Best Professional Employer Organizations (PEO) — 2023

Typically, small and early stage companies that don’t have an in-house HR department work with PEOs to cover the necessary but all too time-consuming tasks that keep them from focusing on what matters most. They want to run a compliant business with robust employee packages that attract top talent and keep current employees engaged. And they want to have the brainpower to focus on scalable business strategies in the process.

If this sounds like your business, know that you can get all of this with the help of a professional employer organization. Here’s a breakdown of other common reasons why small businesses lean on PEOs and how they can help you achieve your business and human resource goals:

• Offer employee benefits: PEOs allow you to offer a host of employee benefits, like affordable health insurance, 401(k) plans, life insurance, disability, commuter perks, employee discount programs, and more. In most cases, a PEO will essentially have its own employee benefits package that is then passed on to your employees.
• Outsource payroll: “Payroll” involves a lot more than sending employees their paychecks. There’s also balancing and verifying payroll data, reporting taxes, factoring in wage deductions, record keeping, filing W-2s and 1099s, and more. Needless to say, it’s a lot — but PEOs will handle all of this for you. Not only that, PEOs will submit payroll using their own tax-ID. All in all, there’s less paperwork for you and reduced risk of filing mistakes if you did it yourself.
• Manage employee records/paperwork: From state and federal W-4 forms, to federal I-9 forms, to state-mandated docs, to personal info and emergency records to application forms, employee paperwork is seemingly endless. Fortunately, PEOs can help you better manage it through software, as well as help in actually filling out and submitting these forms.
• Streamline onboarding: Paperwork is one piece of the new hire onboarding puzzle. You also have to train new employees, get them familiar with company policies, and go over your employee handbook. PEOs can take this off your plate with their compliant and ready-made trainings, policies, handbooks, and more.
• Get workers’ comp: Many PEOs provide workers’ compensation insurance to protect your company and your employees from the costs of work-related injuries or illnesses and any resulting employee claims.

Some PEOs offer all of these things and some are more specialized. But for the most part, PEOs serve as a “one stop shop” for your HR needs. So instead of using individual software programs for each of these needs, you can use one PEO to cover it all.

Think about what’s most important to you, then check out our next section to see what the top PEOs offer so you can find one that works for you.

As helpful as PEOs can be, there are a couple things to keep in mind before committing to one. The considerations we’ve outlined here are based off of common mistakes companies have made when using a professional employer organization. Learn from them now so you can implement seamlessly and get the most bang for your buck

• Still in control: The biggest misconception companies have is that they lose control of their employees because they are part of a PEO.  Companies that are part of a PEO still have full discretion over any employee related decisions - think about the structure of a PEO more as a loophole to get better benefits and employee services than as a parent organization.
• Know the cost breakdown: Some PEO vendors charge hidden fees, so make sure you get a breakdown of how much money you’ll owe and where it's going (vendor fee, salaries, state/local taxes, etc).
• Prevent overly-complicated onboarding: You want your new hires to have a simple and informative onboarding experience as they get up and running in their new roles. This means making it easy for them to access information and submit applications/sign up forms for things related to payroll, benefits, etc. So make sure you work with your PEO on an optimized onboarding/training process that gives new employees a positive first impression of your company.
• Understand support options: Your employees and internal admins will need some level of customer support from time to time. That way issues can be resolved quickly and efficiently, and you won’t have to worry about frustrated employees or dips in morale. Try to understand what level of customer support your PEO offers, whether a dedicated person is assigned to your company, what hours he or she is available, how long response times are, etc.
• Beware of bad tech: Some PEOs are legacy organizations with old technologies and/or poorly integrated software add-ons. Use your demo to get a sense of this so you can plan accordingly.  Really dig into the workflows for the employees, HR, and executives.
• Opt for ease of use: When assessing the tech side of things, make sure to factor in how easily employees can access their information. Some older systems involve complicated processes and have key pieces of information buried in hard-to-find areas. Opting for more streamlined platforms that are optimized for user-experience is key.
• Supplement with EEOC compliance: While PEOs pride themselves on being HR compliant, many are not compliant with anti-discrimination protocols, so make sure you supplement with EEOC compliance.

If you have concerns about any of these, make sure to ask about them in your demo. Keep reading for other recommended demo questions...

As we’ve been mentioning, there are a lot of benefits to using a PEO. For simplicity, we’re going to bucket them into three distinct categories — people, cost, and focus.

People Benefits:

• Better employer branding = better recruiting: When you can package your benefits and expand your benefits offering, you give your employer branding a leg up over your competition. Candidates will see how much you offer and will be more likely to apply, accept and keep a job at your company.
• Increased employee retention: While your benefits package might be enough to keep an employee happy, giving them transparency and better access to their benefits and payroll will further increase engagement and morale. They’re more inclined to trust you as their employer and will thus stick around.

Better Cost:

• Decreased administrative overhead and HR headcount: You can more efficiently run your HR tasks without having to hire an entire internal team. That means less people to train. Less people to manage. More time and money in your company’s pocket.
• Cost savings for you and your employees: By leveraging your PEO’s group rates, you will end up paying less for your benefits package and your employees will end up paying less for each benefit offering.

More Focus:

• Streamlined management of tools: Instead of investing in a payroll software program, a compliance platform, a benefits and insurance tool, etc., you can house all your HR functions in one place. That means less to keep track of and more productivity as a result.
• More time to focus on business operations and growth: Imagine all the big picture planning and executing you can do when you’re not stuck in the administrative HR weeds. PEOs take so much tedious work off your plate so you can focus on building a scalable business.

To help you calculate your return on investment, check out our ROI calculator for professional employer organizations. It covers a variety of key points, including:

• How to measure increases in productivity
• How having an all-in-one partner can save you money on compounding fees from smaller, more specialized programs

Pricing depends on a number of variables, but the most common pricing model that PEOs use is a per employee/per month fee. For example, smaller companies can expect to start with a price of $100 per employee per month. Sounds pretty straightforward, but make sure your provider doesn’t have any hidden fees on top of your monthly charge — for example, percent of payroll in addition to admin fees.

As we’ve mentioned, PEOs allow you to essentially outsource your HR function and back-office work so you can focus on business strategy and day-to-day operations. So what exactly does this include? Here is a list of features you can expect from professional employer organizations.

• Single sign-on: Giving your employees one login to a comprehensive HR dashboard not only increases security but it provides a better user experience. Employees can more easily and securely access info on payroll, health insurance, 401(k), etc.
• Corporate-level benefits: Large companies seem to have larger benefits packages. With PEOs, smaller companies can, too. Such benefits go beyond the typical health and retirement plans and include everything from commuter benefits to dependent care to pet insurance to discounts on wireless plans, spa treatments and gyms — and more.
• Trainings and onboarding: In addition to providing benefits, PEOs also help educate employees on each benefit option so they can make the right decisions for themselves. Further, PEOs help you with on-site employee onboarding and trainings so new hires can get familiar with your policies, employee handbook, and more.
• HR consulting: PEOs have in-house HR experts and consultants that can help you with your day to day HR needs, from recruiting to onboarding to compliance, and more.
• Time tracking & PTO requests: Gone are the days of punch cards and written or verbal requests for time off. PEOs help automate time tracking and PTO requests, which means payroll processing is easier and more accurate, you have a better picture of team coverage each day, and more.
• Risk-mitigation: PEOs are HR-certified organizations, which means they know HR law and will ensure your company is not only following the right state and federal labor laws but also is using HR best practices. While, in most cases, you’d be required to adopt their policies, procedures and employee handbook wording, you’ll greatly reduce your liability as an employer.
• Streamlined payroll processing: PEOs handle all aspects of payroll, including auto-deposits, one-off payments, and payroll tax filings. And they’ll do all of this for everyone who works for your company, from salaried employees to hourly workers to full- and part-time staffers, even contractors and freelancers.
• Flexible permissions: While a PEO assumes the responsibility of an HR department, they’re not the only ones with access to the back-end. You can give admin privileges to certain team members that will need access — for example, an accountant that needs to make expense reimbursements, an HR lead who has PTO requests to approve, or a COO to elect benefits.
• Company directory: Keep employees connected with an online company directory complete with employee photos, titles and contact info, plus a calendar with birthdays and work-iversaries, and more.
• 24/7 support: Because business has gone well beyond the typical 9-5 hours, many PEOs offer support 24/7 — be it by phone, email, chat, text, even Slack. And depending on the need, your employees can reach a PEO representative directly — it doesn’t just have to be an elected admin that does the outreach for you.
• Mobile app: In addition to the self-service tools your employees can use to look up things like expenses, benefits enrollment, PTO requests, paycheck history, etc., many PEOs also offer mobile apps for on-the-go access.

The services that PEOs offer are designed to give you a fully functioning HR department without having to hire a whole team or sign up for a multitude of separate software programs. With the goal of helping you run a sound business and reduce costs for both you and your employees, PEOs will give you the peace of mind you need to focus on your business’ growth.

Whenever you’re considering a new human resource tool or partner (like a PEO), you want to fully understand what’s involved in the product/implementation/cost. That way there won’t be any surprises as you implement. To ensure you can confidently invest in a PEO, make sure to ask these questions during your demo and sales conversations:

• How do you handle employee data securely?
• What other systems (accounting, expenses, time tracking) do you integrate with?
• How are employees entered into the system?
• Can you walk me through how employees are onboarded?
• Are you available in all the states we do business with for payroll?  Benefits?
• How long does it take to run payroll each cycle?
• Do you manage unemployment benefits?
• What benefits do you have beyond healthcare?
• How do you handle withholding taxes?
• Do you send employees W-2s and 1099s?
• How do you help navigate ACA, COBRA, and other benefit related compliance issues?

Additionally, it’s always a good idea to have a sense for these more general implementation questions. Work them into your demo as it’s relevant for each PEO in question:

• How will this solution fit into the rest of my tech stack? What integrations do I need?
• How will others in the organization use this solution?
• What are the key features I want to ask about?
• What are the things that would make me nervous about buying this sort of solution?
• How does pricing work?
• What implementation guidelines do they suggest?

No matter what new software program you’re investing in or what third-party organization you’re partnering with, we always recommend having a solid implementation plan in place. Here are a few general best practices to get you started:

• Select a project manager: Appoint one person to oversee the implementation process and keep track of key stakeholders, timelines, communication (both internally and with the software provider), etc.
• Understand tech requirements: Find out what tech requirements and/or system integrations are necessary for this implementation. To determine this, discuss with your tech and/or IT teams as well as your software company point person. Pro Tip: Ask about this during the demo process so you have an understanding of the work involved before you sign any contracts.
• Stay focused: Create a well-defined scope to keep things on track, on time and on budget.
• Have regular check-ins: You’ll want to have regular touchpoints with your key stakeholders to make sure everything is running smoothly. Whether these happen daily, weekly or monthly depends on the scope of your implementation and the estimated timeline.
• Communicate: Make sure to have a continuous dialogue with your software partner and internal stakeholders outside of your regular check-ins so that everyone is on the same page.

For PEOs specifically, you’ll want to be prepared to export data from your existing HRIS, then import it into your new system. During your demo, make sure to talk about what’s involved here so you can prepare accordingly on your end. Then, you’ll want to focus on employee training — both for those with admin access and everyone else who will be a “regular” user.

What does PEO stand for? ‍

PEO stands for professional employment organization, an entity specifically setup to help smaller companies take care of their HR needs.‍

What is a professional employment organization?

‍A professional employment organization is a vendor that helps small companies leverage the power of an HR department to minimize employment risk and labor costs, offer employee benefits, take care of payroll and more.

‍How does a professional employment organization work?‍

A professional employment organization works by sharing employer responsibilities. An organization will tend to handle its people and business operations while shifting administrative and HR functions to the PEO.

‍What services do professional employment organizations provide?‍

Professional employment organizations can provide the following services:

• HR consulting
• Payroll processing
• Tax filing
• Workers’ comp
• Health benefit
• Employers’ practice and liability insurance
• Employee onboarding
• Record keeping
• Safety and risk mitigation
• Employee training and development
  

What are the pros and cons of a professional employment organization?

Pros of a professional employment organization include:

• Complete takeover of HR responsibilities
• Single sign-on to HR dashboard
• Corporate-level benefits
• Time tracking and PTO requests
• Streamlined payroll processing
• Risk-mitigation
  

While there are cons of a PEO, they are minimal, such as: 

• Can get costly 
• Aren’t always compliant with EEOC
  

Who should use a professional employment organization? 

Professional employment organizations are designed to be used by small and mid-sized businesses.