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What Is a PEO?

What Is a PEO?

A PEO is a Professional Employer Organization, one of the most comprehensive support solutions available for your business. 98% of companies using a PEO would recommend one to a colleague.

When you work with a PEO company, you offload time-consuming responsibilities like HR and payroll administration, quarterly reporting, workers’ compensation claims management, and employee benefit procurement. PEOs are a source of expert advice—providing you a partner in the fast-paced world of business.

PEOs can be defined as a source for expert HR consulting —providing you a partner in the fast-paced world of business. 98% of companies using a PEO would recommend one to a colleague.

What is a PEO? A PEO is a Professional Employer Organization, one of the most comprehensive support solutions available for your business.
A PEO is a company that lets you offload time-consuming human resources (HR) responsibilities for your business.
98% of businesses using a PEO company would recommend one to a colleague.

What Services Do PEOs Offer?

A PEO company offers HR services for your business including outsourcing payrollhuman resourcesemployee benefits administrationworkers’ compensation, and risk and safety management, including compliance.

  • Track time and attendance, including paid time off, sick time, and vacation accruals.
  • Access to payroll data, census reports, and invoices
  • Issue paychecks, direct deposits, and annual W-2s
  • Manage garnishments and unemployment claims
  • Complete tax reporting
  • Recruit and onboard new hires​
  • Complete employee tax forms such as W-2s, 1099s, and I-9s​
  • Manage employee performance, e.g., performance benchmarking, development training, and succession planning​
  • Conduct background checks, interviews, and gamification​
  • Maintain HR compliance with local, state, and federal laws and regulations
  • Assist with employee benefits administration, such as plan selection, open and special enrollment, benefits implementation, claims management, and other benefits-related tasks
  • Access to basic benefits coverage, e.g., medical, dental, and vision
  • Explore ancillary or secondary benefit offerings, e.g., 401(k), life insurance, short-term and long-term disability, and telehealth
  • Increase unique benefit options, e.g., employee assistance programs, pet insurance, and cross-border benefits
  • Access to multiple “A” rated carriers with pay-as-you-go options
  • Manage workers’ compensation claims, e.g., serve as a liaison between injured employee, company, workers’ compensation carrier, and medical care provider
  • Reduce risk exposure through increased federal and state law compliance
  • Investigate accidents and develop safety programs
  • Customize safety program, including free Occupational Health and Safety Administration (OSHA) training
  • Assess on-site hazards and training
  • Analyze job tasks and reporting

How Does a PEO Benefit Your Business?

The numbers speak for themselves: Businesses that work with a PEO experience 10 to 14 percent lower employee turnover, 7 to 9 percent faster growth, and are 50 percent less likely to go out of business.



PEOs provide expansive, customizable employee benefits options at competitive rates—in many cases, more options than small to mid-size businesses would have if they were to provide employee benefits on their own. Businesses of all sizes can profit from a PEO’s purchasing power to negotiate more affordable healthcare benefits and insurance coverage.


As your designated representatives at your PEO company get to know your business, they can recommend different products or services to help streamline areas of the business and eliminate redundancies. Your business will see a significant boost to its annualized budget as employee time is freed up to spend on priorities that benefit customers and help grow your bottom line.


A PEO helps ensure deadlines are met, information is accurate, and reporting is delivered to the appropriate recordkeeping agencies. The PEO undertakes employment-related compliance by staying up to date on frequently changing rules and regulations, as well as providing any appropriate action you may need to take to adhere to them.

How Does Co-Employment Work?

To deliver their services, some PEO’s use the co-employment model. In these cases, the PEO company becomes the employer of record of the business’ employees. 

The Professional Services Organization will typically handle payroll, taxes, employee benefits and provide human resources guidance, while the business focuses on its own operations and can make important decisions – such as which employees to hire or terminate.

Do PEOs always involve co-employment?

Although PEOs typically involve co-employment, it is possible for a business to hire a PEO for specific services like payroll and benefits administration without entering into a co-employment relationship.

This is sometimes an “ASO” (administrative services only) arrangement. In this scenario, the PEO acts as a service provider rather than a co-employer. Learn more about the differences between ASO vs. PEO.

What Does a PEO NOT Do?

Although a PEO can offer various HR services to support a business, there are certain tasks that they won’t typically handle. Here are some examples of things a PEO won’t do for your company:

  • Marketing: PEOs usually aren’t involved in developing or executing a business’s marketing strategy. 
  • Core business functions: While PEOs can handle administrative tasks, they won’t take over core business functions such as product development or sales. 
  • Legal representation: While PEOs can provide guidance on HR and employment law, they typically won’t provide legal representation in court. You’ll need to work with a separate attorney or law firm if you require legal representation.
  • Financial planning and accounting: Although PEOs may handle payroll and benefits administration, they don’t usually provide financial planning or accounting services.
  • Executive decision-making: PEO companies won’t typically make executive-level decisions for your business.

Does a PEO Fit My Budget?

The price of a PEO company varies based on several factors including the number of worksite employees, use of recruiting services, business administration such as policy and procedure revisions, handbook development, performance management, workers’ compensation insurance, claim management services, and payroll administration.

A company looking for payroll only will be charged a lower amount than an organization looking for on-site hazard assessments, job task analysis, applicant tracking, and HR management software.

PEO services


This payment option is based on a percentage of total employer payroll for each pay period, including local, state, and federal taxes, workers’ compensation, and employment practice liability insurance (EPLI). Additional administrative fees may apply, depending on the PEO partner.


This payment option typically does not include any additional fees, such as a setup charge for additional services or features. For example, if a PEO charges $100 per employee per month and you have 50 employees, you will be paying $5,000 per month or $60,000 per year.

What Kinds of Businesses Can Benefit From Using a PEO?

While any business can benefit from using a PEO, there are some types of businesses that stand to gain even more.

In this section, we’ll take a look at some of these businesses and how they can take advantage of the services PEOs offer.

  1. Small businesses in any industry: PEOs can help small businesses by providing HR expertise, reducing administrative burdens, and streamlining HR processes. Small businesses may not have the resources to hire a full-time HR staff, making a PEO a cost-effective solution.
  2. Startups: Startups may have limited resources and a small staff, making it challenging to manage HR processes. By providing HR support, PEOs allow startups to focus on growing their business.
  3. Healthcare businesses: Healthcare businesses are highly regulated and require strict compliance with labor laws and regulations. A PEO can help healthcare businesses ensure compliance while providing HR support for their employees.
  4. Technology businesses: Technology businesses require highly skilled and specialized employees. With a PEO, these businesses can attract and retain top talent by offering competitive benefits packages and HR support.
  5. Manufacturing businesses: Manufacturing businesses often have a large workforce and complex HR needs. A PEO can help manage payroll and benefits administration, while ensuring compliance with labor laws.
  6. Hospitality businesses: Hospitality businesses, including hotels and restaurants, require a large workforce. A PEO can help these businesses manage their HR needs, including scheduling and payroll.
  7. Non-profit organizations: Non-profit organizations often have limited resources and rely on volunteers and part-time staff. A PEO can help these organizations manage their HR needs, while freeing up time and resources for their mission-driven work.

In conclusion, businesses of all types can benefit from partnering with a PEO. If you’re interested in learning more about PEOs and how they can benefit your business, request a call with VensureHR today.

What Do I Need to Consider When Choosing a PEO?

A PEO can offer your business an abundance of administrative relief, but it’s not always the best solution for every business. There are some considerations to evaluate before choosing the right PEO partner.

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Maintaining Daily Business Operations
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Understanding Laws and Regulations
Personalizing Customer Service

I’m Ready to Talk to a PEO. What Now?

Now that you know what a PEO is and how it can help your company, what is the best way to move forward? Plan to interview a potential PEO as you would expect to be interviewed by a potential business investor. Keep federal, state, and local compliance top of mind while navigating the partnership process. The right PEO will be able to support your company as it grows and expands, providing the type and level of support needed to keep your operations moving like a well-oiled machine.

Keep in mind while searching for the right PEO partner that you will be handing over the majority of those demanding but necessary administrative tasks that guide your day-to-day business operations.

Whether you are opening a new business or looking to grow a longstanding company, it’s important to know that you have an expert partner in some of the more complex avenues of your business. A PEO partnership brings incredible value to businesses of all sizes, especially to new businesses without extra funds to hire a seasoned human resource professional, staff accountant, or benefits coordinator. 

VensureHR is a proven partner to help keep your costs low while reducing complexity, helping you focus on accelerating your business’s growth. Want to learn more?

FAQs About PEOs

What is the meaning of PEO?
PEO stands for Professional Employer Organization. A PEO is a third-party company that provides HR solutions and services to businesses. In some cases, a PEO can act as a co-employer.
What is a PEO agreement?
A PEO agreement is a legal contract between a PEO and a client company. It outlines the terms of the relationship between the two parties, including the services that the PEO will provide, and the fees. The agreement typically covers areas such as payroll processing, benefits administration, HR compliance, risk management, and other HR-related services.
What is PEO insurance?
PEO insurance refers to the insurance coverage provided by a Professional Employer Organization (PEO) to its clients. PEOs typically offer workers’ compensation insurance, general liability insurance, and employment practices liability insurance (EPLI) as part of their services. By providing these insurance coverages, PEOs help their client companies manage risk and ensure compliance with insurance requirements.
Will the PEO become my staff’s employer?
If you enter a co-employment arrangement with the PEO, your employees will become co-employees of the PEO and your business. This means that while you will still be the primary employer, the PEO will share certain employer responsibilities with you, including managing payroll, benefits, compliance, and more.
How will working with a PEO affect my company’s culture?
Partnering with a PEO will not necessarily have an impact on your company’s culture. If you do want help in this aspect, a PEO can assist you in coming up with strategies that will allow you to shape your company’s culture and create a more positive and supportive work environment for your employees.
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