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A Professional Employer Organization, or PEO, is a service provider utilizing a business relationship that allows outsourcing of human resources tasks, mainly for small to mid-sized business that do not have the need or resources for a dedicated human resources department.

Description

Typically, a PEO will legally hire a company's current employees, thereby making the PEO the "employer of record" for taxation and insurance purposes. Subsequently, the employees are leased back to the original employer (now client) under a co-employment contract, which sets out the powers, responsibilities and liabilities of the parties. This practice is also known as employee leasing or staff leasing. The PEO assumes responsibility for all payroll obligations and tax filings, with health benefits, welfare and retirement benefits being optional additional services that can also be contracted, as well as all the associated administrative paperwork.

A PEO is defined as an organization that provides an integrated and cost effective approach to the management and administration of the human resources and employer risk of its clients, by contractually assuming substantial employer responsibilities and risk, through the establishment and maintenance of a co-employer relationship with the clients employees. Health Tips.