Professional employer organization (PEO) 🏢

A standard PEO is a human resources service provider.

Here are some common services PEOs provide:

• Payroll and tax administration

• Health insurance and benefits management

• Compliance with employment laws and regulations

• Onboarding, training, and HR support

PEOs don’t fully replace an in-house HR department, but you can partner with one to fill gaps in expertise or resources. The co-employment model means you and the PEO share employer responsibilities. You set the culture; the PEO handles the admin.

What is a global PEO? 🌐

A global or international PEO helps you hire and manage employees around the world. However, unlike an Employer of Record (EOR), you must first establish a legal entity in each country before engaging a global PEO.

The global PEO then handles country-specific HR tasks such as payroll, tax compliance, and benefits — while you retain authority over hiring, firing, and culture-building. This model works well for businesses that operate remotely but want local infrastructure.

Benefits of hiring a PEO ✅

Startups and small businesses often can’t afford in-house HR teams like enterprise companies can. PEOs can relieve that burden — and improve employee experience.

Better employee benefit packages

Great benefits attract and retain talent. Because PEOs negotiate on behalf of many clients, they can secure higher-tier plans at lower costs.

In fact, a National Association of Professional Employer Organizations (NAPEO) study found that small businesses using PEOs grow 7-9% faster and have 10–14% lower turnover than their peers.

PEOs often offer:

• Medical, dental, and vision plans

• Retirement plans and 401(k) administration

• Workers’ comp and unemployment insurance

• Online training programs

Reduced risk of litigation

Employment law is complicated — and getting it wrong can be expensive.

PEOs employ compliance experts to help you navigate changing regulations and minimize risk. SHRM reports that PEOs can also reduce employer liability through workers’ comp coverage and employee dispute handling.

Easier to scale the business domestically

PEOs streamline hiring and onboarding, making it easier to grow quickly without overwhelming your team.

Here’s how PEOs help you scale:

• Post job openings and manage listings

• Review resumes and screen candidates

• Handle onboarding documents and handbooks

• Ensure legal compliance in new locations

• Support performance reviews and training

With employee retention critical to growth, a strong onboarding experience is essential — and PEOs can deliver it.

Risks of hiring a PEO ❌

PEOs solve many problems — but they also introduce new considerations.

Employee confusion

The concept of “co-employment” can confuse employees, especially if they’re unsure whether to contact you or the PEO for benefits or payroll questions.

Cultural mismatches may also arise. If your communication or leadership style doesn’t align with the PEO’s, it can affect morale or trust.

Location and headcount restrictions

To use a PEO, you typically need:

• A registered business entity in the relevant location

• Employees located within that jurisdiction

• A minimum number of employees (usually 5) (source)

If you’re very early-stage or planning to hire abroad, a global EOR may be a better fit. Learn more in our foreign subsidiary guide.

Less control over HR functions

Partnering with a PEO means handing over some control — particularly around vendors, compliance policies, and timelines.

For example, if the PEO changes your healthcare provider, your employees may be frustrated. That’s why shared communication plans and ample notice are crucial. Read more.

Alternatives to a PEO ⚖

PEOs aren’t your only option for outsourcing HR.

Administrative services organization (ASO)

An ASO handles many of the same services as a PEO — without becoming a co-employer.

You remain the legal employer, and all filings (like payroll tax) use your company’s EIN. ASOs don’t sponsor benefits or workers’ comp but can connect you with providers. Learn more in this PEO vs ASO guide.

Human resources outsourcing (HRO)

An HRO lets you outsource HR in a piecemeal fashion. Want to keep control over benefits but outsource just payroll? An HRO might be your best bet.

Unlike PEOs, HROs don’t assume risk — but they give you maximum flexibility. See the PEO vs HRO comparison.

Employer of record (EOR)

An EOR becomes the full legal employer of your workers — not just a co-employer.

Unlike a global PEO, you don’t need to set up a local entity to hire abroad. EORs take care of:

• Payroll and taxes

• Employment contracts

• Benefits administration

• Onboarding and offboarding

Compare the PEO model vs EOR model in this guide.

Why Plane is a strong PEO alternative 👍

PEOs can be great for domestic growth. But if you want to scale globally, Plane’s EOR model is a better fit.

We help companies:

• Hire and pay workers in 100+ countries

• Stay compliant with local labor laws

• Avoid the cost and time of setting up foreign entities

Schedule a call or watch a demo video to see how Plane can simplify your global hiring.

FAQs

What is a PEO?

A PEO is a company that provides HR services — such as payroll, compliance, and benefits — through a co-employment model.

What is a global PEO?

A global PEO provides similar HR services in other countries, but you must first establish a legal entity in each country where you want to hire.

Who is the employer of record when I use a PEO?

With a PEO, you are the employer of record. The PEO is a co-employer that handles admin tasks, but legal responsibility remains with your company.

How many employees do I need to partner with a PEO?

Many PEOs require a minimum of 5 full-time employees to start. This number can vary by provider.

Better employee benefit packages

Excellent benefit packages attract and retain talent. Because PEOs often have a large roster of business clients, they have the negotiating power to secure better benefits at better rates. 

In many cases, a PEO provides more than medical, dental, and vision benefits. They often offer retirement plans, unemployment insurance, and online training resources, all of which help keep your workers happy and motivated and, ultimately, reduce employee turnover.

Reduced risk of litigation

As a co-employer, the PEO helps maintain compliance by keeping track of complex employment laws and offering risk management strategies. PEOs share the legal risks associated with maintaining compliance.

For example, many PEOs provide workers’ compensation insurance coverage to offset any liability from worksite injuries. The PEO will address any claims or disputes relating to this coverage, not you.

Easier to scale the business domestically

PEOs help businesses scale by improving the hiring process without sacrificing compliance or employee satisfaction. If you’re busy running a business, it can be difficult to recruit, interview, and onboard at a pace that keeps up with your growth trajectory.

With employee retention so critical to business success, you must provide thorough onboarding to each new hire and dedicate resources to ensure a good experience for your teams. 

Many PEOs help you keep employee handbooks and performance management criteria current, facilitating a smooth onboarding experience. They also post job openings, review job applications, and screen candidates before handing them off, ensuring you have a qualified team behind you that will support healthy growth.

Risks associated with hiring a PEO ❌

While PEOs take time-consuming but critical tasks off your plate, they come with risks that can make them less attractive, depending on your management style.

Employee confusion

Employers shouldn’t assume that employees will understand the concept of “co-employment.” Dealing with two separate entities might create employee confusion because of conflicting experiences with each one. 

Whom to contact may also be a point of confusion for your employees. For example, when staff have questions about benefits, they might reach out to you instead of the PEO, taking some by surprise.

PEOs may also affect your company’s culture, and your communication methods and management styles might clash. Suppose your PEO offers a self-service portal where employees can access their benefits and pay stubs at any time. Your employees might expect all human resources functions to be as seamless. 

Location and headcount restrictions

Because PEOs are co-employers, your business must meet certain conditions in order to contract with one.

Before you sign with a PEO, you must establish your business as a local legal entity. Employees covered by the PEO must reside in the state, region, or country where you’ve registered your company. If you anticipate international expansion, make sure your PEO has global capabilities.

Hiring a PEO also usually requires you to have a minimum number of employees – usually five, although this number varies with the PEO. If you’re running a very small company, you might have trouble finding a provider that will work with you.

Some loss of control over HR functions

Working with a PEO means handing them control over certain business-critical activities like compliance. For some business owners, not having as much of a say in key decisions can be a source of stress. 

When you become a PEO client, make sure your contract includes a shared communication strategy. Suppose your employees love their current healthcare provider, but the PEO wants to switch for financial reasons.

You’ll have to manage any backlash that comes from the switch, so have the PEO give you enough notice to inform employees prior to the shift in providers. This advance notice gives you time to manage any possible fallout.

PEO alternatives ⚖️

PEOs are not the only option if you’re seeking assistance with HR services. Depending on your needs, growth trajectory, and desired level of control, ASOs, EORs, and HROs are available.

Administrative services offering (ASO)

An ASO is similar to a PEO in that it takes many HR tasks off your plate. The difference is that contracting with an ASO does not involve a “co-employment” relationship. Think of an ASO as a “middleman,” an organization that helps you negotiate and secure services without sponsoring them.

For example, an ASO will handle your company’s payroll and tax filings, but the paperwork is filed under your company’s EIN number.

Unlike a PEO, ASOs don’t sponsor employee benefit programs or workers’ compensation coverage. You’re the sponsor, but the ASO will connect you with providers that fit your business needs.

For more information on the difference between a PEO and an ASO, check out Business News Daily’s PEO vs ASO.

Human resources outsourcing (HRO)

An HRO resembles an ASO in that it doesn’t “co-employ” your workers. HROs offer services through a more “piecemeal” model, while PEOs and ASOs are more likely to bundle their services.

Suppose you just want to outsource payroll services but maintain full control over benefit providers. An HRO might make more sense for your business. 

HROs generally assume less risk than PEOs. This means you trade some peace of mind for the increased flexibility HROs offer.

For a side-by-side comparison between a PEO and HRO, please read PEO vs. HRO: What’s the Difference?

Employer of record (EOR)

An employer of record is the full legal employer — not the co-employer — of your workers. As a result, an EOR assumes all risks associated with hiring and maintaining your workforce.

EORs let you hire and pay international employees without setting up a legal entity in those countries. This sets an EOR apart from a global PEO. Establishing a legal entity in another country usually takes months of work and costs thousands of dollars. EORs save you this time and expense, making them especially attractive to smaller companies with limited resources who want to hire abroad.

Like a standard or global PEO, an EOR can administer benefits, onboard and offboard employees, file payroll taxes, and more.

Take a look at our post, PEO vs EOR: What are the Differences and Which is Right for You? to compare the two different services.

The best PEO alternative? Consider Plane 👍

PEOs can solve many of the human resources problems faced by businesses seeking to expand domestically. But for businesses seeking international expansion, alternative structures, such as EORs, may offer more advantages.

For example, Plane's EOR services enable you to hire in 100+ countries worldwide – without having to set up your own legal entity in those countries. If an EOR makes more sense for your business, schedule a call with a Plane expert today — or watch a video overview of our platform — to learn how we can help your business scale quickly.

Legal Disclaimer

The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.