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Global Work Glossary

Lost in a maze of global employment jargon? Find your way out with our handy collection of work and HR terminology

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# A B C D E F G H I J L M N O P R S T U V W X Y Z

PEO (Professional Employer Organization)

What is a PEO (Professional Employer Organization)?

A Professional Employer Organization (PEO) is a firm that provides comprehensive human resources (HR) services to small and medium-sized businesses (SMBs). Through a co-employment model, a PEO assumes responsibility for employee administration, allowing businesses to outsource functions such as payroll, benefits, regulatory compliance, and workers’ compensation.

Function and Scope

In this partnership, the PEO becomes the employer of record for tax purposes and manages all HR-related functions. This includes processing payroll, handling tax filings, managing employee health and retirement benefits, and ensuring compliance with all relevant employment laws and regulations. The client company retains control over day-to-day employee management and business operations.

Benefits and Strategic Importance

Partnering with a PEO allows businesses to leverage economies of scale for better rates on benefits, access expert HR guidance, and reduce administrative burdens. This support helps businesses focus on their core operations and growth while minimizing legal risks associated with HR and compliance. The strategic importance of using a PEO lies in its ability to provide SMBs with resources and expertise that would typically be available only to larger organizations.

A PEO offers a strategic advantage for businesses looking to outsource their HR functions efficiently. By providing expert services and comprehensive support, PEOs enable businesses to improve operational efficiency, enhance employee satisfaction, and navigate the complexities of HR management with greater ease and confidence.

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