Problems with Professional Employer Organizations

Professional Employer Organizations (PEO’s) are staffing companies used to group employees to offer benefits such as workers’ compensation, health insurance, and an outsourced HR and payroll service. Businesses enter into a co-employment contract with a PEO, where the PEO becomes the employer of record for tax and insurance purposes and the business leases the employees from the PEO. That is why PEO’s are sometimes called Employee Leasing Companies. This relationship may save businesses money in the short run and be especially helpful for small businesses in high risk industries that are unable to find insurance coverage. On the other hand, PEO’s may be very expensive for businesses.