As with other evolutions, traditional employment agencies have given way to “professional employer organizations” (“PEO’s”). A PEO is a co-employer, together with the enterprise, of permanent and temporary employees of an enterprise. As such, the PEO is jointly responsible for paying the payroll, withholding and paying payroll taxes, other mandatory withholdings and contributions, and voluntary contributions to retirement plans and medical plans. In short, this frees the “real” employer to focus on its customers and on training and managing the “PEO’s” personnel.
Professional employer organizations (“PEO’s”) have emerged from the payroll processing industry to add other services that support the small to mid-sized business. The PEO industry has successfully lobbied for legislative changes that justify and authorize the use of HR outsourcing across the various components of the employment relationship.