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Professional Employer Organization (PEO)

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Professional Employer Organization (PEO)
What Is A Professional EmployerOrganization (PEO)?

What Is A Professional Employer Organization (PEO)?

A PEO is an outsourcing firm that assists businesses with tasks related to the employee management, such as human resources, payroll processing, tax filings, employee benefits, safety and risk mitigation.

When a company gets a PEO on board, it establishes a co-employment relationship - they help companies with their staffing needs, but the responsibility is divided. The company takes care of employee’s day-to-day management, while PEO manages HR and payroll. Both, the PEO and company are legally responsible.

How Does A PEO Work?

Partnering with a can help tech companies in payroll processing, insurance coverage, local compliance, taxation, benefits and more. The client-company can avail all services or customize a solution based on their needs. Working with a PEO helps spend fewer resources - time, money and personnel.

The PEO will essentially be hiring the staff and leasing them to the client-company. This employee leasing method allows companies to avoid the tedious administrative processes and get right to working with global talent - training them and assigning them tasks.

How Is A PEO Different From An Employer Of Record (EOR)?

The roles of a PEO and an EOR may appear very similar, but it is important that to understand the difference between the two to make the right choice. The basic difference between the two is – a PEO shares a co-employment relationship with the company, whereas, an EOR as your partner in a specific geography, is the legal employer of your employees.

Contracts An EOR is the legal employer, which means the employment contract is with the EOR. The employment contract is with the client-company and not the PEO.
Control An EOR takes care of hiring, contracts, payroll, tax & benefits. They take care of all HR admin and legal hiring responsibilities. While a PEO will do all these tasks, the final decision will always be of the client.
Registration The client-company doesn't need to set up a subsidiary or register itself in a specific country. The client-company must register their business in every location.
Compliance The client-company doesn't have to worry about compliance. The EOR is the legal employer and is locally compliant to all local laws. The client-company must be aware of and adhere to all local laws in the country of employment.
Insurance With an EOR, the client-company is fully protected against any compliance related hassles and overheads. While a PEO may provide some protection, the client-company may still have to buy their own insurance as a co-employer.