What is a PEO?
A Professional Employer Organization is a service firm that becomes the administrative employer of a client’s workforce through co-employment: the PEO runs payroll, files employment taxes, administers benefits and insurance, and keeps HR processes compliant. The client company remains the worksite employer — it decides who gets hired, assigns the work and manages performance day to day.
The model originated in the United States, where pooling thousands of employees under one PEO gives small and mid-sized companies access to benefits and insurance rates they could never negotiate alone. What is outsourced is HR administration — never the decision about who works for the company.
How the co-employment model works
A PEO relationship rests on a client service agreement that splits employer responsibilities between two parties. In a typical setup:
- You hire, manage and — where necessary — dismiss employees; they work in your business, under your direction.
- The PEO runs payroll, remits employment taxes and social contributions, and administers benefits, pensions and insurances.
- Both parties carry defined legal employer duties under the agreement — which is exactly why the model is called co-employment.
- Crucially, the employment sits on your company’s registration in that country: a PEO does not remove the need for a local legal entity.
PEO vs. EOR — the critical difference
The two terms are constantly confused, but the legal difference is fundamental. A PEO is a co-employer: your company must already own a legal entity in the country, because it remains an employer alongside the PEO. An Employer of Record (EOR) is the sole legal employer: it employs the person entirely through its own local entity, so you need no entity at all.
In Europe the label is used loosely — many providers marketed as “international PEO” actually sell EOR services, because classic US-style co-employment has no direct equivalent in most European labour-law systems. When comparing offers, ignore the label and ask one question: who is the legal employer, and on whose entity does the employment contract sit?
When each model makes sense for European expansion
The decision tree is short. No entity in the target market and one to five hires planned: EOR. An existing entity whose HR administration you want to offload: PEO — or, in most of Europe, a local payroll and HR outsourcing provider doing the same job under a different name. A growing country team with local revenue: your own entity with in-house or outsourced payroll.
Neither model finds the people. Whether a company enters Italy or the Czech Republic via EOR or hires onto a fresh subsidiary supported by a PEO, the commercial outcome depends on who the first sales hire is. That is where we come in: as a boutique focused on machinery and plant engineering sales roles, we fill the country-manager and sales positions these employment structures exist to carry.
