PEO stands for Professional Employer Organization. A Professional Employer Organization (PEO) assumes the administrative functions of a human resources department and assists businesses with managing complex employment tasks such as employee benefits, payroll administration and tax processing, risk management, workers’ compensation and ACA regulations. PEO companies provide the following services: Payroll Administration, Employee Benefits, Human Resource and Compliance, Risk Management and Workers’ Compensation Management, as well as many other services.
These services and business solutions are provided through pooling together thousands of employees which enable the PEO company to negotiate comprehensive benefits at attractive rates, as well as reduce employee related liability and risk.
How does this work?
This works through a “co-employment” relationship. Co-employment is a relationship wherein the PEO Company acts as the Administrative employer, and the client acts as the Worksite employer. This relationship is based on a true partnership. The PEO Company becomes the “employer of record” for employment and benefit purposes, thereby assuming many of the responsibilities and liabilities for the client company.
By creating the “co-employment” relationship the clients employees are pooled with the PEO’s current employees to give them large group buying power. The PEO would handle payroll, taxes and unemployment administration, human resources compliance as well as compliance with the Affordable Healthcare Act regulations. This tremendous benefit greatly reduces the work associated with the transactional HR function and allows them focus on profit generating areas of their business.
Now, does that make sense???