Monday, September 8, 2008

What is a PEO?

A PEO is a Professional Employer Organization. Companies who do not want to manage all of the employee related human resource aspects of running a company, often align themselves with one of these types of companies. A PEO provides a cost-effective alternative to outsource the management of HR, employee benefits, payroll and workers compensation which allows the business owner to focus on their core competencies of running and building their company.

By aligning yourself with a PEO you become a Co-Employer with them. For the most part everything stays the same with this arrangement, you still run the day-to-day management of the company and your people, but your PEO Company makes sure you do it within all of the State and Federal guidelines. They in essence become your in-house consulting firm to consult with to make sure you do everything right with your compliance, administration, procedures and interaction as it relates to your employees.

Another big benefit to aligning yourself with one of these PEO’s is that you can typically offer big Company benefits even though you are a smaller company. How? Because PEO’s usually have hundreds if not thousands of people in their Co-Employment relationships you are able to leverage these big numbers of employees to provide your employees more comprehensive benefits at what are usually lower prices than you could get on your own.

The fees for a PEO are usually a percentage of your payroll. The fees you pay them can sometimes be offset by the savings you might have with workers compensation, payroll administration and benefits cost reductions. Often times companies can compete better for new recruits with more comprehensive benefits and a more coordinated HR process.

© 2008 eMarketing 4 Business LLC


Unknown said...

Good definition. There is another definition of what is a PEO? on .

Unknown said...

While running a smaller to medium-sized business, I have often thought of how convenient it would be to be able to outsource my human resources. I think researching is key and I have been looking at a PEO that may work well with my company.

Emarketing 4 Business said...

Hi Eric & Lisa, thanks for your thoughts. Looks like you both have links to specific PEOs in your comments. For anyone who is evaluating a PEO, it's best to check out two websites: and Both provide independent information on what to look for when researching a PEO. Good luck!