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What is a PEO and how is it different from traditional HR outsourcing?

A professional employer organization, or PEO, may provide payroll, benefits and HR services through a co-employment arrangement. Traditional HRO usually means selected or broad services under a service agreement without assuming the same structure. Exact responsibilities depend on the contract and facts.

Compare the operating relationship

Ask which entity reports wages, whose tax identification number is used, how benefits are arranged, who controls employee data and which decisions remain with the client. For HRO, confirm which employer systems and accounts stay in place and what the provider actually performs.

Review tax, benefit and exit implications

A label does not settle every federal or state responsibility. CPEOs have separate federal certification rules, while other PEO arrangements may differ. Qualified legal, tax and benefits advisers should review the final proposal, including worker and data transition at exit.

For related guidance, read HRO versus PEO guide and HR outsourcing buyer's guide.