The A-Zs of Hiring Glossary

Professional Employer Organization (PEO)

What is a Professional Employer Organization (PEO)?

A Professional Employer Organization (PEO) is a company that provides comprehensive HR solutions to small and medium-sized businesses. PEOs offer services such as payroll processing, workers’ compensation insurance, employee benefits administration, and human resources management.

PEOs act as co-employers, which means they share certain employer responsibilities with their clients. This allows small and medium-sized businesses to outsource their HR functions and focus on their core business operations.

PEOs are regulated by the Internal Revenue Service (IRS) and must comply with state and federal laws. They are often a cost-effective solution for businesses that want to offer competitive benefits and HR services to their employees without the overhead costs associated with in-house HR departments.

Examples of PEOs include ADP TotalSource, TriNet, and Insperity.

What is a Professional Employer Organization (PEO)?

A Professional Employer Organization (PEO) is a company that provides comprehensive HR solutions for small and medium-sized businesses. PEOs typically offer services such as payroll processing, employee benefits administration, workers’ compensation insurance, and HR compliance assistance.

How does a PEO work?

A PEO works by entering into a co-employment relationship with its clients. This means that the PEO becomes the employer of record for the client’s employees, handling all payroll and HR-related tasks. However, the client company retains control over the day-to-day operations and management of its employees.

Dos And Donts for Professional Employer Organization (PEO)


  • Do thoroughly research and choose a reputable PEO provider that has experience and a good track record.
  • Do clearly define the roles and responsibilities of the PEO provider and your organization in the PEO arrangement.
  • Do communicate effectively and regularly with your PEO provider to ensure that your HR needs are being met.
  • Do take advantage of the cost savings and administrative relief that a PEO can provide.
  • Do ensure that your PEO provider is compliant with all relevant laws and regulations.


  • Don’t choose a PEO provider solely based on cost. Cheaper is not always better when it comes to HR services.
  • Don’t assume that all PEO providers offer the same services. Make sure you understand exactly what services you will be receiving.
  • Don’t neglect your responsibilities as an employer. Even with a PEO, your organization is still ultimately responsible for compliance with employment laws.
  • Don’t hesitate to ask questions and seek clarification from your PEO provider. It’s important to understand all aspects of your PEO arrangement.
  • Don’t overlook the importance of culture fit when choosing a PEO provider. Make sure they align with your organization’s values and goals.
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