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What is a PEO?

3 min read

Running a business involves a lot of moving parts. From recruiting and retaining employees to building strong client relationships, it can be difficult for business owners to handle one task at a time. If you’re a business owner with too much on your plate, it may be time to find a PEO. 

As a business owner, entering a PEO service agreement takes tedious administrative work off your plate, giving you back the time needed to take your business to new heights! By outsourcing a PEO for your business’s human resources, you’ll find it’s much easier to protect and grow your business. Read below to learn more about PEOs and how they can help your business thrive. 

What is a PEO?

A PEO, or professional employer organization, acts as a co-employer for small and medium-sized businesses needing HR outsourcing. When a PEO is brought on board, they take on the responsibility of their client company’s administrative tasks, including payroll, employee benefits, human resources, tax administration, workers’ compensation, and regulatory compliance assistance. In some cases, a PEO may offer additional services such as employee onboarding, staff handbooks, data analytics and strategic services, and more. 

How does a PEO work? 

When incorporating PEO into your business, you contractually enter a co-employment relationship. Called a PEO service agreement, this contract will outline and divide business responsibilities between you, the client company, and your PEO. This service agreement will also put your worksite employees on the PEO’s payroll, becoming their “employer of record” for tax purposes. 

A common misconception about PEOs is that they overstep when it comes to business operations. However, the PEO service agreement eliminates this risk and clearly states which tasks solely belong to the client company. While a PEO handles administrative functions on your behalf, it does not take control of your day-to-day business operations. A PEO also does not replace your internal HR team. Rather, it supports your team and their workplace improvement efforts. And while a PEO oversees employee wages, benefits, and withholdings, it is not responsible for hiring or managing your worksite employees. 

Sometimes, a PEO and client company outline shared administrative responsibilities in their PEO service agreement. For example, you and your PEO may work together to develop an employee handbook for your business to define expectations for employee etiquette. 

Who should use a PEO? 

While companies of any size can benefit from a PEO, these organizations are especially helpful for small and medium-sized businesses. Businesses of this size typically need all hands on deck when managing core business functions, and sometimes HR operations can get in the way. In addition, newer businesses may also need more direct expertise to efficiently manage HR, legal, and tax-related matters. With a PEO on board, small and medium-sized businesses can go full force into operations fundamental to their company’s upward trajectory.

In general, PEOs are a valuable asset to small and medium-sized businesses in the following industries: 

  • Real estate
  • Computer services
  • Engineering
  • Health services
  • Legal services
  • Management consulting services
  • Accounting, auditing, and bookkeeping
  • Manufacturing
  • Plumbing, HVAC, electrical
  • Insurance
  • Wholesale
  • Nonprofit organizations

Simplify Your Business with 

At, we make it easier to find the perfect PEO provider for your business. With access to some of the largest PEOs in the country, our agents provide high-performing options that will unlock your business’s true potential. If you’re ready to take your business to new heights, connect with our team today to shop PEO quotes and receive competitive pricing within 24-72 hours! 

Ready to take your business to the next level?

Contact us today to learn more about how we can help you achieve your goals.

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