PEO outsourcing refers to a third-party company with whom a client enters into an agreement with the objective of handing over the HR related and employee related liabilities to it. A PEO enters into an agreement known as the Client Servicing Agreement (CSA) wherein, the two parties clearly decide upon the terms and conditions to be adhered to for a financial year. The contract gets renewed or terminated after a year depending upon the satisfaction level of both the parties.

So, everything you need to know about PEO outsourcing is going to be clearly stated in this article.  When you avail the services of a PEO, it provides you with the requisite professionals, infrastructure and resources through which you can focus primarily on expanding your business.

How does a PEO operate?

It is vital to understand that the two parties enter into a co-employment’ kind of relationship. In this kind of business relationship, the client enters into an agreement with a PEO, according to which employee responsibilities and liabilities are shared by a PEO. The fee of this (CSA) agreement is calculated either on per employee basis or as a percentage of the payroll.

What are the benefits of using a PEO?

A PEO is the one-stop outsourcing solution for all your HR related and employed related responsibilities. By using the services of a PEO, your company happens to

  • Saves time and money;
  • Minimize exposure to risk;
  • Avail proficient manpower in foreign lands



What are the services provided by a PEO?

Every kind of organization—big, small and medium—all set to gain from the plethora of services provided by a PEO.

  1. Primarily, small enterprises hire the services of a PEO to be able to provide medical, life insurance, retirement plan and other benefits to its employees. This will help them to attract talent and retain them as well.
  2. Secondly, a PEO helps to provide coverage to you from any kind of exposure to risk. For instance, any kind of employee claims on termination, or unemployment are tackled by a PEO. Also, tax deduction and submission as per the laws of the respective country are done by a PEO.
  3. Thirdly, a PEO supports your HR team as well by working on payroll management, recruitment, training and development, preparing and sharing employee handbooks, performance management and so forth.


Misconceptions about PEO

Everything you need to know about PEO outsourcing includes the wrong notions or misconceptions held about this entity. Several believe that once you enter into an agreement with a PEO, you tend to lose control over your employees, in short, your business. Here, it is necessary to comprehend that while a PEO handles all employee-related tasks and risks, you maintain control over your business and its operations.

Many also believe that the hiring of a PEO implies the removal of HR staff. Well, it is vital to understand that a PEO provides the necessary support and assistance to your company HR staff in running the business operations seamlessly. A PEO comes very handy to the HR in cases related to employee compensation, resolving conflicts and designing training programmes.

Lastly, a PEO does not hamper or intrude in the normal way of functioning of your organization. All the more, it aids, facilitates and improves the employee-employer relationship with entire focus on the growth and expansion of your organization.


Everything you need to know about PEO outsourcing is essential before you to set to avail the said benefits of a PEO. Also, remember, PEO outsourcing is of immense help if you wish to expand your business across new horizons without getting stuck in legal complications and without losing focus on your business goals.

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