Academic journal article Monthly Labor Review

Professional Employer Organizations

Academic journal article Monthly Labor Review

Professional Employer Organizations

Article excerpt

In the early 1980s, a new type of company became a significant part of the economy: the professional employer organization (PEO). This type of company helps other firms manage their employees' benefits, process payrolls, comply with regulations, and handle other human resources management issues. Economists have learned some important facts about the use of PEOs, but many unanswered questions remain about the PEO industry, a sector that grew by 386 percent from 1992 to 2002. In an effort to dig deeper, Britton Lombardi and Yukako Ono have written an article entitled "Professional employer organizations: What are they, who uses them, and why should we care?" (Economic Perspectives, Federal Reserve Bank of Chicago, fourth quarter 2008).

A PEO typically takes human resources employees from its client companies and places them on its own payroll; the PEO then "leases" the companies' own employees back to them. This can cause problems in calculating changes in the sizes of companies and industries. For example, employment in manufacturing reportedly decreased by 4.1 percent from 1989 to 2000, but it has been estimated that manufacturing employment would have grown by 1.4 percent if the manufacturing employees on PEO payrolls had been included. …

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