The Best PEO Service Providers of 2023

A professional employer organization (PEO) provides human resources outsourcing, benefits administration, payroll support and more to small and midsize businesses. PEOs differ from HR outsourcing companies because of the co-employment model: The PEO absorbs your employees legally to leverage large numbers in benefits markets to obtain competitive pricing. The best PEOs provide all of the HR-related services you need, including guidance that a small business without a full-time HR team needs, while ensuring employees can get their HR-related questions answered.

What Is a Professional Employer Organization (PEO)?

A PEO is a company that can take care of HR responsibilities, primarily for small and midsize companies. PEOs have drawbacks, but they can manage HR functions, like employee training and development, risk and compliance, workers’ compensation, payroll and benefits. Some PEOs bundle these services in a preset package, and others offer customizable plans with a la carte features. When you partner with a PEO, you enter a co-employment agreement, which means the PEO is the legal employer of record (EOR) for your employees.

PEOs offer two main pricing structures for small and midsize businesses: They charge either a per-employee fee (roughly $40 to $160 per month) or a percentage of your total monthly payroll (roughly 3% to 12%). There are advantages and disadvantages to both types of pricing. The best pricing model for your business depends on factors such as your business type, the number of employees you have and the PEO services you want.

PEOs typically do not offer free trials of their HR services, and contract lengths and structures vary by company. Some PEOs only offer long-term contracts, while others don’t require a contract at all. Cancellation policies also vary, but business owners typically need to provide at least 30 to 60 days’ notice before terminating their PEO service. Some companies allow you to leave at any time for any reason; others charge you a fee for leaving.

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.

Plan Structure

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 provide a one-size-fits-all solution, whereas others offer customizable services that you can add or remove to fit your small business’s needs. Both models have advantages and disadvantages. A bundled solution means you can grow into all of 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 need only a few services, such as payroll and health insurance.

Additional Fees

Inquire upfront about additional fees. For example, some companies charge a fee if you cancel service. Thoroughly review the materials the sales team gives you to spot any costs associated with service. If you’re not sure, ask the sales representative. Also, remember that the pricing model, whether it charges per employee or a percentage of income, does not include additional costs for healthcare and other employee benefits.

Employee Minimums

Many of the PEOs we evaluated require a minimum number of employees — usually five — to qualify for their services. (Another type of minimum you may see is a minimum monthly salary if your business is below a certain employee threshold.)

If you don’t qualify, many companies offer administrative services organization (ASO) or HR outsourcing services. While these services may be similar to the PEO model, they do not have co-employment agreements.

Make sure you understand what your PEO expects from you. You don’t want to have to cancel your service or pay an additional fee for falling below the PEO’s minimum requirements.

PEOs operate under a co-employment model, meaning your employees 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. PEOs can negotiate contracts with employee benefits providers for more favorable rates on unemployment and workers’ compensation insurance. It also gives them the power and scope to build and leverage powerful time-tracking and payroll technology for small businesses.

When you sign on with a PEO, you’ll work closely with customer success managers (and other team members) to build the services you need for your small business. As your business grows, your PEO can adjust to meet your needs. Working with a PEO under the co-employment model essentially means that you’re 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 out of running your business so you can focus on more pressing needs.

Roughly 173,000 small and midsize businesses partner with PEOs to get high-quality benefits and proper HR support to help their businesses run smoothly. A PEO must adhere to both state and federal regulations, so some companies are divided by region or state.

PEOs provide several beneficial resources for small businesses. Because they focus on HR tasks and administration, you are left with more time to focus on your business. On top of that, PEOs can offer better benefits to your employees than you might be able to obtain on your own. This can help you attract and retain top talent. Many employer organizations use mobile applications and online portals for small businesses and employees to easily access important information, like payroll, benefits and training courses.

Although not every business will need every PEO feature available, here are some of the top PEO features that could help your business.

Administrative HR Services

One advantage of partnering with a PEO is having a professional organization take care of all your HR services. PEOs can create your employee handbook and policies, onboard new hires, cover HR administrative tasks, offer unemployment assistance, and help with compliance reporting and employee termination. They often have online HR reporting tools, employee self-service options and advanced HR technology.

Employee Benefits

Because PEOs co-employ multiple businesses’ employees, they can offer better employee benefits than you might otherwise be able to provide. PEOs typically offer medical, dental, vision, life, and long- and short-term disability insurance. Some offer additional plans, like flexible spending accounts (FSAs), health savings accounts (HSAs) and health reimbursement arrangements (HRAs).

Employees often receive retirement plans, such as 401(k) plans, as well as additional benefits, like commuter and parking discounts, home and auto insurance discounts, and access to employee assistance programs. Many employers receive guidance on Affordable Care Act (ACA) compliance, while their employees get access to consulting services by licensed benefits professionals. The benefits vary by PEO, as does the cost.

Payroll

PEOs offer small businesses an affordable way to package all of their HR responsibilities, including payroll processing and taxes. PEOs can process your employee payroll, prepare and distribute payroll checks, administer direct deposits, and process employee liens and garnishments. PEOs take care of your employees’ paid time off, track their sick and vacation time, and prepare and distribute their W-2s.

Many PEOs offer quarterly and year-end state and federal tax deposits and filing, along with detailed management reports. The PEO you partner with should be able to handle all of your employee payroll needs. By including this cost in the PEO’s total, you can ultimately save money on your payroll.

Risk and Compliance

Managing risk and legal compliance is an important part of running a small business. However, if you work with a PEO, it can manage much of that for you. Depending on your business’s industry, this could be a great deal of work handled by someone else. The level of compliance and risk that a PEO manages varies, but many PEOs perform tasks such as managing ACA coordination and compliance, running on-site safety inspections, performing accident investigations and job hazard analyses, allocating workers’ compensation coverage, and maintaining OSHA compliance for your business.

A PEO ensures that your business takes the appropriate measures to maintain workplace safety. Some PEOs provide employment practices liability insurance (EPLI) coverage, safety and loss prevention programs, Health Insurance Portability and Accountability Act (HIPAA) compliance, and Consolidated Omnibus Budget Reconciliation Act (COBRA) insurance. There are several other compliance measures that PEOs can take to keep your employees safe and ensure that your business abides by legal employment guidelines. This alone is reason enough for some businesses to partner with a PEO.

Training and Development

Some PEOs offer employee training and development. Many provide online and on-site training courses that your employees can take to enhance their skills. They can access courses on communication, sexual harassment and discrimination, hiring and firing, disciplinary actions, leadership, social media and workplace technology, as well as get industry-specific training.

Not all PEOs provide continuing-education courses, and the courses that PEOs do offer vary. However, at the very least, most PEOs can train your staff on necessary workplace concepts, like avoiding workplace discrimination and sexual harassment.

Customer Support

Make sure the PEO you partner with assigns you a designated team of experts who can handle your HR, risk management, benefits and payroll needs. Work with a company that provides specialists in each area, along with a relationship manager who can help you take advantage of all of the services the PEO offers. Sometimes, the HR consultant doubles as a relationship manager, which is also a good option. The best companies have HR consultants who are certified by the Society for Human Resource Management (SHRM). SHRM certification ensures that your account coordinator is more than just a company relationship manager.

Generally, it’s a good idea to get as much information as you can about a company before you contact it. That way, you get a good understanding of the services the PEO offers, as well as the pricing and contract structures, before heading into the sales process.

Working with accredited agencies is always a good option, but accreditations are not the be-all and end-all of the PEO world. A few companies on our list that aren’t accredited are reputable. Here is a three-step guide for choosing a PEO that can seamlessly integrate with your company.

1. Define your business’s needs.

The first step in any buying decision is to understand exactly what your company needs. In the case of a PEO, are you looking for health benefits? COBRA administration? A seamless cloud-based platform to keep HR information organized? It’s also important to partner with an organization that can support your growth. That is one of the major advantages of working with a PEO: It can help your organization grow from an administrative perspective.

2. Make a short list of potential companies.

Our reviews are a great resource. Learn about the services offered by the PEOs on our list, and get familiar with their customer service and the implementation process. Any of our best picks would be a good option for your business. It’s your job to match your needs to the right company. This is especially true when it comes to pricing and contract structure. Focus on the size of your organization, your growth plans and whether a specific PEO structure would be the best for your business.

Once you’ve narrowed your options to two or three PEOs, you can start the next step in the process.

3. Contact PEOs, and make your decision.

Contact the sales teams of PEOs you’re interested in so you can get a specific picture of what your business partnership would look like. Ask about additional fees, estimated costs and other features. The sales process should be smooth and simple. If you have trouble, it could be an early indication of a partnership you shouldn’t pursue. Decide on the PEO that fits your business’s needs most closely, and work with a company that you can grow with as your business reaches the next level.

The needs of employees have changed drastically over the past few years, which means employers must seek to partner with PEOs that are evolving to meet those needs. Because the PEO market is projected to grow exponentially over the next five years, employers can feel confident that top PEOs on the market are doing just that. Employers should expect to see advanced tools — such as employee self-service capabilities, mobile applications, enhanced employee benefits (and administration) and legal compliance assistance — become staples of PEO offerings.

As many employees have remote and hybrid work arrangements, they need software to be accessible both inside and outside the office. PEOs offer extensive cloud-based technology platforms that are simple and easy for everyone to use from any location and device. This is essential for companies with different types of workers, especially for ensuring that sensitive HR-related information is properly secured.

The types of benefits employees prioritize have also shifted in recent years, which means PEOs must modify their benefit offerings and administration to stay competitive. Past employee benefits, like company lunches or other employee perk programs, may no longer be possible or practical for many organizations. Instead, employees are prioritizing benefits like flextime, sick leave, affordable health insurance, and professional learning and development opportunities. PEOs are continuously evolving so that employees can easily get and manage the benefits they want.

By working with a PEO that’s up to date with technology, you can track flexible work hours and provide remote workers with a standardized, simple HR, payroll and benefits solution. This can go a long way for smaller companies that are looking to combat burnout among managers and employees alike, as many processes can be automated, especially from an HR perspective.

Although legal compliance has always been important, the shift to hybrid and remote work has made it even more vital. As PEOs navigate employment and labor laws, they must work closely with small businesses to ensure that the owners are maintaining a safe and compliant workplace, regardless of where their employees are located.