PEO stands for Professional Employer Organization. It is a type of outsourcing company that provides human resources services to small and medium-sized businesses. PEOs typically handle tasks such as payroll processing, benefits administration, compliance with employment laws, and risk management.

When a company contracts with a PEO, the PEO becomes the employer of record for the company's employees for tax and insurance purposes. This arrangement allows the PEO to leverage its size and scale to negotiate better rates for benefits such as health insurance, workers' compensation insurance, and retirement plans. It also allows the client company to focus on its core business operations while leaving HR and administrative tasks to the PEO.

In addition to handling HR and administrative tasks, PEOs can also provide other services such as employee training, recruiting and hiring, and performance management. By using a PEO, small and medium-sized businesses can access expertise and resources that might otherwise be cost-prohibitive.

PEOs operate under a co-employment model, where the PEO and the client company share certain employer responsibilities. The client company remains responsible for managing its employees' day-to-day work and retaining control over business operations.

In summary, a PEO is a business that provides human resources services to other businesses. By outsourcing HR and administrative tasks to a PEO, small and medium-sized businesses can access expertise, resources, and cost savings that might otherwise be out of reach.