What is PEO

The Professional Employer Organization is referred as PEO. The PEO is a type of organization that provides HR outsourcing,  outsourcing of payroll, employee leasing employee benefits administration etc. The PEO service is vastly preferred by small and mid sized enterprises across United States. In early 1940’s the United States became the birthplace of PEO services.

The PEO firms generate their income from various methods of wage, insurance and tax arbitrage. Most PEO firms generate revenue by charging clients a specific percentage of payroll costs. In various insurance products the PEO employee benefits insurance, employment practices liability and purchases workers’ compensation at an agreed price. The PEO firm then adds its margin to the paid premium and then it bills the same to the client company, which is still very much less than the actual amount that client company would have to pay on its own.

The use of a PEO services for client company saves their time and employee management. This means the company can be free from any legal liabilities to the employees. The PEO service model is very much attractive for small and medium sized businesses and that is why PEO marketing is normally targeted towards this business segment.