Definition of Professional Employer Organization (PEO)

a staffing firm that provides employees to another company through employee leasing or staff leasing. The PEO is the employer of record and, in exchange for a fee from the client company, may provide many or all of the following services: paying wages and employment taxes of the employee out of its own accounts; reporting, collecting, and depositing employment taxes with state and federal authorities; establishing and maintaining a co-employment relationship with its employees that is intended to be long-term and not temporary; assuming responsibility as an employer for specified purposes of the workers assigned to the client locations; and sharing the responsibility of co-employees' wages and safety with the client. In essence, PEOs assume the burden of Human Resources Management for client companies.