Chapter 8: HR and the High-Growth SME: The Role of Professional Employer Organizations

Small and Medium Enterprises (SMEs) face significant challenges in their efforts to effectively manage human resources. Because of these challenges, many SMEs have explored using Professional Employer Organizations to obtain a wide array of HR services. While PEOs have the potential to offer many benefits for SMEs, a number of factors have emerged that might threaten the feasibility of this form of governance and the PEO’s ability to achieve positive outcomes for client organizations. For SMEs considering use of a PEO, numerous questions are raised by this combination of potential benefits from PEO utilization and threats to the feasibility of the PEO model. In this paper, we have attempted to identify some of the more significant questions, our current knowledge base with regard to these questions, and areas where future research might be beneficial.