The Best PEO Service Providers of 2021

A PEO is a company that can take care of HR responsibilities, primarily for small and midsize companies. PEOs have drawbacks, but can manage HR functions, like employee training and development, risk and compliance, workers' compensation, payroll, and benefits, with some offering these services bundled in a preset package, and some offering customizable plans with a la carte features.

PEOs differ from typical HR outsourcing services by operating 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 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 out a lot of the stress (and handle most of the legwork) of running your business so you can focus on more pressing needs.

Roughly 175,000 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 up by region or even state.

Did you know? There are more than 900 PEO providers serving and operating in all 50 states.

As you search for a PEO, keep your state and region in mind – some PEOs are only qualified to serve small businesses in some states, whereas others have global partnerships. Most of the companies we reviewed are qualified to offer coverage in all 50 states. If you're curious about whether a certain PEO operates in your state or not, you can look it up in the National Association of Professional Employer Organizations' directory.

PEOs provide several beneficial resources for small businesses. Since 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.

HR Services

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

Employee Benefits

Since PEOs co-employ multiple businesses' employees, they can offer better employee benefits than you might otherwise be able to offer. PEOs typically offer insurance plans like medical (such as PPO, POS, EPO, HNO and ACO plans), dental, vision, life, and long- and short-term disability insurance. Some offer additional plans like flexible spending accounts, health savings accounts and health reimbursement arrangements.

Employees often receive retirement plans, such as 401(k) and Roth IRA plans, as well as additional benefits like commuter and parking discounts, home and auto insurance discounts, and an employee assistance program (EAP). Many employers receive Affordable Care Act guidance and 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 together, including payroll and taxes. PEOs can process your employee payroll with CPAs, prepare and distribute payroll checks, employ direct deposit, 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 deposits and filings, along with detailed management reports. The PEO you partner with should be able to take care of all your employee payroll needs. By including this cost into the PEO's total, you can ultimately save money on your payroll being handled by financial professionals.

Bottom line: A PEO allows you to operate your business with the peace of mind that your employees are being paid properly and on time.

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 like 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 your business takes the appropriate measures to maintain workplace safety. Some PEOs provide employment practices liability insurance 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

A benefit that some PEOs offer is employee training and development. Many offer 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, workplace technology, and even industry-specific training.

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

Customer Service

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. You want to partner with a company that provides specialists in each area, as well as a relationship manager who can help you take advantage of all 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 certification ensures that your account coordinator is more than just a company relationship manager.

Choosing a PEO isn't a difficult process, but it's important to prioritize certain things when looking for the right company. As a general rule, it's a good idea to get as much information gathered about the company before you contact them. That way, you can have a good understanding of the services they offer, 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. Below is a three-step guide on choosing a PEO that can seamlessly integrate with your company.

1. Define Your Business's Needs.

The first step to any buying decision is understanding exactly what it is your company needs from 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.

Tip: As your company changes and more people are brought on board, you want to work with a PEO that can meet your changing needs.

2. Make a Shortlist of Potential Companies.

Our reviews are a great resource. Learn about the services the PEOs that we selected offer, 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 out there. 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 type of PEO structure would be better for your business.

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

3. Contact PEOs, and Make Your Decision.

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

How can PEO services help you attract great employees to your business?

When small businesses offer competitive benefits to potential employees, they are in a better position to attract and retain top talent; this is where PEOs come in. A PEO allows you to offer your employees affordable health benefits with reputable health insurance companies, and additional benefits, like supplemental insurance plans (e.g., FSA, HSA and HRA), employee perks (e.g., home and auto insurance discounts, parking and commuting benefits), and retirement savings accounts like 401(k) and Roth IRA plans.

Additionally, a PEO can help you maintain risk and legal compliance. This can reduce legal problems for your business, helping you earn a positive reputation in your community and reducing employee turnover. Since many employees seek an employer that can offer continued education, partnering with a PEO that offers training and development courses can entice top talent as well.

What is the difference between a PEO and a staffing company?

Although they seem similar, PEOs and staffing companies serve different HR needs. The primary benefit of a PEO is that it handles tedious and time-consuming HR tasks, like administrative work, payroll, employee benefits, risk and compliance, and employee training and development.

A staffing company, on the other hand, primarily serves short-term or temporary employment needs. Staffing companies handle other HR-related tasks, like payroll and unemployment taxes, but often with much higher fees for these services. Small businesses should only consider partnering with a staffing company if they need temporary staffing.

What is the difference between hiring a PEO and an HR outsourcing (HRO) company?

A PEO is an affordable HR option for many small businesses, as it can handle all your HR functions under a co-employment model. A PEO removes the burden of many HR tasks and gives small businesses peace of knowing that critical functions like risk and compliance are being managed by HR experts.

HRO services can handle many of the same HR functions as a PEO, but they operate as a separate entity instead of through an employer partnership. Businesses that use an HRO can choose the HR functions they need to outsource, whether that be just payroll and employee benefits or a full-service HR suite. HR outsourcing is better for larger companies that only need assistance with specific HR tasks.

What is the difference between a PEO and an ASO?

A PEO and an administrative services organization (ASO) both provide human resources services, with one major difference: the employment relationship. PEOs use a co-employment model (meaning the PEO is the "employer of record" for employees); under an ASO partnership, the ASO offers assistance with HR services while the employees remain under the ownership of your organization.

Another difference between PEOs and ASOs is the specific services they offer. Both PEOs and ASOs offer HR services, but ASOs do not provide workers' compensation insurance or employee benefits programs like a PEO does. ASOs are also more flexible in terms of the HR services you can outsource, whereas PEOs typically bundle services.

What do the best PEO services have in common?

The best PEO service providers satisfy your human resources needs, whether those needs are HR administration, employee benefits, payroll, workers' comp, risk and compliance management, or training and development. They use the latest technology so that businesses and employees can easily access their information. Great providers offer HR expertise and customized, one-on-one assistance to help you navigate your PEO services, regardless of how long you've worked with them. The best professional employer organization services are transparent, easy to communicate with, and they are accredited by ESAC and the IRS.

What are the disadvantages of using a PEO?

When you partner with a PEO, that company is technically a co-employer of your staff. This can cost you some internal control over your team and processes, possibly having an outside influence on your company culture. Having an outside company manage your payroll and taxes might make you feel a lack of security as well. For these reasons, it is important to partner with a PEO that you trust and believe in. The right PEO can be a great asset to your company.

How long does it take to get started once I choose a PEO?

Transitioning your HR processes over to a PEO is a big undertaking, but it can ultimately simplify your HR responsibilities. The average PEO transition takes roughly four weeks, starting at the beginning of a payroll cycle, but it could take anywhere from three to six weeks. During this time, the PEO will work closely with your team to ensure all the proper paperwork is complete and successfully transitioned.

What is the advantage of using a PEO for recruiting?

One advantage of using a PEO is the ability to recruit top candidates. PEOs typically offer small businesses access to comprehensive employee benefits that they otherwise might not be able to afford, and these benefits can greatly impact the quality of employees they can hire and retain.

Additionally, PEOs employ experienced HR professionals who can help small businesses implement recruiting and hiring best practices. They understand the current employment laws and regulations that apply to recruiting, so they can help small businesses stay compliant.