Professional employer organization definition

First, it's best to identify what a professional employer organization (PEO) is not. It is not a temp firm, a staffing agency or a payroll service agency.

A PEO provides a wide variety of professional human resources (HR) services for its client businesses, including, but not limited to:

- Employment administration
- Manage and deliver employee benefits
- Employment and tax compliance
- The co-employment relationship administration

A client company enters into an agreement with the PEO to establish a three-way relationship between it, the employees and the PEO. The client company and the PEO become co-employers, instead of the traditional employer company/employee relationship.

The PEO takes responsibility for HR administration, payroll and compliance tasks, for which it charges a service fee. Client employees continue to work at client company which continues to exercise control over the business and all employee activity.