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Professional employer organizations (PEOs) use a unique model to help companies with their HR needs. A PEO creates a unique collaboration where both parties share responsibilities. So, who do employees really work for in a PEO?
The company maintains control over daily operations while the PEO handles administrative tasks and compliance. This impacts everything from payroll to benefits and HR support. By breaking down these roles, we’ll clarify what this relationship looks like in practice and what it means for your business.
What is a PEO?
A PEO is a firm that partners with businesses to handle key employer responsibilities. The PEO manages payroll, employee benefits, compliance, and HR administration through a co-employment agreement. The company retains control over the day-to-day operations and workforce management. This lets you focus on growth and reduce administrative burdens.
Key Functions
A PEO takes on several employer responsibilities, helping you stay organized and compliant with employment laws.
- HR Administration – PEOs manage hiring support, employee handbooks, and workplace policies.
- Payroll & Benefits – PEOs process payroll, administer benefits packages, and handle tax filings.
- Risk & Compliance Support – PEOs assist with workers’ compensation and employment law compliance.
By outsourcing these functions, businesses gain access to expertise and resources that would be difficult to maintain in-house.
Who Does the Employee Work For?
From a legal standpoint, the PEO acts as the employer of record for tax and benefits purposes. This means the PEO files payroll taxes and provides access to benefits packages while your company retains control over job duties, workplace conduct, and performance management. This shared framework helps reduce administrative burdens while maintaining your business’s autonomy.
Common Misconceptions
One common myth is that employees working under a PEO are leased or lose their connection to their company. In reality, employees remain part of your company’s team. The PEO handles HR administration, but you retain control over everything else.
Some people also believe that co-employment shifts employee allegiance to the PEO, but this isn’t the case. You still shape the team dynamics and company culture. The PEO only functions as an administrative support system, not a replacement for internal leadership.
Advantages of the PEO Model for Employees and Employers
Partnering with a PEO gives your employees access to better benefits and perks that might typically be out of reach for your company. PEOs also simplify HR processes. This means employees spend less time navigating policies and more time focused on their roles.
For employers, a PEO lets you offload time-consuming admin work. This frees up leadership to concentrate on strategic goals. PEOs also help you stay aligned with labor laws and workplace regulations. With fewer HR challenges, companies can dedicate more energy to expansion, innovation, and employee engagement.
The dual employment model has many advantages and a strong track record. With shared responsibilities, you can focus on core business activities while giving your workforce competitive benefits and personalized HR support.
Want to learn more about how PEOs can help your business? Contact us for your HR Review and Needs Analysis today!