A Professional Employer Organization (PEO) is a firm that provides comprehensive HR services to small and medium-sized businesses by entering into a co-employment relationship, managing payroll, benefits, compliance, and other human resource functions. This arrangement allows businesses to outsource complex and time-consuming HR tasks while maintaining control over day-to-day operations and employee management.
PEOs continue to be a valuable resource for businesses seeking to scale efficiently, reduce administrative burdens, and stay compliant in a dynamic regulatory environment.
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Key Facts
- Co-Employment: The PEO becomes the employer of record for tax and compliance purposes while the client company retains control over day-to-day operations.
- Services: Includes payroll processing, benefits administration, workers’ compensation, regulatory compliance, and employee onboarding.
- Cost Savings: Offers access to better employee benefits and lower insurance rates through pooled risk.
- Compliance Support: Helps businesses stay compliant with labor laws and tax regulations.
- Scalability: Ideal for small to mid-size businesses looking to outsource HR functions.
1. What is a PEO?
A company that manages HR, payroll, and benefits functions through a co-employment arrangement with client businesses.
2. How does co-employment work?
The PEO handles HR administration and legal employer responsibilities, while the client manages work assignments and business operations.
3. What are the benefits of using a PEO?
Improved compliance, cost savings on benefits, reduced administrative burden, and access to HR expertise.
4. Are employees of a PEO considered employees of the client company?
Legally, employees are co-employed by both the PEO and the client company.
5. How does a PEO affect taxes and workers’ compensation?
The PEO typically handles payroll tax filings and manages workers’ compensation insurance on behalf of the client.
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