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Professional Employer Organizations or PEO's are service providers that perform employee leasing, by assuming certain responsibilities of the employer. The process of employee leasing is performed by legally hiring a client company's current employees, thereby making the PEO the "employer of record" for taxation and insurance purposes. After this, PEO will lease back the employees to the original employer (Client Company) under a co-employment contract. This contract sets out the powers, responsibilities and liabilities of the PEO and the client company.

The co-employment contract enables the PEO to assume responsibility for all payroll obligations, tax filing, provision of health benefits, welfare and retirement benefits and their associated administrative paperwork. The PEO is to establish and maintain a co-employment relationship with it's employee on a long term basis. The PEO will pay wages and salaries to the employees after deducting the tax amount out of its own accounts. It will report, collect, and deposits employment taxes with state and federal authorities. It is responsible to for looking after the workers assigned to client locations and must ensure their safety in the work location. In short, as co-employers with their client companies, PEO's contractually assume substantial employer rights, responsibilities, and take on employer risks with respects to the workers assigned to its clients. The client company will pay a professional services fee to the Professional Employer Organization for their services.

Today's businesses are very complex and organization managements have to deals with equally complex issues related to human resource management. Taking the services offered by a Profession Employer Organization will make them better equipped to deal with issues such maintaining good relations with employees, proving payroll, payroll tax compliance, dealing with workers' compensation claims and unemployment insurance claims, since these issues will become the responsibility of the PEO. This gives the management more time to concentrate on revenue generating operations or operations involving business expansion and new investments, which will enable them to achieve their business objective on time and can stay ahead of their competition.

About the Author

Catherine Joesph - Employee Leasing