The PEO arrangement is a Co-Employer relationship in which both the PEO and the client company have an employment relationship with the employee. Contractually, the PEO and the client company allocate and share many of the traditional employer responsibilities and liabilities. As an example, responsibilities and liability for employment related matters such as Payroll and Payroll Taxes, Employee Benefits, Human Resources Management, and Safety and Risk Management is assumed by the PEO, allowing the management to concentrate 100% on operating their business.
Outsourcing is a contractual arrangement, absent an employment relationship, with a vendor (and its supervised personnel), for services, either on the customer’s premises or off-site at the vendor’s location, to perform a function or run a department that was previously staffed and supervised by the customer directly. Examples include: Payroll Processing, Agent of Record Services, Employment Practices Training, Legal Services, and Safety Consulting. Today’s Professional Employer Organization is a “hybrid” of all of the honorable characteristics of the Staff Leasing Business Model combined with all of the efficiencies of the Outsourcing Business Model.