Professional Employer Organization definition

Professional employer organisations (PEO) are entities that provide employee management services, such as payroll processing, benefits management and recruitment, to businesses.

Legally speaking, they hire the employees directly in a process called co-employment or joint employment. This makes processing payroll, tax, benefits and insurance far easier. PEOs may or may not assume legal risk for the employees they hire.

Administrative services only (ASO) firms  provide the same types of services as PEOs but do not form the co-employment relationship – the employees are legally employed by the client company only.

In the UK, a common form of PEO is an umbrella company, which provide the same types of services for contractors rather than permanent employees.