What is a PEO?
A complete guide to Professional Employer Organizations — what they do, how they work, and whether one is right for your business.
The short answer
A Professional Employer Organization (PEO) is a company that provides comprehensive HR services to small and mid-sized businesses through a co-employment arrangement. When you partner with a PEO, they become the employer of record for your employees — handling payroll, benefits, taxes, and compliance — while you retain full control over day-to-day operations and business decisions.
How co-employment works
Under co-employment, your employees technically have two employers: you (the client company) and the PEO. You handle everything related to running your business — who to hire, what work gets done, how employees perform their jobs. The PEO handles the administrative burden: payroll processing, tax filings, benefits administration, workers' compensation, and HR compliance.
What services does a PEO provide?
Who should use a PEO?
PEOs are typically best suited for businesses with 5 to 500 employees that want to offer competitive benefits, reduce HR administrative burden, and ensure compliance without building a large internal HR team. Industries that particularly benefit include professional services, technology, construction, healthcare, and nonprofits.
PEO vs. doing HR yourself
Small businesses that manage HR internally often pay more for benefits (due to smaller group sizes), spend significant time on compliance, and face higher risk of costly HR mistakes. A PEO pools employees from many client companies to negotiate better benefit rates and provides expertise that would otherwise require multiple dedicated HR staff members.