What are the main differences between a staffing company and a PEO?

Business owners understand that when one organization grows the workforce starts growing as well, so the expansion is necessary and there are several partnership alternatives to take into consideration in order to manage HR-related responsibilities and different tasks. 

People usually get confused when it comes to differentiate PEO services with a staffing company. Actually, in different situations business owners have had experiences with one or the other, but the differences are not totally clear, so what are the main differences between a staffing company and a PEO? Let’s check it out in this article.

The main differences between a staffing company and a PEO

Let’s start with the concepts:

What’s a staffing company?

These kinds of companies not only place employees in temporary or positions with contracts, they also provide temporary to permanent placement, as well as direct hire placement. While the process is running they act as a recruiter for the employer, and the main job is to find the best candidate possible to fill the open position.

Staffing companies can provide resources for temporary positions, so you will have staff options available in case of vacations, leaves of absence, or new projects that may occur.

What´s a PEO company?

PEO´s emerged because many companies considered there’s a strong need for more support than the regular staffing companies or agencies offer. 

Professional employer organizations form a co employment relationship with the client’s organization with an agreement. The PEO offers comprehensive HR services to the company’s employer like payroll processing, HR compliance, employee benefits and everything related to workers compensation. Sometimes they run all these processes with an HR software.

On the other hand, in order for the company to comply with everything related to legal matters they also act as a co-employer and take on the legal responsibilities for a company’s employees. 

You might be interested in: What is the future of work?: tips to prepare your workforce

Businesses and organizations working with PEOs

Basically any business can benefit from working with a PEO, but it might work really well with small and medium enterprises. We can say that bigger companies are also finding PEO services to be useful in the past years, and this is because they realized how robust their  technologies are and they also acknowledge that the broad expertise in every human resources activity is needed more than ever before.

Businesses and organizations working with staffing companies

Different organizations utilice staffing agencies to find the right talent for them. Small, medium and large companies work with them to fill full-time and temporary positions.

Staffing companies are experts in finding and placing permanent employees, especially in certain industries where there is a high demand for specialized skills. 

The main differences 

Both staffing agencies and PEOs are focused on workforce and HR activities, but with a staffing agency you’re outsourcing your hiring process and the associated tasks. With a PEO, you’re hiring on your own and only outsourcing the administrative tasks related, like payroll, workers compensation and compliance associated.

Let’s remember the people in a staffing company are part of their employees and when it comes to a PEO there is a co-employment agreement, where there is an employer “on site” (the client) and one employer of “record” (PEO), in those cases the PEO is responsible for taxes and unemployment claims.

In order to give a closing to this article we can say it’s clear that PEO offers more services than staffing companies, and one of the main differences is the role of the PEO as a co-employer, because they share all the accountability and responsibility related to the workers.

Midtown HR is the company behind a hundred happy companies. We´re focused on simple solutions for payroll and taxes, propose benefits that really feel like benefits, keep up with employment law and also help protect your team. Let’s talk!