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What is a PEO Company and How Does it Work?

What is a PEO Company and How Does it Work?

Some businesses lack the resources necessary to carry out all the duties of their HR staff. A PEO, or Professional Employer Organization, can assist companies in carrying out these vital tasks and improving overall efficiency. When deciding whether to outsource a PEO company or keep specific responsibilities in-house, it helps to have a company-wide understanding of the advantages of using a PEO.

In this article, we’ll discuss everything a PEO can do for a business, so if you’re interested in learning more about this crucial service, you’ve come to the right place!

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What is a PEO Company?

PEO, or Professional Employer Organization, assists businesses in handling employee payroll, managing human resources, and regulatory compliance for their clients. Employing a PEO company can provide far-reaching advantages; companies can scale by lowering the price of administrative services and simplifying payroll. In addition to these benefits, a PEO allows companies to expand internationally without formally registering in each new market.

How Does a PEO Work?

PEOs act as employers of record, taking on the administrative burdens of things like hiring and onboarding new workers, as well as paying their wages, benefits, and mandatory payroll taxes. As part of the process by which it secures the PEO’s services, the hosting company typically signs a contract outlining the PEO’s obligations and the host’s expectations. Meanwhile, the host business is responsible for managing the employee on a day-to-day basis.

What Are the Benefits of a PEO?

PEOs are helpful in more ways than one, as they alleviate stress and free up time for business owners. Additionally, they also help you save money by preventing mistakes like hiring the wrong person for a pivotal position and avoiding other HR compliance issues that might cost you a lot of money in fines.

A PEO can aid you in a number of important ways, some of which are outlined in the next section!

It Makes It Possible to Hire at a Reasonable Cost

Hiring the wrong individual may be costly when you include the time and resources invested in posting jobs, evaluating candidates, completing background checks, and more. Suitable recruiters have the ability to quickly assess whether or not a candidate is a good fit for an open position.

They’re trained to listen for cues like a candidate’s tone of voice during the interview, evaluate a person’s attitude and EQ, and draw conclusions about that person’s likely performance on the job.

what is a peo company

PEOs Are Useful for Keeping up With Regulations and Reducing Potential Dangers

PEOs can act as co-employer, assuming some of the liability for things like workers’ compensation and unemployment insurance claims. In addition, PEOs offer guidance on implementing sector-specific safety measures in the workplace.

Also, PEOs can provide access to HR experts or lawyers to help you understand the laws and rules of any circumstance you find yourself in. Finally, when recruiting remote workers, PEOs can help you comply with the myriad of state and federal regulations governing compensation, benefits, and time off.

Provide Advantages to Employees

PEO acts as the benefits administrator in co-employment arrangements. As a result, the PEO relieves its clients of the burden of compliance and administrative duties while providing competitively priced benefit packages to its staff.

In addition to providing services like enrollment, carrier negotiations, administration, and legal notices, PEOs are able to offer a wide range of benefits to their clients, including vision, dentistry, and health insurance. PEOs also aid staff in comprehending their benefits and assisting with enrollment.

PEOs Are Beneficial Since They Cut Down on Expenses and Save Valuable Time

If you want to expand your company internationally, it would be wise to familiarize yourself with the local financial system before you go. Estimating how much money will be needed to hire someone from another country can be challenging.

A Global PEO can help you weather the financial storm by streamlining the procedure with their significant research and experience. In addition, these PEOs are equipped with knowledge and data to provide sound financial recommendations in times of crisis.

Employing a PEO Makes Entering New Markets Much Easier

There are both positives and negatives to establishing a business in a foreign country. The difficulties of entering a new market go beyond the obvious ones of language and taxation. A global PEO will make sure that all recruiting regulations are met.

In turn, this inspires trust among your remote workers and safeguards your financial stability and tax compliance. Trust from the local government might improve with time when you employ a global PEO.

what is peo company

Are There Limitations to Using a Global PEO?

Although there are no restrictions or limitations on using a global Professional Employer Organization, it’s possible, though, that there are logistical or practical factors to consider. In addition, a global PEO may not be conversant with the employment laws and regulations in every country in which it operates.

Therefore, before committing to a PEO, it’s crucial to investigate the services it provides in your country. Also, it’s essential to keep in mind that cultural differences can contribute to misconceptions and miscommunications while working with a global PEO.

But, overall, it is clear that working with a PEO business is a prudent and helpful decision when we carefully analyze the potential drawbacks of doing so and balance them against the advantages.

Which Type of Business Can Benefit from a Global PEO Solution?

Companies of any size or industry who are interested in expanding into new foreign markets might profit from using a global Professional Employer Organization solution. This comes as no surprise, considering the many advantages PEO can provide. 

Companies that may gain the most from a global PEO solution include:

Large Enterprises

A PEO is valid for any business, but it can benefit large corporations with complicated HR and employment structures looking to simplify their procedures. 

With the help of a PEO, the company can focus on its core competencies rather than the administrative burdens of employing and supporting a large workforce spread across multiple locations. 

Furthermore, a PEO can aid a multinational corporation in meeting the stringent requirements of labor laws and regulations in several jurisdictions. 

A PEO may help large businesses in several ways, including reducing expenses, boosting productivity, and ensuring they are in full compliance with all applicable employment requirements.

Small and Medium-Sized Enterprises

Employing a PEO can be especially helpful for small and medium-sized businesses because these organizations often lack the personnel and infrastructure necessary to manage employees effectively, and human resources function internally. 

With a PEO’s assistance, a small or medium-sized corporation can devote more time and energy to growing its core competencies rather than spending time and money on HR administration. 

Furthermore, it can be difficult for small and medium-sized firms (SMEs) with minimal human resources to adhere to all applicable employment laws and regulations, but a PEO can help.

In addition, with the assistance of a PEO, small and medium-sized businesses (SMEs) can provide competitive benefits packages to their employees, increasing the likelihood of attracting and retaining top talent.


The administrative burdens of payroll and benefits administration can be too much for a startup to bear without the assistance of a PEO.

A startup can save time and energy by handing off these responsibilities to a PEO so that it can concentrate on expanding its primary business. 

A PEO can give a young company access to benefits like health coverage, retirement programs, and other amenities that the company might not be able to afford on its own. 

Also, a PEO may aid a startup in remaining following employment laws and regulations, which can be difficult for a company just starting, helping them follow the rules and regulations by providing advice and assistance.

Freelancers and Contractors

Freelancers and contract employees may be eligible for health insurance, retirement plans, and other employment-related services through a PEO. Furthermore, a PEO can aid independent workers in handling payroll and staying in line with employment requirements. 

This can be especially helpful for employees who aren’t already well-versed in these regulations or who lack the means to handle these responsibilities on their own. 

Finally, the assistance and direction a PEO may provide in the event of employment-related challenges or conflicts can give freelancers and contract workers a sense of security and stability they might not otherwise have.

Non-Governmental Organizations or Non-Profits

As payroll and benefits administration can be time-consuming and complicated for firms with limited resources, a PEO can provide assistance in these areas. 

In addition, a PEO can give non-profits and NGOs access to benefits like health insurance and retirement plans that they might not be able to offer on their own. 

Employing a PEO is also a good way for a non-profit or NGO to ensure that it is following all applicable regulations and laws on employee treatment. 

A PEO can provide direction and help to ensure that these organizations are in compliance with all applicable laws and regulations, which may be more complicated for non-profits or organizations doing similar tasks.

what is a peo company

How Much Does a PEO Cost?

The price of a PEO will differ from one company to the next based on a wide range of variables, including but not limited to the size of the company, the number of employees, the scope of the services provided, and the nature of the firm itself.

On platforms such as Native Teams, prices vary from €39 to €199 per seat, invoiced monthly, depending on location and monthly income. They provide various pricing plans, and you may check their costs here so you can choose the one that best suits your needs!

To Wrap Up

Many businesses that value their employees’ well-being and are willing to invest in HR and payroll services may find that a PEO is the best option. When a company hires a PEO, it is relieved of HR tasks and legal obligations that it may not be able to handle on its own. In addition, a PEO offers major corporate incentives that are useful in attracting and retaining top talent!

Angela Manevska avatar


Angela Manevska is a content creator with a passion for reading, staying up-to-date on the latest trends, and a knack for connecting with people. She loves to explore new places, re-watching her favorite TV series, and iced coffee.

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