PROFESSIONAL EMPLOYER ORGANIZATIONS Introductio

This research paper presents information regarding professional employer organizations (PEOs). The content will discuss what a PEO is and its history, advantages and disadvantages of using a PEO, legal implications of PEO use, how the PEO affects employees, employee benefits, and Human Resources (HR) staff, and the future of the PEO.

A PEO is a new type of leasing company that provides a range of outsourced HR services. The PEO sells benefits and expertise to organizations that cannot afford them independently. PEO's have long-term relationships with clients with one-year renewable contracts; they are named as co-employers. The PEO assumes responsibility for most or all HR functions; they provide a solution to paperwork nightmares that include payroll, taxes, and more, freeing up the management's time. The client maintains control over the worksite and production (Finegan, 1997, p. 17; & Hirshman, 1997, pp. 80-85).

PEOs are also known as employee leasing firms. They claim to be able to cut through bureaucracy and costs. Employees of a company, including the owner and CEO are hired by the PEO and leased back to the company for a fee (around 2 percent to 6 percent of total payroll). The PEO is the employer on record and takes care of HR duties. The PEO administers payroll and taxes, offers legal counsel, and insures compliance with federal and state laws. PEOs pool businesses and employee

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a PEO would be more beneficial. PEOs may provide services beyond administration of payroll, unemployment insurance, workers' compensation, and payroll-tax compliance, and knowledge of existing and new labor laws. They can also provide job descriptions, employee manuals, employee assistance programs (EAP), and handle employee grievances (Laabs, 1996, pp. 64-72). A firm does not have to buy or lease all of a PEO's services or employees. Services can be hand-picked to serve the business needs. However, most PEOs typically bundle HR services together to lower overall costs. Despite the potential risks, employers are stating that PEO relationships work well and meet goals to save money and increase efficiency (Laabs, 1996, pp. 64-72). Employee leasing may be difficult, it involves a new method of conducting traditional HR functions. It also severs traditional ties that agencies have with their employees. The decision is an emotional one, however many claim that once accomplished, working with the PEO is a favorable situation (Beller, 1997, pp. 30-32). Corporate downsizing reduces the employee base, this may occur with the use of outsourcing. In this case employee loyalty and security may be affected and employee relations
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Approximate Word count = 2590
Approximate Pages = 10 (250 words per page)