Payroll service bureau
A payroll service bureau calculates payroll, produces pay statements, and files and deposits employment taxes for employers under each employer’s own EIN.
You stay employer of recordEmployer of record (EOR). An employer of record (EOR) is an organization that becomes the legal employer of a client business’s employees, while the client directs the daily work.Click to open the term and taxpayer of record. A bureau sells payroll processing as the core service, often alongside tax filing and reporting, with no co-employmentCo-employment. Co-employment is a contractual arrangement in which a professional employer organization (PEO) and its client company each hold defined employer responsibilities for the same employees.Click to open the term. It generally files and deposits under your EINEIN (Employer Identification Number). An EIN, or Employer Identification Number, is the nine-digit federal tax ID the IRS assigns to a business, in the format XX-XXXXXXX.Click to open the term, often as an authorized reporting agent. Decisions stay with you: who is employed, how they are classified and paid, which policies apply, and which hours are approved. Funding stays with you too. Confirm which authorization form is on file, which agencies are covered, and how you receive filing copies and deposit confirmations.
How does a payroll service bureau differ from a PEO or an ASO?
The three models differ in the employment relationship and the scope of work, not in software. A bureau concentrates on payroll processing, tax filing, and payroll reporting. An ASOASO (administrative services organization). An administrative services organization (ASO) performs payroll, HR, and benefits administration for a business under the business’s own EIN, without co-employment.Click to open the term usually bundles broader HR and benefits administration with payroll. The IRS describes several third-party payerThird-party payer. Third-party payer is the IRS umbrella term for another party performing employment tax functions for you, such as calculating withholding, making deposits, or filing returns.Click to open the term arrangements, each with different authority and liability. If you use a payroll service provider or a reporting agent, you generally remain responsible for employment taxes. Read the service agreement and the tax authorizations rather than the brochure label.
| MODEL | EMPLOYMENT RELATIONSHIP | TAX AND REPORTING |
|---|---|---|
| Payroll service bureau | No co-employment | Under your own EIN |
| ASO | No co-employment | Under your own EIN |
| PEO | Co-employment | Certain obligations can sit with the PEO under a written agreement |
- Third party payer arrangements: Payroll service providers and reporting agents
- Third party arrangement chart
General information, not legal or tax advice. Apply current federal and state rules with qualified guidance.