The Best Professional Employment Organizations (PEOs)

Professional employment organizations (PEOs) support their clients’ human resource operations by providing services throughout the worker’s engagement with the company. Depending on the company’s needs, a PEO might help with everything from recruitment, onboarding, and development to workers’ compensation and unemployment  administration.  

PEOs typically work with small- or medium-sized businesses by serving as the employees’ professional employer. They then lease the employees’ services to clients. This allows companies to offload many of the functions and duties of human resources, including some regulatory compliance and tax filings, to the PEO.

This article will help you better understand what a professional employment organization is and answer some frequently asked questions about how they work. We’ll also highlight the pros and cons, how much it costs, and the top PEOs to consider hiring.

What is a Professional Employment Organization (PEO)?

A PEO is a third-party organization that helps businesses manage their staffing requirements.

The way they work is simple. When a PEO enters into a joint-employment relationship with a business, they manage some or all of the human resources functions for their employees. They then lease their employees’ time and services to their client companies. This makes the PEO company responsible for all liabilities and responsibilities relating to employment, while giving their clients the professional staffing they need.

The PEO’s scope of work depends on the contract with their clients, and may include many common human resources (HR) tasks, such as benefits, family and medical leave, and health insurance. While some PEOs only do basic HR functions, others offer more in-depth services, such as providing employee-related data and insights.

When does it make sense to use a PEO?

Working with a PEO can be to your advantage in several scenarios. Smaller companies with limited resources can use PEO services to manage and help their staffing.

Instead of spending the time and effort to hire and manage an in-house HR department, startups can use PEOs to scale their companies and achieve larger goals. Companies with a remote or hybrid work model can also work with PEOs to avoid some of the complications of managing the payroll for international teams.

However, alternative HR solutions to PEOs might be more appropriate depending on the specific needs and context of the business. Startups and remote-first organizations might consider working with contract, freelance, or fractional HR talent.

Pros and cons of using a PEO

Some pros and cons of using a PEO for small or medium-sized businesses include:

Pros

• Improved employee benefits. PEOs co-employ a large number of employees. This makes it easier for them to offer workers attractive compensation and benefits packages, which small businesses might be unable to match on their own. PEOs often provide talent with health care coverage, unemployment insurance, workers’ compensation insurance, retirement plans, dependent allowance, and other perks.
• Compliance with legal and tax requirements. Ensuring compliance with legal and tax requirements is essential for any business, but it can be challenging without an experienced HR team. By partnering with a PEO, businesses can meet all necessary international, national, and local regulations, tax laws, and employment laws. This allows businesses to focus on their core operations and achieve their goals with increased peace of mind.
• Save time by outsourcing time-consuming tasks. Partnering with a PEO can help businesses streamline HR paperwork and payroll processing, freeing time and resources to focus on more value-adding tasks. This includes enhancing the quality of products or services, and creating a superior customer experience—helping businesses grow and thrive.

Cons

• Cost. There’s a monthly fee associated with partnering with a PEO, so businesses should assess their financial situation to determine if it’s feasible for their HR needs. While PEOs may not be the most cost-efficient solution for hiring a large number of employees, they can offer a range of valuable services.
• Loss of control. Depending on the contract you have with a PEO, it might handle everything from recruiting and interviewing to employee development, removing you from these important interactions. While you won’t be forced to work with someone who isn’t a right fit for your company, working with a PEO can add layers to the relationships you have with your workforce.
• Co-employment risk. When a company partners with a PEO, it enters into a co-employment relationship where the PEO assumes certain employer responsibilities and liability. However, legal entities may still hold you liable even if your contract states the PEO bears responsibility. For example, even if the PEO is responsible for filing the employee tax information, the IRS may hold you liable for any errors in those filings.

How much does it cost to hire a professional employment organization?

PEO fees can vary depending on the number of employees and the services they provide. Most PEOs offer one of two pricing models—they charge clients a flat fee per employee per year, or an annual fee equivalent to a percentage of the company’s overall payroll.

You’ll need to make a decision based on the size of your company and the nature of your business, among other considerations, such as whether you plan to expand the size of your organization and hire new staff.

5 best professional employment organizations

Are you looking to hire the services of a PEO but don’t know which one to pick? We cover the top five professional employment organizations based on factors like reputation and services.

1. Paychex

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Paychex is a multifunctional PEO well-suited for startups. It provides time-saving services, such as helping hire, pay, manage, and retain employees and ensuring your business complies with the necessary regulations.

Paychex offers several service bundles and provides customized solutions for support beyond payroll. Moreover, it offers 24/7 chat and phone support.

2. TriNet

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TriNet gives growing businesses the HR support they need to function smoothly. From headache-free payroll management to talent acquisition and retention, TriNet can handle it all.

Its cutting-edge, all-in-one platform makes viewing and updating data a breeze, giving business owners peace of mind. Its unique selling proposition (USP) is helping you find talent for niche industries.

3. ADP TotalSource

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If great HR services and customer support are what you need, look no further than ADP TotalSource. From simple tools to full-service outsourcing, it can cater to your needs and provides global experience in HR, payroll, and compliance. Its reputation has earned the trust of over a million clients.

4. Insperity

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Insperity’s distinguishing feature is that it provides scalable solutions. Its comprehensive HR packages adapt to your business’s evolving needs. This PEO supports organizations of all kinds but is best suited for small- to medium-sized businesses.

5. Justworks

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Justworks is a straightforward, no-frills PEO that helps you get HR tasks done quickly and efficiently. It’s well-suited for small businesses looking for support on payroll, employee benefits, and IRS.

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Best PEO alternative: Hire finance, admin, and HR professionals directly on Upwork

While PEOs offer excellent HR outsourcing support and establish a valuable co-employment relationship with the client company, they aren’t the only option available.

If you’re looking for external assistance to streamline and manage payroll taxes, onboarding, and other administrative tasks, consider looking to Upwork to source your finance, admin, and HR professionals. Our intuitive platform can help you find and hire top talent with ease.

If you’re an independent worker looking for freelance work in payroll services, risk management, or employment taxes, you can find new clients and projects on Upwork. All you need to do is create a profile, enter your professional details and experience, and start looking for new opportunities.  

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Upwork is not affiliated with and does not sponsor or endorse any of the tools or services discussed in this article. These tools and services are provided only as potential options, and each reader and company should take the time needed to adequately analyse and determine the tools or services that would best fit their specific needs and situation.