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A Professional Employer Organization (PEO) provides an outsourcing alternative to small and medium-sized companies for employment and human resource functions. The client company and the PEO enter into a co-employer relationship, usually initiated by the conversion of client employees to the PEO payroll. The PEO then becomes the employer of record handling most human resource functions, while the company retains operational control over the employee. Small business owners face a number of employment concerns, most of which have little to do with executing their business strategy. PEOs attempt to relieve owners and managers of these concerns by providing them with a one-stop shop for human resource-related functions. Of the 12 largest problems faced by small companies (see EXHIBIT 1), eight are directly addressed by the PEO: Small Business Problems Directly Addressed by the PEO
Source: "Small Business Problems and Priorities", The NFIB Foundation |
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