Product and service reviews are conducted independently by our editorial team, but we sometimes make money when you click on links. Learn more.
We've updated this page to include more answers to frequently asked questions about PEO services.
Update: We've updated this page with more answers to frequently asked questions about PEOs.
A professional employer organization (PEO) is ideal for small and midsize businesses that want an experienced administrative staff so they can offer quality health benefits to their employees and remain up to date with financial and legal requirements. We spoke with community experts and small business owners to discover what PEO features are most valuable, such as payroll, employee benefits, risk and compliance management, and training and development. After spending countless hours researching nearly 60 PEO agencies and their services, we narrowed them down the best PEOs for small businesses.
|Accreditations||ESAC, IRS, BBB||ESAC, IRS, BBB||ESAC, IRS, BBB||ESAC, IRS||ESAC, IRS, BBB|
|Contract required||1 year||1 or 2 years||1 year||Varies based on customer's needs||No|
|Minimum # of employees||5||5||5||5||5|
|Pricing structure||Per employee||Per employee||Per employee||Per employee||Based on multiple factors|
|Customer support||A payroll account manager and human resource generalist||An HR manager, a client liaison and safety consultant, and specialists for HR, payroll, performance, benefits and recruiting||A payroll account manager and human resource generalist||Varies based on customer's needs||A dedicated team of experts and a payroll specialist|
With Justworks, a fast-growing HR technology company, entrepreneurs and their teams get access to comprehensive benefit offerings, automated payroll, compliance support, and HR tools – all in one place. As a PEO, Justworks gives small and midsize businesses access to corporate-level benefits at affordable rates, including medical, dental and vision insurance, and employee retirement plans. Its automated payroll services handles all benefits and tax withholdings. Justworks, which offers 24/7 expert customer support via phone, email, chat, Slack, or SMS, helps streamline your back-office functions in one easy-to-use platform. You also get access to HR consultants who can provide tailored guidance and best practices around building policies and managing your people.
PEOs offer two main pricing structures for small and midsize businesses: They either charge a per-employee fee (roughly $40-$160 per month) or a percentage of your total monthly payroll (roughly 3%-12%). There are advantages and disadvantages to both types of pricing. The best pricing model for your business depends on factors like your business type, number of employees and the overall PEO services you want.
Professional employer organizations typically do not offer free trials of their HR services, and contract lengths and structures vary by company. Some PEO companies only offer long-term contracts, while others don't require any contract at all. Cancellation policies vary, but business owners typically need to provide at least 30 to 60 days' notice before canceling a PEO service. Some companies allow you to leave at any time for any reason; others charge you a fee for leaving.
Within each of our reviews, we've listed the PEO's cancellation policy. It's critical, though, that you ask about the PEO's contract and cancellation policy before you reach an agreement – you want the freedom and flexibility to cancel the service if you need to.
Below are other crucial items to address with the PEO service you're considering. You should go over this information – even though it may be available on the company's website – with a member of the PEO's sales team to gain a complete understanding of the PEO's services.
One thing to pay attention to is how a PEO packages its services, like employee onboarding and development, insurance policies, workers' compensation claims, payroll processing, risk and compliance management, and HR tasks. Some PEOs offer a one-size-fits-all solution, whereas others offer customizable services that you can add or remove to fit your small business's needs. There are advantages and disadvantages to both. One bundled solution means you can grow into all the features without changing the pay structure, while an a la carte option is more tailored to your business and can save you money if you only need a few features, such as payroll and health insurance.
Inquire upfront about additional fees. For example, some companies charge for service cancellation. Make sure you thoroughly review the material the sales team gives you to spot any fees associated with service. If you're not sure, ask the sales representative. Also keep in mind that the pricing model, whether it charges per employee or as a percentage of income, does not include additional costs for healthcare and other employee benefits plans.
Many of the PEOs we evaluated have an employee minimum – that is, they require small businesses to have over a certain number of employees, usually five or 10, to qualify for their service. If you don't qualify, many companies offer administrative services organization (ASO) or HR outsourcing services, which may make sense for your business. While these services may be similar to the PEO model, they are not co-employment agreements.
Some companies also structure their services so that a certain number of employees need to enroll in health benefits for your business to qualify for service. Others require a minimum monthly salary if your business is below a certain employee threshold. Make sure you understand what your PEO expects from you. You don't want to have to cancel your services or pay an additional fee for falling below the PEO's employee minimum, for example.
PEOs operate under a co-employment model, where your employees will appear on the PEO's books for legal and tax purposes. This allows PEOs to act as massive corporations with hundreds of thousands of employees. The co-employment model means these companies can negotiate contracts with employee benefits providers for more favorable insurance rates on workers' compensation insurance and unemployment insurance. It also means they have the power and scope to build and leverage powerful time and attendance and payroll technology for small businesses.
Once you sign on with a PEO, you'll work closely with customer success managers and other team members to build out the services you need for your small business. Many of the companies we reviewed offer a la carte services, where companies can sign up for individual services instead of full bundles.
As your business grows, your PEO will adjust to your needs and work with you. Working with a PEO under the co-employment model is essentially partnering with a team of specialists to build out the administrative and back-end processes of your organization. If it makes sense for your business financially, these organizations can take a lot of the stress (and handle most of the legwork) out of running your business so you can focus on more important needs.
More than 150,000 small businesses partner with PEOs across the country to get high-quality benefits and proper HR support to keep their businesses running smoothly. There are more than 800 PEO services companies serving and operating in all 50 states. A PEO must adhere to both state and federal regulations, so some companies are divided up by region or even state.
As you search for a PEO, keep your own state and region in mind – some PEOs are only qualified to serve small businesses in some states. Most of the companies we reviewed are qualified to offer coverage in all 50 states. If you're curious about whether a PEO operates in your state or not, you can look it up in the National Association of Professional Employer Organizations' directory.
Due to the steady growth of the PEO industry, which increased during the third quarter of 2019 according to the NAPEO survey, we predict a stable retention rate or rise in the number of small businesses that partner with PEOs in 2020.
The PEO Model Act obligated PEOs to control their use of experience ratings for workers' compensation insurance. The CPEO program was created to monitor the number of PEOs the IRS certified that were eligible for better tax treatment. When the number of PEOs reached 700, only 30 were certified by the IRS. The increase and advancement of the PEO industry has led to the enactment of regulations in the past, so we anticipate additional regulatory compliance changes in 2020.
One striking difference between PEOs and human resource outsourcing options is the benefits they provide under the co-employment model. As PEOs continue to grow, we predict these organizations will offer more niche features and services that appeal to specific industries and companies.
In the future, we expect PEOs to increase their business reach by adding elements that appeal to typically overlooked businesses in need of specific HR and payroll services. For example, they may offer improved employee learning and development programs, including interactive courses, digital books, or even live and virtual seminars.
Engage PEO provides a solid offering in human resources, risk management, payroll and benefits services. It also has a strong training program that includes onsite and online training on a variety of topics. Engage's HR services are fully integrated and available via desktop, tablet and mobile devices, and its HR consultants double as licensed attorneys.
G&A Partners offers comprehensive human resource services, modern payroll technology, competitive employee benefits, workplace safety measures, and risk and compliance management, but its impressive training programs and technology are what make it our choice as the best HR outsourcing company for employee development.
It is recommended that you have at least five employees before working with G&A, and it charges a flat rate on a per-employee basis. The company does not list pricing on its website, so you will have to contact a representative for a custom quote.
G&A doesn't require long-term contracts. Instead of locking your business in for a year or longer, it provides its services on an ongoing basis. You can cancel services at any time with a 30-day advance notice.
G&A offers a number of convenient HR services to help hire, train and manage your employees. Small businesses that need comprehensive HR assistance are better suited for G&A's PEO services, whereas those that only need to outsource a few HR responsibilities are better off with creating an ASO plan. Although each plan offers many of the same features, the contract structure for these will be different – so work closely with your G&A representative to find the right service type for your business. Both plan structures allow you to scale services to match your business needs.
G&A can handle all of your HR needs. Noteworthy services include development and implementation of HR policies and procedures. Most PEOs offer this, but if you're a small business with a nonexistent HR department, G&A can help you start from scratch. It also provides HR audits and investigation, employee discipline and termination support, performance management and training, and unemployment insurance and claims administration. These are standard HR services, but G&A goes further by providing recruiting services, such as job sourcing, screening, job assessments, job description review and creation, applicant tracking, new-hire onboarding, and general recruitment services. Whether you use its PEO or HRO services, it provides robust HR support for small businesses.
G&A offers standard employee benefits, including health, dental and vision insurance. There are also flexible spending accounts, health savings accounts, health reimbursement accounts, employee assistance programs (EAP), short- and long-term disability, employee wellness and discount programs, and accident insurance. The fees for these plans may be separate from the monthly per-employee rate. Additionally, G&A handles employee questions regarding coverage and claims. This is a standout aspect of its service. Instead of your business wrestling with insurance carriers, G&A can assist with questions or disputes. It also takes care of healthcare reform matters with eligibility monitoring and annual IRS reporting.
G&A provides time and attendance software, time and overtime tracking, PTO accrual, vacation and sick leave tracking, and scheduling management. It offers a full suite of compliance and tax-related payroll services such as tax filings, wage garnishments, new-hire reporting and automated standard deductions. G&A provides a full-fledged payroll service on par with several of its competitors.
G&A offers standard accident prevention services to help keep your team safe and secure. This is especially important for businesses in hazardous industries. G&A can help develop employee safety manuals, conduct safety audits and inspections, carry out post-audit safety reports and trainings, and provide onsite and online safety training materials. It also helps you comply with OSHA regulations and provides workers' compensation.
One standout aspect of G&A Partners' HRO offering is its employee development programs. In addition to great employee training programs, G&A can provide performance management assistance for workers who have fallen behind. It provides multiple forms of support, such as helping you meet industry regulations, building education programs for your employees and tracking each worker's progress. You can use advanced HR technology to find employee competency gaps, match jobs and goals with available courses, and assign employee courses. The performance management system allows you to set and measure employee goals, keep employee performance records, and conduct 360-degree reviews.
An advantage of partnering with G&A is the size of the company. Some HR outsourcing companies we reviewed are major companies that support tens of thousands of small businesses. There are advantages to partnering with a big company, but some small businesses look for more personalized service with one-on-one support, and we found that G&A can provide this level of attention.
Another benefit of partnering with G&A Partners is the technology you'll have access to. The HR technology allows you to offer your employees several e-learning options. You can assign courses, and track employee results and improvement. This is great for growing teams and businesses that want their employees to continue learning and expanding their skill sets.
Healthcare, franchise service, manufacturing, nonprofit and professional service companies can especially benefit from G&A Partners. G&A specializes in these industries, providing industry-specific human resource options. Since each industry has its own guidelines and laws that it must follow, it is helpful to have a PEO or HR outsourcing company that is knowledgeable on those regulations for your industry.
One drawback of G&A is the lack of mobile options. We could not find a mobile application to manage human resources tasks on the go. This would be a valuable tool for companies spread out over several locations, or for those whose HR personnel is constantly on the move.
Another limitation is the lack of information on the company's website about the cost of its services. While this isn't a dealbreaker, many small business owners want a quick idea of how much each service costs, even if it's just a ballpark estimate. Since G&A Partners offers bundled and a la carte services, it is unclear what the cost may be from simply viewing the info on the website. When you get a price quote from a representative, ask about the cost of additional services you may need in the future. You don't want to be caught off guard with unexpected costs as your business expands.
We interacted with G&A sales representatives by email and phone, posing as a small business owner interested in outsourcing our human resources tasks. Its sales representatives were excellent. They gave us all the necessary info about its services, as well as helpful advice for our human resources outsourcing search, never pushing us for a sale. Instead, they were cordial and supportive of our inquiry.
G&A Partners has several helpful online resources, including articles, guides, webinars, videos and whitepapers. It also provides personalized support. When you sign up with G&A Partners, you'll have a client advocate who coordinates your business's services; this person can answer many basic questions related to your service and refer complicated issues to a team of specialists for the coverage area in question.
Tandem HR is a comprehensive HR outsourcing (HRO) company and PEO that offers a wide range of services to small businesses, with HR consulting, payroll administration, employee benefits, training programs, recruiting services and risk management. As both a PEO and HRO, Tandem HR is a flexible human resources company for small businesses with 10 or more employees. Many small businesses start with HRO services and then scale up to PEO services, which involve a separate co-employment agreement between the provider and the small business. By offering both services, Tandem HR shows it has the bandwidth and quality to provide small businesses with valuable HR support.
XcelHR provides human resources, benefits, payroll and risk management services for businesses across the country and of all sizes. Many PEO companies we reviewed require you to have a minimum number of employees to use their services, usually 5-10, but XcelHR has flexible acceptance standards. This is advantageous to very small businesses that need HR services or other PEO features, as they may not qualify with many other companies.
Small businesses that partner with ADP get top-of-the-line human resource services, including payroll, compliance, risk management, employee benefits, training and development, and great customer support. ADP TotalSource provides personalized PEO services throughout all 50 states, and even offers international client service through their partnership with Globalization Partners. In addition to its fantastic customer service, ADP's benefits offering is ideal for any small business seeking outsourced HR services. Thanks to its impressive offering, ADP is a double winner, it's our best pick for customer service in our PEO category and best for benefits in our human resources outsourcing (HRO) category. ADP is accredited by the Better Business Bureau, earning an A+ with the rating agency. It is also certified by the IRS and accredited by the Employer Services Assurance Corporation.
Paychex provides businesses with comprehensive PEO features, including risk management, payroll, employee benefits, HR administration, and numerous onsite and virtual training solutions. This nationwide company represents thousands of employees and businesses of all sizes, so you'll be joining a provider that is equipped to handle your organization. It also assigns you an HR generalist who remains your point person as your business grows and a mobile application so you can access your services on the go. Plans are scalable as your company grows. Paychex is certified by the IRS and accredited by the Employer Services Assurance Corporation (ESAC) and the Better Business Bureau, with an A+ BBB rating. For these reasons, Paychex earns our pick for best PEO service for midsize businesses.