What is Employee Leasing?

A Professional Employer Organization contracts with small companies (generally with 5 to 500 employees) to manage all or most of their human resource functions. The employees of the PEO are leased to the client company. PEOs help their clients in several critical areas: improving and managing employee benefits, reduced cost and risk of workers compensation and obtaining administrative relief. To be more specific, a PEO is responsible for the payroll, benefits, Section 125 cafeteria plans, workers’ compensation, unemployment claims, labor law compliance, record keeping, payroll taxes, and 401(k) pension plans for its clients. In the process, PEOs can save a business owner time and money, improve benefit offerings, and reduce employer liabilities.

In the PEO relationship, a PEO contracts to a worksite employer to co-employ the workforce of the client. The PEO and client establish a co-employment relationship with the workforce employees. The PEO provides a complete human resource, payroll, and employee benefits package.

The PEO assumes responsibility and liability for the “business of employment,” including risk management, human resources, labor law compliance, payroll, and payroll taxes. The client manages the day-to-day operations of his/her business with the employees of the PEO.

What is the difference between temporary staffing services and
a PEO arrangement?

A temporary staffing service recruits employees and assigns them to clients to support or supplement the client’s workforce in special situations. A PEO arrangement involves all or a significant number of the client workplace employees in a long-term, non-project-related employment relationship. The PEO assumes the employer responsibility for employment tax, benefit plans, and other human resource purposes.