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Professional Employer Organizations (PEO)

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Professional Employer Organization (PEO)

 

Professional Employer Organizations provide outsourced services primarily to small and medium-sized businesses. A PEO is designed to replace or supplement a company’s internal human resources (HR) department. When a business uses a PEO, the PEO serves as the employer of record (EOR). In most cases, co-employment exists in a PEO arrangement, with workers employed by both the client and the PEO. 

 

PEO service offerings can include:

 

  • Human resource consulting

  • Workforce management technology

  • Recruitment and hiring

  • Training and development

  • Employee compensation

  • Payroll processing and taxes

  • Performance management

  • Health benefits

  • Retirement vehicles 401(k)

  • Safety and risk mitigation services

  • Information and documentation storage

  • Employer payroll tax filing

  • Workers’ compensation insurance

  • Employers’ practice and liability insurance (EPLI)

  • Regulatory compliance assistance

 

Examples: 

  • Many startups lack funding for HR staff, so a PEO is ideal for filling that need. In some cases, a startup may have the budget for an HR department, but they lack experience managing HR services. In this scenario, working with a PEO temporarily or permanently meets the company’s needs. 

  • Seasonal employers can also benefit from the PEO model because their HR management needs change throughout the year, and hiring HR staff to manage their processes is impractical. 

  • Large corporations may use a PEO if it isn’t feasible to manage HR services nationally or internationally. With a PEO, businesses can ensure that they are compliant with regional laws and regulations.

 

Related Terms

Administrative Services Organization (ASO)

and Administrative Services Only are terms often used interchangeably because the acronym ASO is attached to both. For this reason, the two services are sometimes confused with one another. However, administrative services only organizations only administer employee health benefits and disability coverage. In this arrangement, the employer's health benefits are self-funded, and the employers pay claims out of pocket.

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