What Is a SOC Report and Why Is It Important for Your Clients?
Quick look: To support clients’ continuous growth, brokers seek partnerships with PEOs known for their expertise, experience, and customer service. Though many claim they are among the industry’s best in these areas, taking a look at a PEO’s credentials, like the SOC certification, can help prove it.
The idea of partnering with a professional employer organization (PEO) has become a more readily recognized concept than in years past. Small- and medium-sized businesses (SMBs) find value in outsourcing the complexities of HR and benefits to a team equipped with the knowledge and insights to streamline processes and complement their company’s overall success.
Therefore, more SMB leaders are turning to their broker relationships for help in identifying the best outsourced HR solution for their needs. While the core of what most PEOs offer is similar, there is a big difference in terms of value.
One measurement of this is The System and Organization Controls (SOC) 1 Type 2 certification, an internationally recognized standard for internal controls over financial reporting and data security.
It was developed by the American Institute of Certified Public Accountants, and organizations obtaining the annual Statement on Standards for Attestation Engagements (SSAE) illustrate an ability and dedication to compliance, financial security, and excellence in service delivery.
So, what does the SOC 1 Type 2 certification entail?
Here’s a look at what the certification means, why it’s important for clients, and what other industry credentials and qualifications make an exceptional PEO partner stand out from the rest.
What the SOC 1 Type 2 certification covers
The SOC 1 Type 2 report is the highest statement level. The certification process requires a full examination of a PEO’s internal controls, risk management practices, and data security measures over a specific timeline. The evaluation is performed by independent auditors to ensure the reliability and integrity of the processes.
Though there is a Type 1 version of the report, which serves as a snapshot measuring a specified point in time, the Type 2 report requires extensive testing for the design and effectiveness of the general controls. For organizations to receive SOC 1 Type 2 certification, they must also maintain compliance with the SOC’s standards.
Why obtaining a SOC report is valuable
When reviewing PEO partners, it’s common to look at credentials, industry experience, and peer reviews to narrow down choices. Securing a SOC report offers an extra level of legitimacy and showcases a PEO’s dedication to protect a client’s financials and sensitive data. It also:
Increases client confidence
Since the SOC 1 Type 2 certification process is conducted by an independent third party, there’s no bias involved. Brokers and SMB leaders can rest assured their PEO has undergone comprehensive assessments to cement the reliability and integrity of their internal processes, systems, and practices.
Illustrates commitment to security
The achievement is awarded annually which means organizations must consistently prove their dedication to security and compliance throughout the year to maintain the same status. A SOC-certified PEO has been audited and confirmed as having the appropriate safeguards and procedures in place.
Maintains organizational accountability
To uphold the certification, organizations are accountable for monitoring and improving their internal controls and security measures. This emphasizes year-round accountability and guarantees broker clients receive the utmost level of service and security against data breaches, unauthorized access, and other threats.
Entrusting HR solutions to the right PEO partner
For brokers, a PEO partner allows them to extend their service offerings and strengthen their client relationships. A PEO offers a full suite of HR and benefits services ranging from payroll administration and recruiting to risk and compliance management.
However, not all PEOs are the same.
Big-box PEOs rely on a one-size-fits-all HR solution and are often stretched thin, making them unable to provide the type of customized services and support required for broker clients to succeed.
However, with a boutique PEO like ExtensisHR, brokers and clients receive dedicated support and tailored HR solutions which can be adapted to a SMB’s changing demands.
This is illustrated through ExtensisHR’s 25+ years of expertise, high client retention rate, as well as multiple certifications focused on maintaining the highest industry standard. In addition to the SOC 1 Type 2 report, there are several other certifications and recognitions available to PEOs. ExtensisHR demonstrates a commitment to excellence by maintaining the following:
- CPEO – A Certified Professional Employer Organization (CPEO) is designated by the Internal Revenue Service (IRS) as an elite organization aligned with the highest regulatory standards set by both the PEO industry’s financial assurance program and the U.S. government.
- ESAC – The Employer Service Assurance Corporation (ESAC) provides surety bonds to protect the payment of wages, employee benefits, payroll taxes, and insurance premiums. It ensures PEOs are up-to-date with the latest financial, operational, and ethical standards.
- Certification Institute – The Certification Institute awards recognition for organizations meeting all industry professional risk management best practices in managing workers’ compensation losses and creating safe work environments.
ExtensisHR is in the top one percent of PEOs maintaining all three certifications, in addition to the SOC 1 Type 2 report. Brokers can feel confident entrusting their team of HR professionals with their clients’ needs to help their businesses grow and succeed.
Unparalleled expertise, unmatched service
It can be challenging to determine credibility among different organizations providing similar services. Industry certifications help provide peace of mind for brokers and their clients when choosing a PEO partner.
Establishing SOC standards supports the mission of safeguarding sensitive financial data and an ongoing dedication to security. It is one of the many ways a company can illustrate the importance of constant improvement as an integral part of a client’s growth efforts.
As a people-first organization, we take our responsibility for clients’ HR solutions seriously and are focused on delivering results with trust and integrity.
To learn more about ExtensisHR’s credentials and the comprehensive suite of HR services we provide, contact our broker sales managers today.