Global Work Glossary
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Table of Contents
What does a PEO do?
How does a PEO work?
How much does a PEO cost?
What services do PEOs offer?
PEO vs other HR outsourcing methods
Does a PEO replace my HR team?
What are the pros and cons of using a PEO?
What is a certified PEO (CPEO)?
Are PEO employees considered leased employees?
Why are PEOs valuable to small and mid-sized businesses?
Does Deel offer PEO services?
Keep learning
What is a PEO (professional employer organization)?
A professional employer organization (PEO) is a company that provides HR, payroll, benefits, and compliance services to businesses.
Through a co-employment arrangement, the PEO manages administrative tasks like payroll tax filings, employee benefits, and compliance with state and federal employment laws. The client company retains control over its day-to-day operations, including team management and strategic decisions.
What does a PEO do?
PEOs typically take over time-consuming administrative services so that your business can focus on growth. Here’s what PEO services can cover:
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Payroll processing and payroll tax filings
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Administration of benefits packages, including health insurance and retirement plans
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Support with HR tasks such as onboarding, terminations, and performance reviews
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Compliance with state and federal labor laws
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Risk management and workers’ compensation
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Employee training and development
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Human resource documentation and recordkeeping
How does a PEO work?
When a small or mid-sized business engages a PEO, they form a co-employment relationship. The client company continues to manage all day-to-day operations. Meanwhile, the PEO becomes the employer of record for tax and benefits purposes.
Responsibilities are split as follows:
| Party | Responsibilities |
|---|---|
| Client Company | Team management, product, operations, and culture |
| PEO | Administrative services, payroll, benefits, and legal compliance |
The division of labor is formalized in a PEO agreement, also called a client service agreement.
How much does a PEO cost?
Partnering with a PEO comes with an administrative services fee. Most PEOs use one of two pricing models:
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Flat fee per employee: $1,000–$2,000 annually
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Percentage of payroll: 2%–11% of total payroll
Costs depend on your location, employee count, and which PEO services you use. Learn more about Deel PEO’s pricing model.
What services do PEOs offer?
Below are some of the typical services a PEO provides to businesses:
- HR support: PEOs can help in-house HR teams manage employee contracts, onboarding, terminations, background checks, employment verification, performance management, and more
- Payroll services: PEOs typically handle payroll processing, payroll tax withholding, and deductions on behalf of a company. Payroll also involves meticulous record keeping and reporting, delivering online pay stubs, invoices, forms, and PTO tracking
- Compliance: PEOs comprise legal experts that ensure compliance with state-specific payroll tax and employment laws to avoid penalties and disputes
- Employee benefits administration: PEOs can administer mandatory and voluntary benefits packages such as healthcare, workers’ compensation, retirement plans, unemployment insurance, and more
The PEO industry is built to help businesses reduce risk, save time, and operate more efficiently. See what’s required in each state with our state-by-state guide to PEO services.
PEO vs other HR outsourcing methods
Not all HR outsourcing models offer the same level of service, legal responsibility, or employee experience. Here's how a PEO compares to other common options:
| Service type | Employer of record | Payroll and taxes | Benefits package | Legal compliance | Core focus |
|---|---|---|---|---|---|
| PEO (Professional Employer Organization) | Shared between PEO and client | Yes | Yes – administered by PEO | Yes – state and federal labor law | Full-service HR and compliance for domestic teams |
| EOR (Employer of Record) | Sole (on your behalf) | Yes | Yes – managed by EOR | Yes – international and domestic | Hiring and compliance across countries |
| Payroll Provider | No | Yes | No – client retains or manages separately | No – limited to payroll filings only | Payroll execution only |
| ASO (Administrative Services Only) | No | Yes | Optional – client-administered | No – client retains all liability | Administrative support without co-employment |
| HRO (Human Resource Outsourcing) | No | Yes – if included | Yes – client-selected or third-party | No – advisory only | Outsourced HR functions (e.g., recruiting) |
Does a PEO replace my HR team?
No. A PEO complements your HR management function—it doesn’t replace it. Partnering with a PEO frees your in-house team to focus on long-term strategy while the PEO handles administrative tasks and compliance.
Your team still controls hiring, performance reviews, and employee experience. Learn more about how to enhance HR efficiency.
What are the pros and cons of using a PEO?
A PEO can be an excellent solution for outsourcing your domestic HR duties but are not designed to help you expand internationally.
Pros
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Reduces time spent on HR tasks
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Improves compliance with state and federal laws
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Offers access to competitive benefits packages
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Enhances internal HR management
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Reduces risk and liability
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Helps control HR and payroll costs
Cons
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Doesn’t support global expansion
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Doesn’t assume full legal liability outside the US
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Doesn’t draft localized contracts for international employees
What is a certified PEO (CPEO)?
A Certified Professional Employer Organization (CPEO) is a PEO accredited by the IRS. Certified PEOs meet high standards for financial reporting and tax compliance. Many also seek additional accreditation through ESAC, the Employer Services Assurance Corporation.
Deel PEO
Are PEO employees considered leased employees?
No. While PEO employees are technically co-employed for tax and benefits purposes, they work directly for the client company. This is different from leased employees, who are managed by a staffing agency and usually work on a temporary basis.
Why are PEOs valuable to small and mid-sized businesses?
A PEO helps small and mid-sized businesses access enterprise-level human resource tools, reduce regulatory risk, and offer competitive employee benefits—without building a large HR department. It’s a cost-effective way to professionalize HR and stay compliant across multiple jurisdictions.
Does Deel offer PEO services?
Yes. Deel’s in-house PEO is built to support fast-growing teams with the tools, coverage, and service they need, all in one platform.
Fully in-house support
Deel PEO is run entirely by internal specialists, including certified professionals, licensed advisors, and dedicated HRBPs. Clients get direct access to expert guidance across payroll, benefits, and compliance, with no third-party handoffs or delays.
Benefits admin made easy
Admins can choose, enroll, and manage health benefits for US employees directly in the Deel platform. They can view costs, track coverage, and handle renewals—all in one place, without chasing brokers or juggling paperwork.
Exclusive access to Aetna International plans
For teams with globally mobile employees, Deel is the only PEO to offer Aetna International health plans, ensuring continuous coverage across borders without needing to manage separate providers.
All-in-one platform
Admins can manage hiring, onboarding, payroll, and benefits in one place. Deel simplifies every step, from employee benefits enrollment to renewals, reducing HR admin time.
Compliance coverage at every level
Deel helps businesses meet federal, state, and local employment laws, taking the guesswork out of US HR compliance.
Book a demo to learn more about Deel PEO.
