What Is a PEO? How Does a Professional Employer Organization Work?

The scope of PEO services may vary depending on the labor law, social security, and tax regulations of the country in which the company operates, as well as the company’s needs. Payroll management, personnel administration processes, onboarding and offboarding procedures, employee benefits, leave management, and various human resources operations may be included within the scope of PEO services.

Although the concept of PEO is particularly associated with the co-employment model in the United States in international literature, the legal structure of a PEO is not the same in every country. Therefore, when evaluating PEO services in Türkiye, the actual employment structure in Türkiye and the responsibilities assumed by the parties should be taken into consideration rather than international terminology.

What Does PEO Stand For?

PEO is an abbreviation for “Professional Employer Organization.” Although it may be used in Turkish as “Profesyonel İşveren Organizasyonu” or “Profesyonel İşveren Kuruluşu,” the abbreviation PEO is widely preferred in international human resources terminology.

PEO does not merely mean that payroll calculations are performed by another company. The PEO service model may integrate payroll and HR operations across different stages of the employee lifecycle.

Depending on the scope of services, a PEO may provide companies with support in different areas such as:

• Payroll management,
• Personnel administration,
• Onboarding and offboarding processes,
• Employee benefits management,
• Leave processes,
• Social security and employment notifications,
• Tax processes related to wages,
• Recruitment and talent management,
• Employee data management,
• HR reporting.

The processes to be covered by PEO services are determined in line with the company’s needs, the service agreement, and the regulations of the country in which the service is provided.

How Does a PEO Work?

When establishing a PEO service model, the company’s existing organizational structure, employee profile, and the human resources processes in which support is needed are first determined. The distribution of duties and responsibilities between the company and the PEO service provider is then structured.

The client company generally continues to manage employees’ day-to-day activities, define their duties and performance targets, and make business decisions.

Depending on the scope of services, the PEO may undertake the management of payroll, personnel administration, employee benefits, leave, employee records, and other HR operations.

For example, the company may decide on a salary increase for an employee or the provision of a new benefit. Depending on the scope of the PEO service, the implementation of this decision in the payroll system, the necessary calculations, the updating of the relevant employee records, and updating the relevant reports may be carried out by the service provider.

Therefore, a successful PEO model is based not only on the outsourced management of processes, but also on the proper establishment of the clear data flows and a well-defined allocation of duties and responsibilities between the company and the service provider.

What Do PEO Services Cover?

The scope of PEO services can be tailored according to the company’s organizational structure and needs. Particularly in international companies, it is important to address payroll, HR, and employee processes in an integrated manner rather than independently of one another.

Payroll Management

Payroll management is one of the fundamental components of PEO services. The calculation of employees’ wages, the transfer of wage components to payroll, the calculation of statutory deductions, the preparation of payslips, and the reporting of results may be carried out within this scope.

In Türkiye, payroll processes do not consist solely of monthly wage calculations. An employee’s onboarding or offboarding, wage changes, incentive payments and bonuses, benefits, leave, overtime, and other changes in employment status may directly affect payroll calculations.

Therefore, the proper management of the flow of information between payroll and human resources data is one of the fundamental elements of PEO operations.

Human Resources and Personnel Administration Processes

PEO services may cover different HR and personnel administration processes arising from the commencement of an employee’s employment through their departure. The creation and updating of employee information, management of personnel records, wage changes, leave, benefits, and offboarding processes may be monitored within this structure.

Thus, instead of managing payroll and employee data as disconnected processes, an interconnected operation can be established throughout the employee lifecycle.

Recruitment and Talent Management

Depending on the company’s needs, PEO services may also be supported by recruitment processes. Particularly for international companies newly entering the Türkiye market, knowledge of the local labor market, wage levels, and recruitment dynamics is important.

With CottGroup’s local market experience and human resources expertise, different stages of recruitment processes can be supported, from identifying the positions required by companies to finding suitable candidates.

Tax, Social Security, and Employment Processes

Payroll processes for employees in Türkiye are connected with income tax, stamp tax, social security premiums, and various statutory notifications. The provider may calculate the relevant amounts, monitor obligations, and carry out the agreed procedures.

One of the important advantages of PEO services for international companies is that the company’s global HR policies can be integrated into operations to an appropriate extent while payroll, social security, and employment processes in Türkiye are managed in compliance with local law. Within this scope, employee-related practices concerning wages, benefits, leave, performance, and other HR matters can be adapted to PEO processes while preserving the minimum rights arising from Turkish legislation and without creating any conflict with local regulations. In this way, a consistent and practicable structure can be established between the global human resources approach and local employment requirements in Türkiye.

Employee Benefits and Leave Management

Since employee benefits and leave may be directly connected with payroll, they may be among the important components of PEO operations. Transferring leave information, employee benefits, and changes affecting wages to the payroll process at the right time contributes to the consistent management of both calculations and employee records.

Administrative and Back-Office Services

Companies’ operations in Türkiye may not consist solely of employees’ payroll and HR processes. Depending on the need, accounting, financial reporting, audit support, and various back-office processes may be structured together with other professional services connected with PEO services.

This approach may make it easier, particularly for international companies operating in Türkiye with a limited local organization, to manage different administrative functions within a single service ecosystem.

Why Do Companies Use PEO Services?

The fundamental value that PEO services provide to companies is not merely outsourcing selected HR processes. The PEO model may enable a company to access the local expertise, human resources, and technology infrastructure it needs without expanding its own organization to the same extent.

Access to Local Expertise

A company may have global human resources policies; however, working hours, remuneration, leave, social security, taxation, and termination practices vary from country to country.

PEO services enable international companies to carry out their operations in Türkiye with expert teams familiar with local employment and payroll practices.

Reduction of Operational Workload

As the number of employees increases, the operational workload created by payroll, personnel administration, leave, benefits, and reporting processes also increases. Having these processes managed by a PEO may help the company’s internal human resources teams focus on more strategic areas such as employee experience, talent management, and organizational development instead of repetitive administrative processes.

A Scalable HR Operation

The addition of new employees to the organization, the creation of different employee groups, or the growth of the company’s activities in Türkiye also requires existing HR operations to scale.

The PEO model may enable the company to benefit from the existing service infrastructure instead of creating new payroll and HR resources at the same rate at every stage of growth.

Technology and Centralized Data Management

Technology is an important component of modern PEO services. Managing employee and payroll data through centralized systems helps establish a more integrated structure between calculation, control, reporting, and employee processes.

PEO Services in Türkiye

Türkiye has an important position in the regional operations of international companies due to its location providing access to Europe, Asia, the Middle East, and surrounding markets, its developed business infrastructure, and its broad labor market.

One of the main operational issues faced by companies entering the Türkiye market is how local employment processes will be managed. Once a company starts employing staff, many operations, from employment contracts to SSI procedures, from payroll to taxation, and from leave to employee benefits and offboarding processes, need to be structured within the framework of regulations in Türkiye.

At this point, PEO services can support companies in managing their employee operations in Türkiye with local expertise.

However, PEO is an international service term and is not, in itself, the name of a specific legal employment status in Türkiye. Therefore, the actual legal and operational structure of the service model should be assessed separately.

Employment in Türkiye: Labor Law, Payroll, Tax, and SSI Processes

Companies employing workers in Türkiye need to manage not only payroll calculations but also employment contracts, working hours, overtime, leave, social security, taxation, and termination processes as a whole. Particularly for international companies newly entering the Türkiye market, it is important to structure these processes by taking local employment practices into consideration.

The local expertise provided by PEO services also stands out at this point. While global human resources policies are maintained, processes relating to employees in Türkiye can be carried out in line with local requirements.

Employment Contracts

Employment relationships in Türkiye are predominantly regulated within the framework of Labor Law No. 4857. Depending on the nature of the employment relationship, employment contracts may be concluded for a definite or indefinite term.

For a fixed-term employment contract to be concluded, objective conditions such as work for a definite period, completion of a specific task, or the occurrence of a specific event must exist. Unless there is a substantial reason, fixed-term contracts cannot be concluded successively.

The parties may also include a probationary clause in the employment contract. As a general rule, the probationary period may be a maximum of two months, and may be extended up to four months through collective bargaining agreements. During the probationary period, the parties may terminate the contract without the need for a notice period and without giving rise to notice compensation. The employee remains entitled to wages and other entitlements for the days worked.

Working Hours

The general weekly working time in Türkiye is a maximum of 45 hours. Unless otherwise agreed, this period is distributed equally among the working days of the week.

By agreement of the parties, weekly working time may be distributed differently among the working days of the week, provided that daily working time does not exceed 11 hours. Where a working-time averaging arrangement applies, the average weekly working time within the relevant period must not exceed the normal weekly working time.

Working hours may also be subject to different specific regulations depending on the sector and the nature of the work.

Overtime

Work exceeding 45 hours per week is considered overtime under the conditions set out in the Labor Law. The wage payable for each hour of overtime is calculated by increasing the hourly amount of the normal wage by 50%. Total overtime may not exceed 270 hours per year for an employee.

In order for overtime to be performed, the employee’s consent must be obtained within the scope of the relevant legislation. Maintaining accurate records of working hours and overtime is also important for the accuracy of payroll calculations.

For detailed information on overtime practices and calculations, you can review our Overtime and Overtime Pay under Turkish Labor Law content.

Annual Paid Leave and Other Leave Entitlements

Employees who have worked for at least one year from the date they started work at the workplace, including the probationary period, become entitled to annual paid leave.

As a general rule, annual paid leave periods according to the employee’s length of service may not be less than:

• 14 days for those with 1 to 5 years of service,
• 20 days for those with more than 5 years but less than 15 years of service,
• 26 days for those with 15 years or more of service.

Special provisions may apply to employees subject to different leave periods due to their age and working conditions. In Türkiye, in addition to annual paid leave, there are different leave entitlements such as maternity, paternity, marriage, compassionate, breastfeeding, and job-search leave.

For detailed information, you can review our What You Need to Know About Annual Paid Leave and Types of Leave for Employees content.

National and Public Holidays

Employees covered by Labor Law No. 4857 receive their regular pay for national and public holidays on which they do not work. If they work on such a day, they are entitled to an additional day’s pay for each day worked.

For current dates and wage calculations, you can review our Public Holidays and Overtime Calculation content.

Termination of Employment Contracts and Compensation

The legal and payroll consequences of the termination of an employment contract in Türkiye vary depending on which party terminates the contract and for what reason.

Where the eligibility conditions are met, statutory severance pay is generally calculated on the basis of 30 days’ gross pay for each full year of service, with a proportionate amount for any remaining period. The calculation takes account of the legally relevant pay components and benefits and is subject to the statutory ceiling in force at termination.

In the termination of indefinite-term employment contracts with notice, 2, 4, 6, or 8-week notice periods apply depending on the employee’s length of service. If the notice period is not observed, notice pay may arise where the conditions are met.

For detailed information, you can review our What Is Severance Pay? and What Are the Notice Period and Notice Pay? content.

Taxation of Wages in Türkiye

Wage payments made to employees in Türkiye are subject to income tax, and income tax is calculated according to a progressive tax schedule.

The income tax schedule applicable to employment income in 2026 is as follows:

Income Tax Brackets Applicable to Wage Earners for 2026

As the cumulative income tax base increases during the year, the applicable marginal tax rate may change. Where a net salary has been agreed, this may increase the employer’s gross payroll cost.

Note: Since the tax schedule and payroll parameters may change annually, calculations should be based on the current amounts in force for the relevant period.

Social Security Contributions

Employees working under an employment contract in Türkiye are generally reported as insured persons under Article 4/1-a of Social Insurance and General Health Insurance Law No. 5510. An employee’s social security contribution base may include wages, incentive payments, bonuses, and other payments subject to contributions under the applicable legislation.

In 2026, the monthly minimum social security contribution base for private-sector employees is TRY 33,030, while the upper limit is TRY 297,270.

When structuring wage and benefits packages, determining which payments are fully or partially subject to social security contributions directly affects both the employee’s payroll and the employer’s total cost.

Work Permits for Foreign Employees

For international companies that will employ foreign employees in Türkiye, work permit requirements should also be considered alongside payroll and HR processes. Foreign nationals’ ability to work in Türkiye is generally subject to a work permit under International Labor Force Law No. 6735 and the relevant regulations. The employee’s position, wage level, the employer’s structure, and the relevant work permit assessment criteria may be taken into account in applications.

In particular, wage criteria based on certain multiples of the gross minimum wage may apply to foreign employees depending on the position. Therefore, in international employee transfers, the work permit process and payroll and wage planning should not be managed independently of one another.

In structures involving foreign employees within the scope of PEO services, the work permit, employment model, compensation package, payroll, and social security processes should be assessed together in order to structure the operation correctly.

Are PEO and Temporary Employment Relationships the Same in Türkiye?

PEO and a temporary employment relationship established through a private employment agency in Türkiye are not the same concept. Temporary employment relationships are specifically regulated under Labor Law No. 4857. In a temporary employment relationship established through a private employment agency, the employer is the private employment agency, and the circumstances under which the relationship may be established, as well as the rights and obligations of the parties, are determined by legislation.

Therefore, it is not correct to directly equate the PEO concept used in the international human resources sector with the temporary employment relationship in Türkiye.

When evaluating the structure of a PEO service in Türkiye, the following should be considered together:

• Which company employs the employee,
• With which party the employment contract is concluded,
• Through which employer SSI notifications are made,
• How payroll and wage payments are carried out,
• Which party is responsible for the employee’s daily management,
• Which HR operations are undertaken by the service provider.

What Is the Difference Between PEO and EOR?

The main difference between PEO (Professional Employer Organization) and EOR (Employer of Record) is the service provider’s role in the employment relationship.

In a broader sense, PEO is a model for companies to manage their payroll, HR, and certain employment operations with a specialized service provider. The service provider’s legal role may vary depending on the country and the PEO structure used.

In an EOR arrangement, the provider enters into the employment contract in its own name and assumes employer obligations under applicable law. The client company generally directs day-to-day work. The legal structure under which such a service may be provided in Türkiye must be assessed separately.

This distinction is particularly important for international companies. The service model required by a company that has its own legal entity and existing employer organization in Türkiye may not be the same as the service model required by a foreign investor that does not yet have a corporate structure in Türkiye.

Therefore, the terms PEO and EOR should not be used interchangeably.

What Is the Difference Between PEO and Payroll Outsourcing?

The main difference between PEO and payroll outsourcing is the scope of services. In payroll outsourcing, the service provider primarily performs the company’s payroll calculations and agreed related operations. The client company continues to be the employer of the employees.

PEO, on the other hand, may have a broader operating model that includes personnel administration, onboarding and offboarding operations, benefits, leave management, and other human resources services in addition to payroll.

Therefore, payroll outsourcing may be sufficient for companies that have their own HR organization and wish to outsource only their payroll processes. Where there is a need to manage more comprehensive employee and HR operations, the PEO model may be considered.

What Should Be Considered When Choosing a PEO Provider in Türkiye?

When selecting a PEO provider, service cost alone should not be considered. Since critical processes relating to the company’s employees will be carried out together with the service provider, the provider’s local expertise, operational capacity, and technology infrastructure are important.

In particular, the following should be evaluated:

• Expertise in payroll and employment practices in Türkiye,
• Clear definition of the scope of services,
• Distribution of duties and responsibilities between the company and the PEO,
• Payroll control mechanisms,
• Data security and personal data management,
• HR and payroll technology,
• Data integration with global systems,
• Reporting capabilities,
• Service levels,
• Operational support provided to employees.

In addition, operational responsibilities such as when and by whom payroll inputs will be provided, how wage changes will be communicated, who will initiate onboarding and offboarding processes, how payroll controls will be performed, and how correction processes will be carried out should be determined at the outset.

CottGroup^® PEO Services

Employing workers in Türkiye, particularly for companies headquartered abroad, does not consist solely of carrying out payroll calculations. The employer structure must be properly designed, all processes from employees’ onboarding to offboarding must be managed, the integrity of payroll and personnel data must be ensured, social security and tax obligations must be monitored, and global human resources policies must be aligned with practices in Türkiye.

At CottGroup, we structure our PEO services around this integrated approach. We assess companies’ organizational and employment needs in Türkiye and support payroll, human resources, and related operations with our local expertise, consulting experience, and technology infrastructure.

Rather than treating the service model as a standard package, we shape it in line with the company’s existing structure in Türkiye, number and profile of employees, global HR policies, reporting requirements, and the operational scope it requires.

Planning the Employment Structure in Türkiye

For PEO services to be carried out effectively, the company’s activities and employment structure in Türkiye must first be properly assessed. The needs of organizations that already have a company in Türkiye are not the same as those of international companies that have not yet established their local structure. Therefore, at the beginning of the service, we assess the company’s existing structure, the employees it will employ, and the operations it requires, and support the establishment of an appropriate service model.

Where necessary, we address PEO services together with our company incorporation, EOR (Employer of Record), investment advisory, accounting, finance, and other corporate services, enabling the different components of Türkiye operations to be structured in a coordinated manner.

Integrated Management of Payroll and Employee Operations

Payroll is one of the processes in which many types of data generated throughout the employee lifecycle ultimately come together. Onboarding, wage changes, incentive payments and benefits, leave, working hours, and offboarding may directly affect payroll results.

Therefore, in our PEO services, we do not treat payroll as an independent calculation process, but within a structure integrated with HR and employee operations.

Depending on the scope of services:

• Payroll calculation and control processes,
• Onboarding and offboarding operations,
• Employee personnel administration,
• Wage and benefit practices,
• Tracking of leave and changes in employment status,
• Social security procedures,
• Tax processes related to wages,
• Payroll and HR reporting

may be carried out in coordination by our expert teams.

While this structure supports the timely and accurate transfer of employee data from different sources to payroll, it also helps companies manage their operations in Türkiye in a more centralized and traceable manner.

A Bridge Between Local Expertise and Global HR Structures

One of the main needs encountered by international companies in their operations in Türkiye is the management of global human resources policies together with local employment practices.

Wage policies, benefits, performance periods, reporting standards, or employee processes determined by global headquarters may directly affect payroll, social security, and employment practices in Türkiye.

At CottGroup, we support the establishment of this connection between the global HR approach and local operations in Türkiye. Thus, while companies’ headquarters teams maintain the necessary visibility over Türkiye operations, local processes can be managed by our expert teams in Türkiye.

Technology-Supported PEO Operations with Bordromat^®

One of the important components of our PEO services is our technology infrastructure that supports payroll and employee processes. Developed on the basis of our many years of payroll and human resources experience, the Bordromat Payroll Process Management System enables payroll operations to be managed through a centralized, scalable system with built-in controls and reporting.

With Bordromat, employee data, payroll inputs, controls, reporting, and organization-specific processes can be managed in an integrated manner in addition to payroll calculations. Thus, in PEO operations, the practical experience of expert teams, standardized workflows, and technology infrastructure come together within the same structure.

Through this approach, we position PEO services not merely as the outsourcing of certain operations, but as a sustainable operating model in which human expertise, process management, and payroll technology work together.

The Employee Lifecycle from Recruitment to Offboarding

In PEO operations, we take into account that the employee experience is not limited solely to monthly payroll periods. Depending on the company’s needs, we provide support at different stages of the employee lifecycle, from recruitment and candidate selection and onboarding to the employee’s joining the organization, and from personnel administration, wages, leave management, and benefits processes to offboarding operations.

Drawing on our knowledge of Türkiye’s labor market, we help international companies find the talent they need and manage employees’ administrative processes from the start of employment, in coordination with payroll and HR operations.

Corporate Services Infrastructure Beyond Payroll

The needs of an international company’s operations in Türkiye may change over time. While initially only a limited number of employees may need to be employed, as operations grow, company incorporation, accounting, finance, tax, human resources, or other back-office functions may be required.

One of the elements that differentiates CottGroup’s PEO approach is that these needs can be addressed not as independent services, but, where necessary, as complementary components of the same corporate services infrastructure. By structuring our PEO services together with our company incorporation, EOR, payroll, human resources, recruitment, accounting, finance, tax, and other corporate services, we provide the support that companies may need at different stages of growth in their operations in Türkiye within a single ecosystem of expertise.

Core Elements of CottGroup’s PEO Approach

The CottGroup PEO service model is based on four elements: local expertise, integrated services, technology, and scalability.

Local expertise: We transfer our experience in payroll, human resources, social security, tax, and employment practices in Türkiye to the operations of international companies.

Integrated services: We manage payroll and HR processes not as independent operations, but as interconnected components of the employee lifecycle.

Technology: With the Bordromat infrastructure, we support payroll and employee processes being carried out through a centralized, controllable, and reportable structure.

Scalability: By shaping the scope of services according to the size and development of the company’s operations in Türkiye, we provide a structure that can adapt to changing needs.

With this approach, beyond managing companies’ daily payroll and HR operations in Türkiye, we aim to establish a sustainable operating model between local employment processes and global organizational structures.

Frequently Asked Questions About PEO

Is a PEO the employer of employees?

The employer status of a PEO may vary depending on the model used and the legislation of the country in which the service is provided. Particularly in the United States, the PEO model may be associated with a co-employment structure. It should not be assumed that this approach produces the same legal outcome in every country.

Are PEO and EOR the same?

No. PEO and EOR are different service models. In the EOR model, the service provider’s role as the employer of record for the employee comes to the forefront, while PEO may focus on the management of broader payroll, HR, and employment operations.

Are PEO and payroll outsourcing the same?

No. While payroll outsourcing mainly focuses on payroll calculations and related operations, PEO may also include personnel administration and other human resources operations in addition to payroll.

Is it necessary to establish a company in Türkiye to use PEO services?

The answer depends on the structure of the service offered as a PEO arrangement. Where the client company remains the employer, it must have the employer setup and registrations required to employ staff in Türkiye. Alternative arrangements for companies without a local presence require a separate assessment of their activities and the applicable rules.

Does a PEO undertake the daily management of employees?

Generally, no. Employees’ duties, performance targets, and daily work activities are managed by the client company. The PEO carries out the payroll, HR, and administrative operations specified in the service agreement.

Are PEO services suitable for small and medium-sized companies?

Yes. PEO is not a service intended only for large companies. Small and medium-sized enterprises that wish to benefit from specialized services without establishing a comprehensive payroll and HR organization in-house may also consider the PEO model.

Why do international companies use PEO services in Türkiye?

Through a PEO, international companies can access payroll and HR expertise in Türkiye, manage their administrative operations through outsourcing, and establish a more scalable operating structure as their number of employees increases.

Are PEO and temporary employment relationships the same in Türkiye?

No. PEO is a service concept used in the international human resources sector. A temporary employment relationship through a private employment agency, on the other hand, is an employment model that is separately regulated under Turkish labor law and subject to specific conditions.

Conclusion

PEO is a comprehensive service model that enables companies to manage their payroll and human resources operations together with the local knowledge, operational capacity, and technology infrastructure of a specialized service provider. Particularly for international companies, PEO can provide significant advantages in terms of managing employee processes in a new market, accessing local expertise, and scaling growing operations.

However, the legal structure of a PEO is not the same in every country. When evaluating PEO services in Türkiye, consideration should be given not to the commercial name of the service, but to who the employee’s employer is, how the employment relationship is structured, and which operations are undertaken by the PEO provider.

At CottGroup, we combine our payroll and human resources expertise with our technology infrastructure in our PEO services and support international companies’ employee operations in Türkiye through a scalable and integrated service model structured according to their needs.

Should you have any queries or need further details, please contact us.