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American business is undergoing fundamental changes in human resource management, and the PEO industry is a response to market demands. PEOs offer to their clients and worksite employees the services and expertise of a large corporate personnel department.

Few, if any, small businesses can afford a full-time staff consisting of an accountant, a human resource professional, a lawyer, a risk manager, a benefits manager, and a manager of information services. PEOs offer this expertise to their clients.
A PEO delivers these services by establishing and maintaining an employer relationship with the employees at the client's worksite and by contractually assuming certain employer rights, responsibilities, and risk. This shared employment relationship is called co-employment.
By providing this broad array of services, PEOs enable their clients to concentrate on their core business without the challenges and distractions associated with the "business of employment." As a result, PEOs enhance the profitability of their client companies. The PEO's economy of scale enables each client company to lower employment costs and increase the business's bottom line. The client can maintain a simple in-house HR infrastructure or none at all by relying on the PEO. The client also can reduce hiring overhead. Costs related to monitoring of, and compliance with, employment laws are reduced, as are the often significant costs of failure to comply with such laws. In addition, the PEO saves valuable time by handling routine and redundant tasks for its clients. This enables the business owner to focus on the company's core competency and grow its bottom line.
In addition to providing important services to their business clients, PEOs offer substantial advantages to worksite employees. In many cases, these employees would not be provided the number, or quality, of benefits that a PEO can offer. These benefits may include health insurance, retirement savings plans, disability insurance, life insurance, dependent care reimbursement accounts, vision care, dental insurance, employee assistance plans, job counseling and educational benefits. Each individual small business's cost of establishing and administering this range of plans would be prohibitive. However, due to economies of scale, PEOs can sponsor and offer these plans at an affordable cost.

For more information about PEOs visit the website of the National Association of Professional Employer Organizations (NAPEO)
http://www.napeo.org/peoindustry/index.cfm
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