Definition
What is a PEO?
A PEO (professional employer organization) is a firm that co-employs your workforce inside a legal entity you already own. You stay the legal employer and keep directing the work, while the PEO administers payroll, tax filing, benefits, HR compliance and employment paperwork under a co-employment agreement. The critical limit: a PEO cannot hire for you in a country where you have no entity. That is what an employer of record does.
In one line
A PEO runs HR and payroll inside an entity you already own. An EOR is what you use when you do not own one.
- Also written as
- PEO, professional employer organization, co-employment, global PEO
- Entity required
- Yes, always, in the country where the staff are employed
- Typical cost shape
- Gross salary + 22% to 55% statutory burden + administration fee
The big picture
What a PEO fixes, and the one thing it cannot
A PEO solves the operating burden of employing people somewhere you already exist. It does nothing about the harder problem of employing people somewhere you do not.
You have an entity but no local HR function
The PEO supplies the payroll, benefits and HR compliance machinery you would otherwise have to hire and maintain in-country.
Payroll filings keep slipping
Gross-to-net, withholding, social security and statutory filings become someone's contracted obligation with a calendar behind it.
Benefits are expensive at your headcount
A PEO pools employees across clients, so small teams can access plans priced closer to large-employer rates.
Local labor law keeps changing
Notice, severance, 13th month, vacation and profit-sharing rules are tracked and applied by the PEO instead of your finance team.
You bought a PEO and it cannot hire your candidate
That is the classic misfire. No entity in that country means no co-employment. You need an EOR for that hire, and a PEO only where you already operate.
Some countries have an entity and some do not
Mixed footprints need both models running side by side under one operator, so the employment structure is chosen per country, not per vendor.
The practical rule: entity in country, PEO is on the table. No entity in country, only an employer of record can employ the person. Most LATAM expansions need both at once.
What a PEO actually does
Administers payroll
Gross-to-net calculation, payslips, disbursement and payroll tax filings on your entity's registrations.
Sponsors and manages benefits
Health, pension and supplementary plans, often on pooled rates you could not access alone.
Handles HR compliance
Contracts, handbooks, statutory notices, leave tracking and record retention to local standard.
Shares defined employment risk
Co-employment splits specific obligations, but you remain the employer of record for your staff.
Supports onboarding and offboarding
New-hire registration, documentation and final settlement calculations.
Reports on workforce cost
Consolidated employer cost per head, including burden and accruals, in one place.
What a PEO does not do
- •Employ people in a country where you have no legal entity. Only an EOR can do that.
- •Recruit or source candidates. That is staffing or recruitment.
- •Remove your liability as the employer. Co-employment shares obligations, it does not transfer them.
- •Fix a misclassified contractor population retroactively.
PEO vs EOR vs payroll vs staffing
Pick by what you are missing: an entity, a legal employer, the person, or the administration around them.
| Model | Who is the legal employer | Local entity required | Time to live | Best when |
|---|---|---|---|---|
| PEO (co-employment) | Shared, you remain the legal employer | Yes, required | 2 to 6 weeks | You already operate in the country and want HR, payroll and benefits administered |
| Employer of Record (EOR) | The EOR is the sole legal employer | No | 5 to 15 business days | You have no entity and need 1 to 20 people employed compliantly |
| Payroll bureau | You, fully | Yes, required | 2 to 4 weeks | You have local HR and only need calculation and filing |
| Staffing / staff augmentation | The staffing firm | No | 2 to 6 weeks to placement | You need the person found and delivered, not only employed |
| Own local HR team | You, fully | Yes, required | 2 to 4 months to staff | Large, permanent in-country headcount with ongoing complexity |
Side-by-side on the decision that matters most: EOR vs PEO. Commercial detail: PEO services in Latin America.
What a PEO costs
Compare landed monthly cost per head, including the cost of keeping the entity alive.
Gross salary
Paid on your entity's payroll at the local market band.
Statutory employer burden
Mandatory employer contributions, roughly 22% to 55% of gross depending on the country.
PEO administration fee
Per employee per month, or a percentage of payroll. Usually lower than an EOR fee because you carry the entity.
Benefit plan cost
Priced on the pooled plan you select, separate from the administration fee.
Country salary bands and statutory burden are published free in the LATAM Workforce Index.
Employment support by country
Contribution rates, notice periods and benefit norms differ sharply by market. Start with the country you employ in.
PEO FAQ
PEO or EOR for your next hire?
Tell us the country, the headcount and whether you have an entity there. We come back with the right structure, the landed monthly cost per head and a realistic start date.