By HR Brew Staff
less than 3 min read
Definition:
Professional employer organizations (PEOs) partner with employers that are looking to outsource their HR functions. A PEO may oversee benefits administration, payroll management, and compliance support, among other services. An employer that partners with a PEO enters into a co-employment relationship, where the employer maintains control of day-to-day operations, and the PEO becomes the employer of record.
What types of employers do PEOs typically support?
PEOs typically partner with small and midsize employers that want to support their employees as if they were a large employer, but lack the in-house HR infrastructure and resources to do so. These sorts of co-employment relationships are also most commonly found in the finance, marketing, professional service, and technology industries.
What are the benefits of working with a PEO?
Employers that work with PEOs may find that they are able to more quickly grow their businesses, as they are relatively unencumbered by administrative tasks. They may also be able to offer their employees specialized HR expertise and benefits of a higher quality without breaking the bank. PEOs often represent hundreds if not thousands of employees, meaning they’re well positioned to negotiate more affordable rates.
What are the downsides of working with a PEO?
Some employers that partner with PEOs may find that their organization, or HR team more specifically, does not want to relinquish control over certain processes. Another downside, depending on the employer, may be the upfront cost.
Can you put PEO into context?
“[Orum’s head of people, Sarah Flaherty] uses a professional employer organization (PEO) for tasks like compliance, payroll, and benefits selection, allowing her to focus more time on culture,” HR Brew reported in April 2022.
