A PEO provides HR infrastructure through a co-employment arrangement, handling functions such as payroll, benefits administration, and compliance. Fractional HR, on the other hand, provides experienced HR leadership and expertise on a part-time or as-needed basis without a co-employment relationship. While a PEO focuses primarily on HR administration and systems, a fractional HR partner focuses on strategic and operational people issues such as manager coaching, employee relations, investigations, policy development, performance management, and organizational effectiveness.