A PEO, or Professional Employer Organization, handles the outsourced HR functions for a business through a co-employment relationship where the business becomes the worksite employer with certain roles and obligations, and the PEO becomes the employer of record related to functions such as W2s.
How does it work?
The PEO and the client company enter into a contract where certain duties related to payroll, taxes, benefits, and/or human resources are going to be administered by the PEO. The employees retain their current worksite supervisor, policies unique to their workplace, and perform their daily functions as they would with or without the PEO. Oftentimes the only time they think of the PEO is when they review their paystubs or need a verification of employment for a loan.