Money).