What is a PEO? And is it right for our organization?


A Professional Employer Organization provides HR outsourced services, including payroll, benefits, hiring, and training. The PEO model’s unique aspect is that the PEO actually employs a company’s employees, and the PEO leases the employees back to the company.

When should you use a PEO?

PEOs can be a beneficial solution for many small and mid-sized organizations who don’t have the headcount, time, or experience to effectively manage the myriad of compliance requirements in terms of HR.

PEOs can provide executives with peace of mind and even help to reduce costs in some instances. The primary focus is on providing administrative services related to HR.

When shouldn’t you use a PEO?

But what if you don’t want to outsource your talent completely? What if you want to maintain control of HR vendors, systems, policies, and processes? What if you’re finding the expense to be cost-prohibitive as you scale?

What if you have more complex needs than administrative support? What if you need a strategist and not an administrator?

What if you don’t want to be lumped in with another organization’s workers comp experience and unemployment rates?

What if you’re not happy with the service and how complicated it will be to untangle a co-employment status?

An HR Management partner is an ideal solution to the old traditional PEO model. An HR Management partner can work with internal and external payroll and benefit partners you’ve selected to ensure that your organization’s unique policies, processes, and offerings are compliant, robust, and aligned with your culture, budget, and mission.

An HR management partner focuses on much more than just administrative record-keeping and systems, without the hassle of becoming the “employer of record.” Your ideal partner can help with:

  • Refining your people strategy
  • Fostering your culture
  • Employment Branding & Recruiting Strategies and Tools
  • Implementing Systems and Solutions that are specific to your unique industry and organization
  • Employee Relations Management – performance, leaves of absence, discipline, and more… and coming on-site to walk alongside managers to navigate, communicate, coach, and resolve complex issues.
  • Implementing HR Best Practices that align with your culture, objectives, etc.
  • Creating custom training and talent development offerings, including Leadership Development and Executive Coaching
  • Recommending HR-related technology to enable self-service and streamline all HR processes

Wrapping Up

Again, companies who don’t want to “deal” with employees may find limited value in outsourcing them under a PEO’s co-employment solution.

Leaders who highly value their talent and who want to attract, develop and retain great team members are better served by an HR management partner.

It’s a great idea to further delve into the pros and cons of each, as well as the fine print before signing on the dotted line.

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