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A Professional Employer Organization
(PEO)

A Professional Employer Organization (PEO) is defined as an organization that provides an integrated and cost effective approach to the management and administration of the human resources and employer risk of its clients. This is accomplished by contractually assuming substantial employer rights, responsibilities, and risk, and through the establishment and maintenance of an employer relationship with the workers assigned to its clients.

More specifically, a PEO establishes a contractual relationship with its clients whereby the PEO:

	Assigns workers to client locations, and thereby assumes responsibility as an employer for specified purposes of the workers assigned to the client locations;
	Reserves a right of direction and control of the employees and may share such responsibility with the client, consistent with the client's responsibility for its product or service;
	Pays wages and employment taxes of the employee out of its own accounts;
	Reports, collects, and deposits employment taxes with state and federal authorities;
	Establishes and maintains an employment relationship with its employees which is intended to be long term and not temporary; and
	Retains a right to hire, reassign, and fire the employees.

Businesses today need help managing increasingly complex employee related matters such as personnel management, health benefits, workers' compensation claims, payroll, payroll tax compliance, and unemployment insurance claims. Businesses contract with a PEO to assume these responsibilities, which then allows the client to concentrate on the revenue-producing side of its operations.

A Professional Employer Organization provides integrated services that more cost effectively manage critical human resource responsibilities for clients. Some PEOs deliver these services by establishing and maintaining an employer relationship with the workers assigned to its client and by contractually assuming substantial employer rights, responsibilities, and risk.

Average annual cost of regulation, paperwork, and tax compliance for firms with fewer than 500 employees is about $5,000 per employee, compared with $3,400 per employee for firms with more than 500 employees
- U.S. Small Business Administration

The average small business owner spends between 7% and 25% of his or her time handling employee-related paperwork.
- U.S. Small Business Administration

::: A Professional Employer can help! :::

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