PROFESSIONAL EMPLOYER ORGANIZATIONS
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 employees to buy insurance coverage (Finegan, 1997, p. 17; & Schear, 1995, p. 55).
Employee leasing companies had a reputation for insurance fraud three years ago. Currently they have gained new attention form insurers who see them as a major growth market and an efficient way to market insurance (Covaleski, 1997, p. 50). PEOs are growing fast but still have more room for growth. Presently there are only a few businesses that use the firms (under 2 percent); the primary market is small businesses...