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What is a professional employer organization?

Everything you need to know about PEO

What is a professional employer organization?

Sunday August 05, 2018,

5 min Read


Professional employer organizations, also known as PEOs, work with companies to provide in-depth HR outsourcing to help the company by managing its human resources, regulatory compliance, payroll and employee benefits.

All of the above services that California professional employer organizations help with are what trips business owners up in many cases and keeps them from being successful in the California business-scape. Often when you are focused on running a business, you are thinking of growth and innovation instead of managing human resources. While that is perfectly fine, someone needs to be taking good care of the HR department while you are growing your business.

Is a PEO right for you?

While the idea of a PEO might sound attractive, it can still be a step that you are nervous about making. You will be allocating funds to this area of your business, and you want to make sure that you are getting a good ROI.

If you don’t mind giving up control, a PEO company may be a good option for you. You will be able to operate considerably hand off with your HR since this company will be handling those parts of your business. You should know that the PEO company is a co-employer of these employees which means that they share the responsibility. Having co-employment and sharing the responsibilities may give you some peace of mind when you are thinking about any legal matters that might arise and need to be taken care of legally.

If you want to have access to a larger pool of benefits at a good price for your employees, this is a good move for your company. PEOs can get access to benefits that are only available to Fortune 500 companies. When you can offer these benefits to your employees, they are happier, and you can attract more top talent.

On the other hand, if you like being in control and want to be able to have a primary say in the benefits and other parts of managing your employees, you should not work with a PEO company. You will also carry the entire burden of employment, however, unlike if you were working with a PEO company.

Biggest benefits of working with a PEO

Understanding the benefits of working with a PEO is key when you are deciding whether to hire an in-house HR department or to work with a company to outsource this area. You should know that if you want to keep key people that you have in your HR department, you will be able to keep them and also work with the PEO to compliment the team that you have in place.

Knowing that employees are the most valuable resource we have, it is important that we maintain a good relationship with them as well as maintaining a good relationship with the law. When you work with a PEO, you will find that you have higher employee retention, productivity and you can keep up with the laws as they change and develop throughout the years.

The peace of mind that you can achieve when you are working with professionals that will ensure that you are compliant and that your employees are happy seems near impossible until you begin the process.

As an employer, you have many different responsibilities to your employees. Some of those responsibilities include, but are not limited to:

● Safe work environments

● Managing employee benefit programs

● Remaining compliant with health reform

● Remitting taxes to the appropriate agency

All of these tasks can be overwhelming, and if you are focusing on HR when you should be focusing on growing your business so there will continue to be jobs, you may find yourself going backward in your business. Pushing paperwork isn’t where an executive should be spending their time, and you don’t have to anymore when you are working with a top PEO company.

If you have ever taken action with an employee and wondered if it was legal, you need to work with a professional that can help you. Some people find it challenging to turn over some of their authority to someone else, but in this case, you want to make sure you are acting correctly vs. keeping a tight hold of the reigns.

Wrongfully terminating someone or failing to give the proper leave for maternity could cause you big problems that might end up in court. If you don’t want to deal with court dates and other problems, you need to make sure that you are 100% compliant and only acting by the law.


Deciding whether or not you want to work with a PEO is often a personal preference. Even if the numbers make sense and you can see how it is going to help your company if you do not feel comfortable with the PEO company, you won’t move forward.

Feeling comfort and trust is why it is important that you interview PEO companies until you find the right fit for you. It’s best to work with a company that has experience in your industry and with a company that has a similar amount of employees. When you work with this company, you will know that they understand your needs and have dealt with it before.

Since California is a hotbed of startups, you will be able to choose from the best PEO companies so that you can get the service and the peace of mind that you deserve as a business owner.