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FAQ

What is a PEO and how can it help your business?

Want to learn more about HR outsourcing with a PEO?

 PEO FAQ

What is a PEO and how can it help your business?

Want to learn more about HR outsourcing with a PEO?

What is a Professional Employer Organization? 

A Professional Employer Organization (PEO) is a company that offers HR services and support to small and medium-sized businesses. By partnering with a PEO, businesses can delegate tasks like payroll processing, benefits administration, and compliance with employment laws and regulations.

This frees up businesses to focus on their core operations and growth, while experts handle HR responsibilities.

How does a PEO work?

A PEO acts as an outsourced HR department, taking care of tasks such as payroll, benefits administration, and compliance. When a business partners with a PEO, the PEO becomes the official employer of record. This means that the PEO takes on certain legal and financial responsibilities on behalf of the business. 

Partnering with a PEO allows businesses to gain access to improved benefits and take advantage of affordable insurance rates. This makes it a highly appealing choice for many companies.

Responsibilities in a PEO relationship

Why use a PEO?

Partnering with a professional employer organization offers several advantages that can help businesses grow and succeed. Here's why businesses choose to use a PEO:

Expert Guidance and Strategic Support 

PEOs support businesses with expert guidance on HR management, helping them make smart choices and grow their company.

Enhanced Protection and Security

By working with a PEO, businesses can enjoy enhanced protection and security. PEOs assist with tasks like payroll processing, benefits administration, and complying with employment laws and regulations, helping businesses stay protected.

Focus on Core Operations and Growth 

With a PEO supporting HR tasks, businesses can focus more on their core operations and business growth. This allows them to prioritize their core strengths without getting overwhelmed by administrative responsibilities.

Services Typically Offered by a PEO

Payroll

Benefits

Human Resources

Compliance

Risk Management

Recruitment Services


What are the benefits of partnering with a PEO?

Partnering with a Professional Employer Organization (PEO) can bring several advantages to business owners. By supporting payroll, benefit administration, and HR management, PEOs can help ensure compliance with laws and regulations.

 This allows business owners to focus on the growth and success of their businesses. 

Key benefits of partnering with a PEO:

  • Save time

  • Enhance productivity

  • Improve talent management

  • Reduce turnover

  • Streamline HR processes

With a PEO, businesses can grow and thrive while enjoying the peace of mind that comes with expert HR support.

HR Cost by Employee, Employers to PEOs
HR Cost by Employee, Employers to PEOs

Key benefits of partnering with a PEO:

  • Save time

  • Enhance productivity

  • Improve talent management

  • Reduce turnover

  • Streamline HR processes
With a PEO, businesses can grow and thrive while enjoying the peace of mind that comes with expert HR support.

PEO for Small Businesses

Small and mid-sized business owners frequently rely on PEOs to receive crucial support in managing HR functions strategically. This allows small and mid-sized businesses to prioritize their strengths, such as improving, refining, and promoting their reputation-building offerings.

Partnering with a PEO offers small businesses the advantage of streamlining HR management processes for optimal efficiency. This enables businesses to redirect their efforts toward driving growth.

Types of PEO and other categories of outsourcing

A Professional Employer Organization operates under one business model called co-employment. However, some employers are still confused about this type of model. This confusion stems mainly from the misuse of the term "employee leasing" to describe PEOs and their services over the years. 

While PEOs fall under the umbrella of HR outsourcing, their uniqueness lies in the co-employment arrangement. It's important to distinguish PEOs from other similar outsourcing services often mistaken for them such as:

  • Employee leasing companies
  • Staff leasing companies
  • Human resources outsourcing organizations (HROs)
  • Administrative services organizations (ASOs)
  • Managed payroll services

Understanding these distinctions help employers make informed decisions when seeking the appropriate HR outsourcing solutions for their business needs.

Maximize Your Business Potential with a PEO

According to research*, PEOs have proven to help businesses thrive:

 

50%

Less likely to go out of business when using a PEO

 

7-9%

Faster growth in businesses working with a PEO

 

27.3%

Overall increase in ROI when using a PEO 

Grow Your Business
50% Less likely to go out of business when using a PEO (3)
50% Less likely to go out of business when using a PEO (4)
50% Less likely to go out of business when using a PEO (5)
Grow Your Business

*Source: NAPEO White Paper Series

Additional PEO FAQs

What does PEO mean?

PEO stands for Professional Employer Organization. This is a company that provides HR services and support for small and medium-sized businesses.

How do employees benefit from a PEO arrangement?

  • Access to comprehensive employee benefits packages
  • Assistance with administrative tasks and guidance on workplace issues
  • Increased opportunities for training and professional development
  • Enhanced quality of life through access to perks and benefits
  • Leads to a more productive and committed workforce

Who should use a PEO?

A Professional Employer Organization is perfect for businesses wanting to simplify HR, be more efficient, and focus on their main business. PEOs help small and medium-sized businesses with HR functions when they don't have enough resources or expertise.

Companies can access a wide range of HR services, including payroll administration, employee benefits, risk management, and compliance support. This allows businesses to offload time-consuming administrative tasks and instead concentrate on growth strategies and building a solid workforce.

Experts manage your HR needs when you work with a Professional Employer Organization. This allows you to grow and expand your business over time, ultimately leading to long-term success.

What is the difference between a PEO and staffing company?

Staffing firms provide businesses with leased employees while maintaining full employment responsibility for those workers. On the other hand, PEOs don't directly provide a workforce. Instead, they take on specific responsibilities and act as co-employers alongside their partner organizations.

Who is the employer in a PEO?

In a co-employment agreement, the PEO becomes the official employer of record for tax purposes. The client will maintain full control over its workforce.

What is co-employment?

Co-employment is an arrangement between a PEO and a client company, where the PEO becomes the employer of record and shares certain employment responsibilities with the client company, such as HR functions.

Do business owners lose control of their business when they partner with a PEO?

No, business owners do not lose control of their business when they partner with a PEO. Clients retain full control and direction over their operations and the company's overall direction.

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