As a business owner, taking HR-related responsibilities and tasks off your plate can do wonders. However, who you hand these responsibilities off to can make a big difference. Professional employer organizations and staffing agencies are both viable options for HR outsourcing solutions, but each serves a different overall purpose.
Understanding the difference between professional employer organizations and staffing agencies is important for growing businesses seeking an extra hand. Doing so can help you discover which best aligns with your business’s HR needs and goals. Below, the experts at peo.com have broken down the differences between a professional employer organization and a staffing agency to help you decide which is best for your business.
What is a PEO?
A professional employer organization, or PEO, is an HR outsourcing option for small and mid-sized businesses. As an employer, bringing on a PEO lets you hand off your business’s administrative and HR-related responsibilities. From payroll processing and employee benefits to tax administration and worker’s compensation claims, your PEO will take tedious tasks off your plate and free up your schedule for more core business functions. Together, you and your PEO will contractually outline and distribute administrative tasks through a PEO service agreement.
What is a Staffing Agency?
A staffing agency helps businesses fill urgent and temporary staff positions. If your company experiences sudden vacancies from events like unexpected termination to maternity/paternity leaves, a staffing agency can help fill these open roles. As the employer, you lease these employees from your staffing company, meaning their payroll, benefits, and other employee-related essentials remain the staffing agency’s responsibility.
However, it’s become more common for staffing agencies to onboard permanent employees, particularly for specific industries requiring specialized skills and talents. In this case, these permanent hires would become your responsibility as the employer.
What is the difference between a PEO and a Staffing Agency?
While PEOs and staffing agencies offer a similar scope of HR solutions, they ultimately fulfill different business needs. The following factors are key differences between a PEO and a staffing agency:
Staffing agencies and PEOs have different daily tasks. A PEO will take on a more diverse workload than a staffing agency, overseeing your business’s administrative and HR duties, including administering employee benefits, delivering payroll, and addressing and filing employee compensation claims. Meanwhile, a staffing agency has the daily task of finding and recruiting employees through online platforms or professional networks. Generally, they spend the day solely searching for employment leads.
Both staffing agencies and PEOs help with the recruitment process. However, their efforts differ. A PEO focuses on recruiting and retaining permanent employees, helping by advertising positions and interviewing candidates. In contrast, a staffing agency focuses more on temporary hires. Their recruitment processes are typically a lot quicker than those of PEOs.
Employee liability is a huge disparity between PEOs and staffing agencies. Because a PEO acts as a co-employer, it shares employee responsibilities with its client company. However, the same does not apply to staffing agencies. A staffing agency supplies temporary workers to its client company, meaning these employees remain the agency’s sole responsibility. In the case of permanent staffing, the situation changes, and the client company will assume responsibility for the staffing agency’s permanent hire.
While a PEO can play a hand in the hiring process, it is not their primary responsibility. Instead, they support their client company’s existing employees and play a more distant role in the hiring process. For example, a PEO might help set up job interviews for potential candidates, but they won’t ultimately choose who lands the role. Meanwhile, a staffing agency is more involved. They undergo the recruiting, screening, and interviewing process to fill urgent and temporary staffing needs.
Simplify Your Business with peo.com
At peo.com, 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!