A professional employer organization (PEO) is an outsourcing firm that provides services to small and medium-sized businesses (SMBs). Typically, the PEO offering may include human resource consulting, safety and risk mitigation services, payroll processing, employer payroll tax filing, workers, compensation insurance, health benefits, employers practice and liability insurance, retirement, regulatory compliance assistance, workforce management technology, and training and development. The PEO enters into a contractual co-employment agreement with its clientele. Through co-employment, the PEO becomes the employer of record for tax purposes through filing payroll taxes under its own tax identification numbers. As the legal employer, the PEO is responsible for withholding proper taxes, paying unemployment insurance taxes and providing workers compensation coverage.
A professional employer organization service company is a third-party human resources provider that assumes co-liability for its client’s workforce. Whether managing unemployment and payroll taxes or providing workers’ compensation insurance, PEOs offer numerous employee benefits that can provide more HR stability for your small business. PEOs are great options for small businesses with understaffed HR teams because they take all the necessary HR responsibilities off their plates. Businesses that work with a PEO enter a co-employment arrangement. This means that while businesses are still responsible for running their own operations, their employees are technically also working for the PEO and are reported under the PEO’s employer identification number (EIN).
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