Professional Employer Organization (PEO)

A professional employment organization (PEO) is a company which specializes in payroll processing and HR services. PEOs are widely used by companies which hire staff in other legal jurisdictions. By providing local payroll processing which is compliant with legal requirements in the employee’s jurisdiction, PEOs help their client companies to avoid legal compliance issues.

Unlike employers of record (EORs), PEOs do not hire employees on an employer’s behalf. The employment contract is between the employer and the employee – not between the PEO and the employee. However, the PEO handles all or most administration related to payroll and employment.

Services may include managing paid holiday and sick leave entitlements, and deducting social security contributions, pension fund contributions and health insurance contributions (in Switzerland only accident insurance is handled by employers).

More on this topic:
Global employment organization (GEO)