If you’re a business owner or HR professional, you may have heard of Professional Employer Organizations (PEOs) but may not be entirely sure what they are or how they can benefit your organization. In this post, we’ll explore the concept of PEOs and how they can help businesses manage their HR and payroll responsibilities more effectively. We will also cover how they differ from Employer of Record (EOR) services, and how they can complement each other.
A PEO is a company that provides a range of HR and payroll services to businesses on a contract basis. Essentially, the PEO acts as a “co-employer” of the business’s employees, sharing responsibility for the management of these employees with the business itself. This is different from an EOR, as EORs act as the sole employer of contracted employees, not the co-employer. PEOs offer a range of services that can help businesses streamline their HR and payroll processes outlined below.
- Payroll processing and tax compliance: PEOs can handle the payroll for a business’s employees, including calculating pay, issuing paychecks, and managing tax withholding and compliance.
- Employee benefits: PEOs can help businesses provide employee benefits such as health insurance, retirement plans, and other perks.
- HR support: PEOs can offer HR support and guidance, including assistance with hiring, performance management, and compliance with employment laws and regulations.
One of the main benefits of using a PEO is that it can save businesses time and money by taking on many of the administrative tasks associated with HR and payroll management. This can allow business owners and HR professionals to focus on more strategic tasks, such as talent development and business growth.
Another advantage of PEOs is that they often have more resources and expertise at their disposal than smaller businesses, which can make it easier for them to stay up-to-date on employment laws and regulations, as well as offer a wider range of employee benefits.
How are PEOs and EORs different?
The main difference between an EOR and PEO is the PEOs offer “co-employment” relationships. That means clients and PEOs share risk and responsibility. EORs on the other hand take on all the risk.
The second main difference is that clients do not need an entity in the location where they will be employing workers, when using an EOR. That’s different than a PEO, since PEOs are co-employment, a client must co-employ workers with their entities in each locality. If a client wants to employ a worker in another state or country, and they don’t have an entity, they would have to use an EOR.
Is an EOR or PEO better?
Of course, there are also some potential drawbacks to consider when deciding whether to use a PEO. For example, some businesses may be hesitant to take on co-employment risks as they will lose control of HR tasks, but still be on the hook for HR and other issues. Conversely, EORs enable similar functions to PEOs, but take on all the risk on behalf of clients.
Overall, whether or not a PEO is right for your business will depend on your specific needs and circumstances. You may find that a PEO is better suited for you, or it could be that an EOR better services your needs. If an EOR is on your mind, learn more about FoxHire’s EOR services offer.