A professional employer organization (PEO) helps companies outsource their human resources requirements and manages such areas as employee benefits, payroll and workers’ compensation. This lets the client companies maintain their focus on what they do best — run their business. A PEO is different from standard HR consulting or outsourcing firms, which may provide a limited number of services. ?PEOs should also not be confused with temp firms, staffing agencies or payroll administration companies. ?A PEO integrates completely into a company’s HR framework, providing a comprehensive approach to manage a client company’s day-to-day HR needs and responsibilities. Just like having an in-house HR department, a dedicated team of HR specialists will be on-hand to handle critical human resource responsibilities and to manage employer risk factors. The HR team maintains an employer relationship with the client’s employees and assumes certain employer roles, along with the corresponding rights, responsibilities and risks.
The tasks and functions taken on by a capable PEO include recruitment and hiring, managing workers’ compensation and benefits, payroll and payroll tax management, and managing compliance with government requirements. The PEO staff can help formulate and implement training and development programs, performance management initiatives and policies and guidelines for best practices. This separation of responsibilities is called “co-employment.” Companies that do not yet understand the principles and benefits of the co-employment arrangement with a PEO may mistakenly think that they are giving up control of a key area of company operations, and may be hesitant to hire a PEO. But as many success stories amply demonstrate, working with a PEO can actually give the company more control over details that would have otherwise been overlooked.