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We updated this page with information on the upcoming PEO trends for 2021.
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|
Paychex is ideal for midsize businesses because of its scalability and the HR generalist the company provides to help you manage your services. The HR generalist remains the point person as your business grows and changes, which means you'll receive personalized coverage even as your business grows.
November 2020: Paychex has added new features to its platform to better support businesses, and their employees, during the COVID-19 pandemic. The new services include a PEO protection plus package that provides businesses with cyber liability and employment practices liability insurance. In addition, expanded features now include EEO-1 compliance; tax lookup, a resource where businesses can quickly look up state, local, and unemployment taxes; a peer review feature for work teams; and a new employee user experience, where employees can track their hours, request time off, and review timecards from their smartphones.
April 2020: Paychex is continuing to update its online technology to aid customers during the coronavirus (COVID-19) pandemic. The government recently approved the Paycheck Protection Program, which offers financial assistance for small businesses to pay their employees and other operating costs. To help small businesses quickly and conveniently apply for this program, Paychex has updated its technology platform to package all the data that a small business owner would need for the application in one place.
Paychex is certified by the IRS and accredited by the Employer Services Assurance Corporation. Not all the companies we reviewed had this level of certification. Paychex represents thousands of employees and businesses of varying sizes, so you'll be joining a company that has the infrastructure to support your business as it grows. For these reasons, Paychex is the PEO we recommend for midsize businesses.
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.
The coronavirus pandemic forced many businesses to abruptly change business operations, including how they manage their human capital. With work-from-home policies and flexible working arrangements becoming the norm, we anticipate the PEO industry will accommodate these changes in 2021. PEO software will prioritize self-service options that allow employees to record their hours and modify their benefits remotely.
Small businesses and PEOs will need to work closely together to modify and administer new employee benefits based on employee needs. Employees are prioritizing benefits like flextime, sick leave and affordable health insurance. PEOs must continue evolving to let employees easily manage the benefits they want.
As many companies focus on diversity and inclusion initiatives in 2021, PEOs may increase their virtual education and training programs to help business leaders understand the challenges and best practices for creating an inclusive workplace.
Although legal compliance has always been important, the pandemic has created an even bigger need for this. As PEOs navigate employment and labor laws, they will need to work closely with small businesses to ensure the owners are maintaining a safe and compliant workplace.
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.
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.