Management Glossary

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professional employer organization

Abbreviated as PEO, a professional employer organization hires a company's employees or, more likely, just one group of a company's employees such as its information technology staff or the staff of an administrative department. The PEO then immediately contracts back the services of these employees to their former employer. This serves to outsource to the PEO all of the human resources administrative functions for those contracted employees. The original employer still retains the services of its former employees, but, in addition to eliminating human resources administration costs, it gains more flexibility to increase and decrease staff levels without incurring employment termination costs.

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