What is a Professional Employer Organization?

A Professional Employer Organization, or PEO, is a firm that specializes in managing all the responsibilities relating to employees. From outsourced HR services, payroll services in Honolulu, worker's compensation insurance and benefits management services, a PEO becomes the legal employer of the worksite employees and becomes the Administrative Employer.

A PEO legally hires a company's current employees, thereby making the PEO the "employer of record" for taxation and insurance purposes. The employees are then "leased" back to the client under a co-employment arrangement. The PEO assumes responsibility for all payroll obligations and tax filings, worker's compensation insurance, health benefits, as well as all the associated administrative paperwork.

PEOs are a more cost-effective means to access health care and other benefits for their employees. By contracting out all responsibilities related to its human resources policies and state laws, the company using the PEO offsets a great amount of employment risk.

The small business need for human resources and HR Outsourcing makes PEOs a perfect solution for small-medium sized businesses. In fact, most employee leasing and PEO services in Honolulu target companies that have fewer than 100 employees.

A PEO arrangement is often the only way a business is able to offer benefits like health insurance, dental and vision care, life insurance, and retirement saving plans like 401(k)s, Section 125 cafeteria plans (flexible spending accounts for healthcare and childcare). Most small to medium businesses could neither afford nor manage these benefits on their own.

And finally, most PEOs and employee leasing companies market themselves as strategic HR consultants. The PEO typically monitors employment laws and requires the cooperation of their clients with the adherence to employment laws and compliant policies and procedures.