How Does A Professional Employer Organization Work?
A professional employer organization, or PEO, is a relationship entered by a small to mid-sized business where the PEO company takes on 100 percent of the workforce management administrative responsibility for the company. Specifically, the PEO company takes on the following responsibilities:
- Becomes the employer of record for a company’s employees
- Responsible for payroll processing and completing payroll taxes
- Takes over human resources administration and benefits administration
- Manages workers’ compensation insurances
- Makes sure the employer has policies that are in compliance with federal, state, and local regulatory policies
The PEO company is able to take on these employee administration obligations because of the co-employment agreement, where employees of a company actually become employees of the PEO firm. The small to mid-sized business is still responsible for all day-to-day management, but the PEO is the employer of record so they can manage all of the employee administration burdens.