What is a PEO (Professional Employer Organization)?

A PEO (Professional Employer Organization) basically takes over the human resource (HR) responsibilities of a company, allowing it to focus on its core tasks.

The management of human resources is outsourced to a PEO. A PEO, therefore, offers cost efficient and time saving HR management services, efficient HR practices, streamlined HR administration, means to utilize the full potential of employees, and can suggest rewards and benefits to employees to help them stay motivated and committed to your company.

The PEO’s services inevitably lead to the client company streamlining its overall functioning, as the complex HR department is taken care of and much attention can then be focused on the rest of the management – accounts, production, sales, research and development, and more. The PEO serves businesses of all sizes. Businesses dealing with the production or distribution of any kind of product or service could benefit from the services of a PEO or Professional Employer Organization, be they physicians’ clinics, hospitals, schools, banks, department stores or factories.

A PEO generally functions by hiring the employees of the client company. The PEO then becomes the client’s employer of record, hiring employees and then leasing them back under contract. This relationship established by the PEO with the client company is referred to as co-employment or employee leasing. Variations on this process do exist, with PEOs differing in their extent of involvement with the client’s employees. While the client company continues to exercise control over the activities of its employees, the PEO assumes responsibility of tax payments and insurance coverage.

With the help of experienced and knowledgeable professionals employed by a PEO, the client company saves much time and effort that might otherwise be spent in taking care of HR responsibilities such as administering employee benefits and preparing payroll. It also ensures the company’s regulatory compliance and reduces the risk of criminal penalty by ensuring there isn’t any overlooked legal liability or obligation to employees. The relationship with a PEO or Professional Employer Organization is in many ways an indispensable partnership for a growing company.