What is a PEO?

Professional Employer OrganizationPEO or Professional Employer Organizations (PEO) allow small- to medium-sized businesses more productive by allowing them to outsource their administrative needs.

Think of a PEO as a company in itself, focused specifically on small business tasks like health insurance, payroll, ACA compliance, and various ancillary HR services. 

The partnership of a business and a PEO is called co-employment, which means that the business’s employees also become the PEO company employees. This allows the business to offset some of its liabilities. Co-employment also allows the client’s managers to focus their time and effort on day-to-day tasks like growing the company and generating revenue.

The PEO will take on many different clients, allowing them to pool one company’s employees with another’s. This helps lower risks and insurance costs. It also allows the PEO to propose a wide range of offerings, as well as access to benefit plans that a small business may not have been able to afford on its own. 

PEOs are not bound by state borders or limited in the amount of employees they can accommodate, which is why many employers are beginning to see the tremendous value of their services.

So what do they DO?

The “core” features of any PEO include:

  • HR Outsourcing – monotonous paperwork, monitoring employment regulations and reporting requirements, assisting in hiring/firing and interviewing, and providing access to HR experts to help with training 
  • Payroll – delivering checks, performing direct deposits, filing payroll taxes, correctly categorizing employees, and ensuring compliance with government rules and regulations (especially useful for companies with employees in multiple states, as PEOs ensure that payroll is filed properly for each state)
  • Benefit Outsourcing – providing access to a wide range of medical, dental, retirement, and other insurance offerings that give clients competitive, well-organized package options that help them attract talent, boost employee morale and retain their best employees

Additional Services

Not all PEOs offer the same additional services, and these differences often determine which PEO is the best fit for your company. These services include:

  • Worker's Comp – PEOs can usually offer lower rates, review and process worker’s compensation claims, and help mitigate risk, saving small businesses a great deal of time.
  • Safety – providing risk and safety consultants to review facilities, give advice, and even develop safety programs tailored exclusively to their client’s needs.
  • Recruiting – assistance with résumé screening and the interview process 
  • Training Services – often provided at a discounted rate, in areas ranging from employee development and computer skills to sexual harassment and ethics programs
  • Performance Management  – evaluation and performance tracking to help identify and reward key employees, as well as onboarding programs, goal development, compensation management, market salary data analysis, workforce planning, and writing tools for performance reviews
  • Outplacement Services – assisting downsized employees as they search for new employers
  • Background screening – usually discounted for PEO services due to volume-based pricing

But What Does it Cost?

Most PEOs charge a flat fee per employee per year based on a percentage of payrolls.  This percentage will vary depending on the number of services utilized by the client.  

PEOs also offer bundling packages to reduce overall cost – for example, Human Resources, background checks, and drug screening may be offered together at a reduced rate. 

For a more detailed answer, download our complimentary Insider's Guide to PEO Costs.

How Do I Find One?

Our job is to connect you with PEOs who are best suited to meet your business’s unique needs. Using the information you provide in our free PEO Matching Tool, we can generate a PEO vendor report showing ranked scores of which PEO companies best match your specifications.  From there, you may compare HR service and technology details side by side, view individual service fine points, or simply request more information. 

For more detailed specifics, check out our free PEO Buyer’s Guide or use our shorter PEO Companies Search tool for a quick contrast of PEO insurance offerings, services and availability within different industries.


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