# Professional Employer Organisation (PEO)

> A Professional Employer Organisation (PEO) is a firm that shares employment responsibilities with a client company through a co-employment contract, handling payroll, HR and benefits while the client retains day-to-day control of its workforce.

A Professional Employer Organisation (PEO) is a firm that enters a co-employment arrangement with your company. Under a client service agreement, both you and the PEO are recognised as employers of your staff. You keep full control of daily operations, job assignments, and pay decisions, whilst the PEO takes on payroll processing, tax filings, employee benefits administration, and HR compliance on your behalf.

The key constraint: a PEO only works where your company already has a registered legal entity and a local tax identification number. The co-employment model layers on top of your existing structure; it does not create one for you. This makes a PEO a good fit for companies that are already established in a market and want to hand off HR administration without giving up control of their team.

Because you remain the worksite employer, you share liability with the PEO rather than transferring it entirely. If a PEO is not the right fit, an Employer of Record (EOR) model lets a third party become the legal employer in a country where you have no entity at all.

## How does a PEO co-employment arrangement work?

You and the PEO sign a client service agreement that splits employer duties. You direct your employees' daily work and set their pay. The PEO runs payroll, files employer taxes, manages benefits, and handles HR compliance on your behalf.

Your employees are technically employed by both parties at once. The PEO's name may appear on pay slips and benefits enrolments, but you remain the worksite employer responsible for all business decisions.

## Do you need your own company in the country first?

Yes. A PEO model requires you to have a registered legal entity and a local tax ID in the country or state where your employees are based. Without that, the co-employment contract has no legal foundation to build on.

This is the main practical difference from an EOR. An EOR can hire people in countries where you have no entity; a PEO cannot start until your entity is fully registered, which can take several months depending on the jurisdiction.

## What is the difference between a PEO and an EOR?

A PEO shares the employer role with you; an EOR becomes the sole legal employer. With a PEO you must already have a local entity; with an EOR you do not. The EOR takes on primary compliance liability; the PEO shares it with your company.

Companies often start with an EOR to hire quickly in a new market, then consider setting up their own entity once headcount justifies it. At that point they may switch to a PEO or self-manage HR entirely.

## Key facts

- **Entity requirement:** You must have a registered legal entity and local tax ID in the country or state before using a PEO (Source: NAPEO FAQs, verified 2026-06-24)

## PEO vs EOR at a glance

|  | PEO | EOR |
| --- | --- | --- |
| Own entity required? | Yes | No |
| Legal employer | Shared (co-employment) | EOR provider only |
| Compliance liability | Shared with your company | Primarily with the EOR |
| Best for | Established markets where you already have an entity | New markets where you have no entity yet |
| Speed to hire | Depends on entity setup time | Can be days |

## Frequently asked questions

### Can a PEO help you hire in a country where you have no legal entity?

No. A PEO co-employment model only works where your company already has a registered entity and tax ID. If you want to hire somewhere you are not yet registered, an Employer of Record (EOR) is the arrangement to look at instead.

### Who is responsible if something goes wrong with payroll or compliance under a PEO?

Liability is shared between you and the PEO through your client service agreement. The PEO handles payroll and compliance tasks, but you remain a co-employer, so you are not fully insulated from claims the way you would be under an EOR arrangement.

### Can you move from a PEO to managing HR yourself?

Yes. Because you already hold the legal entity and employ your own staff as a co-employer, unwinding a PEO relationship is typically straightforward. Your employees' contracts do not need to change employer; you simply take back the HR and payroll functions.

### Is a PEO the same as an Employer of Record?

No. A PEO shares employer responsibilities with you through co-employment and requires your own local entity. An EOR becomes the sole legal employer and works in countries where you have no entity at all. They solve different problems at different stages.

## Sources

- [FAQs](https://napeo.org/intro-to-peos/faqs/), NAPEO (National Association of Professional Employer Organizations)
- [What Is a PEO and How Can It Help Your Business?](https://www.adp.com/resources/articles-and-insights/articles/p/peo-what-is-a-peo-professional-employer-organization.aspx), ADP
- [PEO vs EOR: The Difference (And Why It Matters)](https://www.deel.com/blog/eor-vs-peo/), Deel

_Last updated 2026-06-24. Reviewed by Teamed's in-house employment-law team. Source: https://www.teamed.global/glossary/peo_