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What is a Professional Employer Organization (PEO)?
A PEO is a type of human resource outsourcing often used by small and medium-sized companies. A PEO often takes over certain administrative functions of the client company, such as payroll and tax filing, benefits administration, talent management, or even compliance.
PEOs often group client companies together, which helps the companies lower costs, get better benefits packages for their employees, and significantly reduce paperwork.Co-employment and PEO are often used interchangeably, but they’re not the same. Co-employment is the situation when the legal obligations of an employer are shared between two or more companies. In a co-employment agreement, your employees would also simultaneously be employees of the PEO. Contrary to popular belief, hiring a PEO does not always lead to a co-employment situation.
Employee leasing is a temporary employment agreement under which the leaser supplies employees to a client, for a specific project with an end date. These employees are permanently employed with the staffing company, and that’s where they return after the project is over. Even though employee leasing is a form of outsourcing, it is not the same as a PEO.
Who should hire a PEO?
While anyone can use the services of a PEO, SMBs form a major part of their clientele. Organizations who are new to the market and do not yet have the bandwidth to hire a whole team for certain HR functions should go for a PEO’s services. Companies that frequently need seasonal staff for particular projects can also benefit massively from hiring a PEO.