What Is a Professional Employer Organization (PEO)?

A professional employer organization is an outsourcing company that offers services to organizations in matters of human resources. They provide their services to small and mid-sized businesses. Global PEO allows organizations to outsource HR functions, thus letting the companies focus more on core business activities.

PEO vs Employer of Record (EOR): What’s the Difference?

A PEO supports companies with US HR and workforce tasks, and it is used only when the company already has its own legal entity. On the other hand, an employer of record (EOR) helps and supports businesses in hiring and managing a global workforce.

With an international PEO, the businesses or organizations enter into a co-employment relationship. Whereas, with an EOR, they become the legal employer and take full liability for the organization.

Who Should Use a PEO?

A PEO provides expert HR services, thus allowing companies to lean on them when tough HR issues arise at their end. In simple terms, it is best suited for companies that already have their own legal entity and want help managing HR tasks.

Moreover, it is ideal for growing businesses that want to reduce HR workload while still retaining full control and legal responsibility for their employees.

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Frequently Asked Questions

Q1.	What does PEO stand for?
Ans.	It stands for a professional employer organization. They provide HR outsourcing services to businesses and organizations.
Q2.	Is Empxtrack a PEO?
Ans.	No, Empxtrack is not a PEO. It is an HR software platform that helps companies manage various HR functions such as employee database, PEO payroll, attendance, leave, performance, recruitment, onboarding, and exit. It doesn’t act as a co-employer or take on legal employer responsibilities like a PEO does.
Q3.	Is a PEO the same as an Employer of Record (EOR)?
Ans.	No, a PEO is not the same as an Employer of Record (EOR). A PEO works in a co-employment model where the company or an organization remains the legal employer and keeps responsibility for compliance, while the PEO supports HR tasks. Comparatively, an EOR becomes the legal employer on a company’s behalf and takes on employment compliance and liability.
Q4.	Are PEO services suitable for small businesses?
Ans.	Yes, its services are suitable for small to mid-sized businesses seeking to offload time-consuming tasks. Such as payroll and compliance tasks, while retaining control over their employees.
Q5.	How much does a Professional Employer Organization cost?
Ans.	According to the NAPEO (National Association of Professional Employer Organizations), the average annual cost for PEO services is $1,395 per employee. However, PEO pricing can vary quite a bit depending on the provider, your workforce size, and the level of services you choose. In most cases, a certified professional employer organization (CPEO) charges either a percentage of your total payroll (commonly around 2–12%) or a flat fee per employee per month. This monthly fee is generally about $40–$200 per employee (or roughly $900–$1,500 per employee annually) for standard services like payroll or PEO benefits administration. Some providers may also include one-time setup fees or additional charges for extras like advanced HR support, so it’s important to get a detailed quote for your specific needs.
Q6.	Are PEOs legal in the US and other countries?
Ans.	Yes, these are legal and widely used in the United States for co-employment to handle HR or payroll tasks.
Q7.	When should a company use a global or international PEO?
Ans.	A company should use a global or international PEO when it wants to hire employees in other countries without setting up local legal entities. It’s especially useful for businesses looking to expand in international markets or manage compliance, payroll, and local labor laws across multiple regions.
Q8.	What are the downsides of a PEO?
Ans.	Some of the downsides are: ● An outside company’s influence on your company culture and internal practices. ● Loss of control over key HR processes and employee-related decisions. ● Lack of control and security over employee records and documentation. ● Security concerns when sensitive information is managed externally. ● A loss of institutional knowledge and expertise over time. ● Resistance from employees to working with an external HR provider. ● Ongoing service costs that may increase as the company grows. ● Less flexibility to customize HR policies or processes to match specific business needs.