A Professional Employer Organization (PEO) is defined
as an organization that provides an integrated and cost effective approach to
the management and administration of the human resources and employer risk of
its clients, by contractually assuming substantial employer rights, responsibilities,
and risk and, through the establishment and maintenance of an employer relationship
with the workers assigned to its clients.
More specifically, a PEO establishes a contractual relationship
with its clients whereby the PEO:
- assigns workers to client locations, and thereby
assumes responsibility as an employer for specified purposes of the workers
assigned to the client locations;
- reserves a right of direction and control of the
employees and may share such responsibility with the client, consistent with
the client's responsibility for its product or service;
- pays wages and employment taxes of the employee out
of its own accounts;
- reports, collects, and deposits employment taxes
with state and federal authorities;
- establishes and maintains an employment relationship
with its employees which is intended to be long term and not temporary; and
- retains a right to hire, reassign, and fire the employees.
