Guide
A Guide to Professional Employer Organizations (PEO)
PEO
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Demystify PEOs by learning their role and responsibilities
If your team has been searching for a simple and cohesive way to manage HR and payroll, you've likely come across a PEO.
A professional employer organization (PEO) is a strategic partner hired by a company to handle various HR tasks such as payroll, tax filing, and benefits administration.
When a company engages a PEO, they enter into a co-employment relationship, which means the PEO assumes partial legal responsibility for the employees.
Companies often use PEO services when they want to accomplish the following goals:
- Streamline rapid workforce growth
- Increase HR resources and access to experts
- Attract and retain talent with competitive benefit plans
- Fortify compliance in a high-risk industry
But is a PEO the right choice for your company? And how does it compare to other HR service providers, like an EOR or HRO? Download our guide today to learn the ins and outs of PEO providers, their responsibilities, and common use cases.
This guide includes:
- What a PEO is and isn't
- Most common use cases
- What's required to use a PEO
- How PEOs compare to other HR outsourcing options
- And more
Who will benefit from this guide?
Small and medium-sized business owners, HR managers, and founders looking for HR, payroll, and compliance support.
FAQs
Who should use a PEO?
Small and mid-sized businesses that seek to streamline HR functions, ensure compliance with labor laws, and provide competitive health benefits to their employees can benefit from partnering with a PEO. This collaboration allows business owners to focus more on core activities and growth strategies.
What are the three types of PEO?
A PEO is its own type of outsourcing solution. However, it's often referenced alongside other HR and payroll outsourcing options, including ASOs and HROs:
- Professional Employer Organization (PEO): Engages in a co-employment relationship, handling comprehensive HR tasks and sharing certain liabilities with the client company.
- Administrative Services Organization (ASO): Provides administrative HR services without entering into a co-employment arrangement, leaving employment liabilities with the client company.
- Human Resources Outsourcing (HRO): Offers a la carte HR services, allowing businesses to outsource specific functions as needed, without a co-employment relationship.
What is the average cost of a PEO?
The cost of PEO services typically depends on the services provided and the size of the company. Some PEOs charge a flat fee per employee instead. Always evaluate the specific needs of your business to determine the most cost-effective arrangement. You can review Deel PEO costs to learn more.
What is the difference between a CPEO and a PEO?
A Certified Professional Employer Organization (CPEO) is a PEO that has obtained certification from the Internal Revenue Service (IRS) in the United States. This certification means the CPEO meets specific financial, operational, and compliance standards set by the IRS.
Who employs the workers in a PEO arrangement?
In a PEO arrangement, both the PEO and the client company share employment responsibilities in a co-employment relationship. The PEO handles HR-related tasks and compliance, while the client company maintains control over day-to-day operations and management of the employees.
What are Deel’s PEO services?
Deel PEO simplifies US workforce management—including payroll administration, benefits management, HR compliance, and risk mitigation across all 50 states.
Deel PEO provides access to benefit plans from leading providers, assistance with state tax compliance, and support for sensitive issues such as terminations and worker claims.
Additionally, Deel offers localized onboarding, ensuring compliance with state-specific requirements, and automates various HR processes to enhance efficiency.
What are the downsides of a PEO?
While PEOs offer numerous benefits, there are potential drawbacks to consider:
- Less direct control: Outsourcing HR functions may lead to reduced direct oversight of HR processes.
- Potential for inconsistent service quality: The level of service may vary between PEOs, making it crucial to choose a reputable provider.
Thoroughly assess your business needs and conduct due diligence when selecting a PEO to ensure it aligns with your company's goals and compliance requirements.
