What does PEO stand for in HR?

By Colin Gordon | 30.11.2021

A PEO also referred to as a professional employer organization, has continued to gain recognition mainly due to its benefits to small and medium-sized organizations within the United States. It has helped such businesses grow by offering HR services in areas where they can’t hire employees full-time. Additionally, a PEO also benefits companies trying to expand to other regions, and if you are running such a business, you may want to seek PEO HR services. So, what does PEO stand for in HR, and what benefits does it bring to an organization? Read along to find out.

What is a PEO

A professional employer organization (PEO) is an outsourcing firm that offers Human Resource services to small and medium-sized organizations. These services include HR consulting, payroll processing and tax filing, employees’ compensation insurance, safety, and risk management services, hiring across various jurisdictions, retirement vehicles, and more. You may think that working with a PEO means losing control of your business. However, while it will serve as a professional employer to your workers, you will still be in charge of making crucial decisions affecting your company’s bottom line.

Difference Between PEO and HRO

Most individuals fail to differentiate between the functions of a PEO and that of an HRO. To give you a better understanding, the PEO is fully responsible for all HR functions in an organization. This includes sourcing and hiring new employees, meaning that they can also decide the amount of payment a new employee will receive for their services. 

In contrast, a human resource outsourcer (HRO) will also manage HR functions but will not be involved in direct sourcing and hiring of new employees. You will have to find another professional for this duty. With an HRO, you can also choose which functions to outsource and which ones to manage on-premise. Therefore, if you are an upcoming small business, you may want to try out a PEO so that you may have enough time to focus on revenue-bearing functions. 

PEO Benefits

Below are the reasons you should include the services of a PEO in your organization, whether small or medium-sized. 

1. Better Employee Benefits and Experience

Partnering with a PEO means that you will benefit from a wide range of employee benefits at cheaper rates. As a small or medium-sized business, having access to large-business benefits can be challenging since you need to be popular and reputable enough to qualify. Therefore, with a PEO, your employees will enjoy such benefits and more. As a result, you will attract quality talent to help your business quickly achieve its objectives.

Here are some of the employee benefits your business will enjoy when they partner with a PEO.

  • Medical coverage, including dental and vision
  • Educational assistance
  • Drug testing
  • Life insurance
  • Disability insurance
  • Retirement benefits
  • Assistance in adoption
  • Accident insurance, and more

Since a PEO will be in charge of sourcing and hiring candidates, they will ensure the recruits are fully prepared to take on their new roles. In this regard, they will offer onboarding sessions. They also provide leadership development training through online courses, digital books, and training seminars. 

2. Reduce Operational Risks

Through a PEO partnership, your business will likely operate seamlessly, reducing the risks of inaccurate tax reporting, EEO claim resolution, reporting, filing of the I-9 form, or other employee-related claims. This is because most PEOs have highly skilled professionals who are well-versed with federal law and can manage various employer-related laws. This also means that these professionals stay abreast with the changing employment laws and regulations, thereby ensuring a PEO provides the best services to its clients. 

Some of the services a PEO provides to mitigate operational risks include:

  • Review your workplace safety practices to prevent workplace injuries. However, in the event of one, a PEO offers compensation insurance coverage to ensure you get the best medical service. They will also design return-to-work programs and cover any claims issued by an injured employee at the workplace. 
  • PEO payroll processing, including paying workers, record keeping and compliance, PTO accruals, etc.
  • Taking over the HR duties and responsibilities, including managing employment verification, onboarding, and training, employee handbooks management, employee relations, time and attendance management, etc.

3. Save Money

Since you will be working with skilled and qualified professionals, you will save money by hiring top talent, hence reducing employee turnover. Your employees will also benefit from guidance and motivation from professionals, boosting their morale in becoming better performers. In addition, it will be easier for you to plan for the future and help your business achieve its objectives. 

Simply put, a PEO offers all HR services to boost your business performance, and having these services provided by a single provider is way cheaper compared to seeking different services from different companies. Here is how you will save money with PEO services.

  • PEO helps you create a suitable recruitment procedure to suit your business by creating a detailed job description, conducting employee compensation surveys, and motivating hiring managers. 
  • Provide performance management support by offering compensation tools, recognition and reward programs, training team leaders, structuring base pay, and more.
  • Help develop a strategic plan to help you make the best HR decisions to guide your business in the right direction. 


The professional employer organization industry is becoming a new household name in the United States. Many employers find it more beneficial considering that it offers all HR services. This means that there will be no need to seek different service providers to help you with managing your business. Keep in mind that there are various PEOs out there, and it is essential that you find the best one for your business needs.