HR Glossary
Professional employer organization (PEO)

Professional employer organization (PEO)

Updated on:
August 22, 2022


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Table of Content

What is a professional employer organization (PEO)?

A Professional Employer Organization (PEO) also known as co-employment is a business third-party human resources services that outsource a part or all of its human resource management responsibilities, such as payroll, hiring, and employee benefits.

A PEO may also serve as a business' human resource department, providing employees with employee benefits such as health insurance, 401k retirement plans, and life insurance.

PEOs are frequently used by companies whose employees are located outside the United States but whose headquarters are in the United States.

By outsourcing a part of their human resource department, a company may be able to take advantage of cost advantages, which may be especially important for small and medium-sized businesses.

There are many reasons why Professional Employer Organisation (PEO) are necessary. PEO can help businesses with a variety of HR-related tasks, from payroll and benefits to compliance and risk management. By outsourcing these functions to a PEO, businesses can save time and money, and focus on their core competencies. In addition, PEOs can provide businesses with access to a larger pool of talent, and help them navigate the ever-changing landscape of employment law.

Why Do Companies Use a PEO?

 A PEO helps businesses with human resources and the administrative tasks associated with hiring employees. They typically specialize in recruitment, employee benefits, payroll, and tax management.

PEOs offer a single point of access to multiple vendors and the ability to customize their services to fit businesses’ individual needs.

PEOs can help businesses save time and money. They typically offer services through a single contract. They take care of payroll, benefits, and insurance, so they are a one-stop-shop for businesses who would otherwise have to manage these on their own.