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A professional employer organization (PEO) or employee leasing involves the outsourcing of employee benefits administration, payroll, workers’ compensation, and human resources. A PEO will hire a company’s employees and then lease them back to their original employer under a contract for a management fee. This company is considered the PEO’s client.

Employee leasing is done for tax and insurance purposes, because such paperwork is filed under their tax identification number instead of their client company’s. Even though employees are being leased out, their original employer is still in charge of their daily activities.