Official Website of the United States Department of Homeland Security

Generally a professional employer organization (PEO) is a single source provider of integrated services which enable business owners to outsource the management of human resources, employee benefits, payroll and workers’ compensation and other strategic services, such as, recruiting, risk/safety management, and training and development. PEOs often complete and retain Forms I-9 for client companies. The client company retains the authority to hire and fire these employees.

In general, there are two types of PEOs:

  • Co-employers: These PEOs hire a client company’s employees, thus becoming the employer of record for tax purposes and insurance purposes. It then leases them back under contract to the original employer. Employees who work for the client of the PEO are considered to be the employees of both the PEO and the client company, even though the employee is performing only one set of services for both co-employers.
  • Administrative services organizations: These PEOs provide outsourcing of human resources tasks but do not create a co-employment relationship. Tax and insurance filings are done by the PEO, but under the client company’s Employer Identification Number

To return to Questions and Answers, please use your browser's "BACK" button.

While both the client company and the PEO are accountable for ensuring that they comply with Form I-9 and E-Verify rules, they may choose an enrollment that best suits their needs. The client company must ensure that either they or the PEO enroll and verify employees in E-Verify.

The PEO must register in E-Verify as a Employer Agent to be able to perform E-Verify queries on behalf of a client company. Both the client company and the PEO are accountable for ensuring that they comply with Form I-9 and E-Verify rules, because both the client company and the PEO sign an MOU.

The client company can enroll in E-Verify as an Employer and designate itself as a Federal contractor with the FAR E-Verify clause to verify its employees.

Please see the E-Verify User Manual for Federal Contractors and the E-Verify Supplemental Guide for Federal Contractors.

 

To return to Questions and Answers, please use your browser's "BACK" button.

Last Reviewed/Updated: 
10/14/2010