PEO vs. Staffing Company: What Is the Difference?


There are multiple partnership options you can consider for handling your HR-related responsibilities and tasks. Two of the most common are PEO and staffing companies. 

However, the terms are often interchangeably used due to the kind of services they provide. Despite some similarities, both serve at two different ends of the HR spectrum.  We will discuss other key differences in detail later in the article.  

What is a PEO (Professional Employer Organization)? 

Professional Employer Organization form a co-employment relationship with the client’s organization by entering into a services agreementThe payroll processing, taxes, paychecks, forms and everything related to compensating the employees are handled within the PEO’s payroll processing team and software.  The daily management, direction supervision and control of the workers remains directed by the client company.  The co-employment model allows for the PEO to provide access to powerful and valuable employee benefits such as healthcare or retirement savings plans, which are only available to PEO client partners. 

The PEO also provides human resource-related functions, including Labor Law compliance, employee handbooks, and guidance geared toward the mitigation or even elimination of employment-related liability. This creates time available for client companies to focus on their key competencies and grow their business.  

Who uses PEO? 

Typically any business can benefit from the services of PEO, but it is ideal for small-to-medium sized businesses with between 10 to 25 employees. Lately, larger companies are also finding PEO to be a useful resource due to its robust technologies and expertise in Human Resources and ever-changing Federal and state regulations and statutes. A PEO can also work in conjunction with their existing HR department to enhance work efficiencies 

From Hi-tech companies to manufacturing facilities and accounting firms…all kinds of businesses can collaborate with PEO for HR and many other valuable products and services. It is estimated that around 2 million Americans are co-employed through PEOs, and its success has grown at rate of 20% in the previous six years. With approximately $68 billion revenue and 88% client retention, it is a tremendously successful business model.  

What is a Staffing Agency? 

As the name suggests, it’s a company that provides staffing services, sourcing and matching suitable candidates to open job positions. By utilizing a staffing agency, through their methods and resources you’re more likely to get a professional best suited for your open position. These agencies carry out the entire recruitment process on behalf of an employer saving you both time and money 

They can provide resources for temporary positions that are a direct result of vacations, leaves of absence, or new projects that may occur during peak seasons. These agencies have been established and have evolved with time and now provide additional services such as permanent placement 

You may even find specialized staffing agencies that provide employees or potential candidates in ‘niche’ fields where a particular, difficult or rare skill set is needed.   

Who uses the services of the Staffing Agency? 

A vast majority of businesses depend on staffing agencies to locate the right talent, save time and provide the staff they need, when and as they need it. Largeinternational and multicultural companies such as Google, Amazon, PepsiCo, Apple, and many others work with staffing agencies to fill full-time and contract (temporary)-based positions.  

So how are PEO and Staffing Agencies Similar? 

To begin with, both of them may provide recruitment and employment retention services. They also deal with payroll, employment insurance, and other benefits. Thus, both of them provide comprehensive HR solutions to various companies and businesses. 

How is a PEO Different from Staffing Agency? 

  1. One of the most notable differences is that PEO acts as a co-employer, meaning it shares the responsibility and liability related to the employees 
  2. PEO handles administrative tasks as well, which deals with payroll management and backend HR components such as company policies. Staffing firms handle their own payroll processing and Human Resources in-house 
  3. Moreover, PEO works with the existing workforcecontrary to the staffing agency that specialized in recruiting new talent.

    After learning the difference between PEO and Staffing Company it is important to know, Kismet has the expertise to help your business today! 

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