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The History of Professional Employer Organizations

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Are you looking forward to expanding your team as your business prepares for bigger and better challenges?  It is understandable how pressures can buildup, and the Human Resources department may find itself deep in a pit due to the evergrowing needs of the employees and ever-changing laws and statues related to compliant employment. 

 The same can be true for many small and medium-sized businesses that are not ready to hire a full-time HR person. Consequently, this can bring business growth to a halt or further complicate operations.  

  • However, businesses need not fret now, as they can rely on an outsourced partner to assist with HR and compliance-related matters. An efficient option may be to partner with a PEO. 

 

What is a PEO? 

 A PEO, or Professional Employer Organization, is the solution to a business’s HR outsourcing needsThrough collaboration, a PEO can handle payroll processing, employee benefits, benefits administration workers’ compensation, and legal compliance. Outsourcing to a competent PEO allows the employer to focus on core business activities while the PEO handles time-consuming employee-related matters.  

A brief history of Professional Employer Organizations 

While the PEO concept may appear as a new concept, it isn’t. The demand for them has always existed, albeit at a low level. Their popularity has beguto soar in the past 2-3 years, especially to certain “untapped” market regions in the US, between the mid-west and mid-Atlantic regions. 

 PEO was born in the late 1980s in the southern states, with Florida and Texas as the first two early adopters of the model. However, a somewhat similar concept known as ’employee leasing’ always had existed since the 1960s. Marvin Selter normalized and popularized the initial model of traditional employee leasing. It all began when he leased team of employees to a doctor’s office based in California. As mentioned earlier, while employee leasing shares similarities with the PEO working model, it differs from the services and responsibilities being offered. 

 Again, PEOs emerged in the U.S. in the 1980s, as firms that provided more than just “employees available to work and perform specific tasks as needed” and began to provide Human Resources services, payroll processing, assistance, and guidance with Labor Law compliance and much morePEOs provide powerful technology platforms, HRIS systems, training platforms, and more in more recent years. Now client partners can automate critical processes, saving time, and offer online training and benefits administration, all through ever-enhanced technology accelerators.
  

What is the primary difference between PEOs and Employee Leasing Companies? 

 While PEOs take on the responsibility of managing administrative tasks and providing compliance management to the client company and their workforce, an employee leasing company provides the client company with their own set of workers temporarily. Then, the workers return to the leasing company once the assigned task is complete. They are then available to be leaseto another client. 

 

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