What is a PEO?
What is a PEO?
The simplest response to, “What is a PEO?” is a Professional Employer Organization. Professional employer organizations are often referred to as “employee leasing.” They enable clients to cost-effectively outsource the management of human resources, employee benefits, payroll and workers’ compensation. Employee Leasing clients focus on their core competencies to maintain and grow their bottom line.
Businesses today need help managing increasingly complex employee related matters such as health benefits, workers’ compensation claims, payroll, payroll tax compliance, and unemployment insurance claims. They contract with a PEO to assume these responsibilities and provide expertise in human resources management. This allows the employee leasing client to concentrate on the operational and revenue-producing side of its operations.
An employee leasing company provides integrated services to effectively manage critical human resource responsibilities and employer risks for clients. A PEO delivers these services by establishing and maintaining a co-employer relationship with the employees at the client’s worksite and by contractually assuming certain employer rights, responsibilities, and risk.
The PEO relationship involves a contractual allocation and sharing of employer responsibilities between the employee leasing company and the client; this shared employment relationship is called co-employment. When evaluating the employer role of either the PEO or the client, the facts and circumstances of each employer obligation should be examined separately, since neither party alone is responsible for performing all of the obligations of employment. Each party will be solely responsible for certain obligations of employment, while both parties will share responsibility for other obligations. When the facts and circumstances of a PEO arrangement are examined appropriately, both the employee leasing company and the client will be found to be an employer for some purposes, but neither party will be found to be “the” employer for all purposes.