As a small business grows, it might need help with HR and backoffice tasks. Instead of hiring a full-time or part-time role for those jobs, oftentimes, we see these businesses turn to PEOs for that work. We know that it can be hard to sift through the internet to find the right fit so in today’s article, we’re introducing you to the six most well-known PEOs out there, and a new type of organization we’re seeing in the marketplace called an Alternative Employer Organization.
Additionally, there are great resources that provide price comparisons, customer reviews, and pros and cons on trusted sites like G2 and Software advice. If you're looking for more information about any of the companies we've listed here.
What is a Professional Employer Organization? (PEO)
Professional Employer Organizations (PEOs) are companies that provide HR and employment-related services to small businesses. These services may include payroll processing, employee benefits administration, workers' compensation insurance, and compliance assistance. Some well-known PEO providers include ADP TotalSource, TriNet, Insperity, Paychex, and Justworks.
When choosing a PEO, it's important to consider your business's specific needs and budget.
Here are some factors to consider when evaluating PEO providers:
- Services offered: Make sure the PEO offers the services your business needs, such as payroll processing, benefits administration, and compliance assistance.
- Cost: Compare the costs of different PEO providers to find one that fits within your budget. Be sure to ask about any additional fees or hidden costs. (There are a lot!)
- Reputation: Check the PEO provider's reputation by reading reviews and testimonials from other small business owners.
- Customer service: Look for a PEO provider that offers excellent customer service and support.
- Industry expertise: Some PEO providers specialize in serving specific industries, such as healthcare or hospitality. If your business operates in a specific industry, look for a PEO provider that has expertise in that area.
Ultimately, the best PEO provider for your small business will depend on your specific needs and budget. It's important to do your research and evaluate multiple providers before making a decision.
What types of businesses are good fits for PEOs?
Professional Employer Organizations (PEOs) can provide a range of HR and employment-related services to businesses of all sizes, but they are particularly beneficial for small and medium-sized businesses that may not have the resources or expertise to manage these tasks in-house.
PEOs can help businesses in various industries, but some industries may benefit more than others. For example, businesses in industries that require a lot of specialized HR and compliance expertise, such as healthcare, finance, or manufacturing, may find that outsourcing HR functions to a PEO provider can help them save time, reduce risk, and ensure compliance with complex regulations.
In general, businesses that are looking to:
- streamline HR and administrative tasks, such as payroll processing, benefits administration, and compliance management,
- reduce the risk of non-compliance with employment laws and regulations,
- improve their ability to attract and retain top talent by offering competitive benefits and HR programs, and
- free up time and resources to focus on their core business activities, may benefit from outsourcing to a PEO.
What businesses are NOT a good fit for PEOs?
While outsourcing to a Professional Employer Organization (PEO) can benefit many businesses, there may be situations where outsourcing may not be the best option. Here are some situations where a business may not want to outsource to a PEO:
- Businesses with in-house HR expertise: If your business already has a robust HR team with expertise in payroll processing, benefits administration, and compliance management, outsourcing to a PEO may not provide much added value.
- Businesses that require a high degree of control over HR functions: Some businesses may prefer to maintain complete control over their HR functions and may not want to delegate these responsibilities to a third-party provider.
- Businesses with unique HR needs: Some businesses may have unique HR requirements that a PEO may not be able to accommodate. For example, if your business operates in a highly regulated industry, like home health care, with specific HR requirements, you may need to manage these functions in-house.
- Businesses with very small employee populations: For very small businesses with only a few employees (like employers with less than 25 employees), outsourcing HR functions to a PEO may not be cost-effective.
- Businesses with limited budget: While outsourcing to a PEO can provide many benefits, it does come with a cost. If your business has limited resources, you may need to prioritize other areas of your business over outsourcing HR functions.
Now let’s break down the most well-known PEOs in the marketplace and introduce you to their new competitor, AEOs. We have included pricing costs when they were published on their website, and included best fits and reviews from their websites. As a general rule, PEO services should cost between 1-2% of your gross annual payroll which will include the PEO service fees and the insurance that you offer to employees. So if you spend $500,000 in annual payroll, your PEO cost should be between $50,000-$100,000 annually. That number may seem expensive, but remember: that price will include your insurance premiums and should help offset an in-house payroll or HR hire you would need to make if you did not work a PEO.
ADP Totalsource - A team of HR professionals
ADP TotalSource is a Professional Employer Organization (PEO) that provides comprehensive HR solutions for small and medium-sized businesses. It offers a range of services, including payroll processing, benefits administration, compliance management, and risk management, to help businesses streamline HR functions and stay compliant with employment laws and regulations.
ADP TotalSource also provides businesses with access to a team of HR professionals who can offer guidance and support on a range of HR issues, including recruitment, employee relations, and performance management. Additionally, ADP TotalSource offers a variety of employee benefits programs, such as health insurance, retirement plans, and flexible spending accounts, to help businesses attract and retain top talent.
By outsourcing HR functions to ADP TotalSource, businesses can reduce administrative burdens and focus on their core business activities. ADP TotalSource also helps businesses manage risk and stay compliant with employment laws and regulations, which can help reduce the risk of costly penalties and lawsuits.
ADP Totalsource does not publish their cost for services on their website, but many reviews report that their services start at $85/month. In addition, ADP Totalsource is commonly listed as a great organization for employers with many employees, so if you’re a larger company with more than 100 employees, ADPTotalsource may be a great fit for you.
Trinet - Focused on customized HR solutions
TriNet is a Professional Employer Organization (PEO) that provides HR solutions for small and medium-sized businesses. It offers a range of HR services, including payroll processing, benefits administration, compliance management, and risk management, to help businesses streamline their HR functions and stay compliant with employment laws and regulations.
In addition to these core HR services, TriNet also offers a range of value-added services, such as employee benefits programs, HR consulting, and training and development programs. These services are designed to help businesses attract and retain top talent, while also improving overall business performance.
One of TriNet's key strengths is its focus on providing customized HR solutions tailored to the unique needs of each business it serves. The company offers industry-specific expertise, which can be particularly beneficial for businesses in specialized industries such as healthcare, technology, and finance. Overall, TriNet's comprehensive HR solutions can help businesses save time, reduce risk, and improve overall HR and business performance.
Trinet does not list their pricing on their website, but they do have comparisons against other PEOs and employers can request a quote directly on their website here. They work with many industries, and claim on their website that they have 22,000 clients and work with over 348,500 employees. That means that their average employee count by employer is 16 employees. So if you’re in the small business space 10-20 employees, Trinet could be a great option.
Insperity - Personalized service and support
Offers business solutions to small and medium-sized businesses. The company's services include payroll processing, benefits administration, compliance management, and risk management, as well as employee relations support and performance management. Insperity also offers a range of value-added services, such as employee benefits programs, retirement planning, and employee training and development programs, to help businesses attract and retain top talent.
One of Insperity's key strengths is its focus on providing personalized service and support to each of its clients. The company assigns a dedicated team of HR specialists to each client, who work closely with the business to understand its unique needs and provide customized HR solutions.
Insperity also offers a range of technology solutions to help businesses streamline HR processes and improve overall efficiency. This includes its proprietary Workforce Administration platform, which provides businesses with real-time access to HR data and analytics. Overall, Insperity's comprehensive HR solutions and personalized approach can help businesses improve HR performance, reduce administrative burdens, and focus on their core business activities.
Insperity does not providing pricing on their website, but you can request a meeting with their sales team to get a dedicated quote. Insperity lists on their website that they have CPEO status, which is a certified professional employer organization designated by the IRS. According to inside Indiana Business, “CPEOs offer clients various benefits including limited liability, financial security, and no wage-based restarting. When looking for a strategic partner, these reasons exemplify the value of partnering with a CPEO.”
Paychex PEO - A wider array of value-added services
Paychex PEO (Professional Employer Organization) is a service offered by Paychex, a leading provider of HR and payroll solutions for small and medium-sized businesses. The Paychex PEO service offers businesses a range of HR solutions, including payroll processing, benefits administration, compliance management, and risk management, as well as employee relations support and performance management. By outsourcing HR functions to Paychex PEO, businesses can reduce administrative burdens and focus on their core business activities. Paychex PEO also helps businesses manage risk and stay compliant with employment laws and regulations, which can help reduce the risk of costly penalties and lawsuits.
In addition to its core HR services, Paychex PEO offers a range of value-added services, such as employee benefits programs, retirement planning, and employee training and development programs. These services are designed to help businesses attract and retain top talent, while also improving overall business performance.
Paychex PEO also offers a range of technology solutions to help businesses streamline HR processes and improve overall efficiency. This includes its proprietary Paychex Flex platform, which provides businesses with real-time access to HR data and analytics. Overall, Paychex PEO's comprehensive HR solutions, value-added services, and technology solutions can help businesses improve HR performance, reduce administrative burdens, and focus on their core business activities.
Paychex PEO services touts a 4.5 rating on HR client satisfaction, according to their website. Paychex PEO also claims to save you on average of $1,775 per employee per year when switching to their PEO service. They also do not publish pricing so you will need to request pricing from their website.
Justworks - Great for small and medium-sized businesses
Justworks is a cloud-based HR technology platform that provides a range of HR solutions to small and medium-sized businesses. It offers a range of HR services, including payroll processing, benefits administration, compliance management, and risk management, to help businesses streamline their HR functions and stay compliant with employment laws and regulations.
In addition to these core HR services, Justworks also offers a range of value-added services, such as employee benefits programs, 401(k) plans, and employee training and development programs. These services are designed to help businesses attract and retain top talent, while also improving overall business performance. One of Justworks' key strengths is its focus on providing a modern, easy-to-use platform that is accessible to businesses of all sizes. The platform is designed to be user-friendly and intuitive, with features such as a self-service portal for employees and a mobile app for on-the-go access.
Justworks also offers a range of integrations with other HR and business applications, such as QuickBooks, Slack, and Trello, to help businesses streamline their workflows and improve overall efficiency. Overall, Justworks' comprehensive HR solutions, value-added services, and user-friendly platform can help businesses improve HR performance, reduce administrative burdens, and focus on their core business activities.
Justworks does list some pricing on their website, at $59/month or $99/month for their basic and plus plans. This does not include your insurance premiums, but is the cost of services at Justworks. They have an editors score of 96/100.
What if I like some aspects of a PEO but do not want to be in a co-employment relationship with a Professional Employer Organization?
What is an AEO?
An Alternate Employer Organization (AEO) is a type of outsourcing service that provides an alternative to traditional HR outsourcing or PEO (Professional Employer Organization) services. An AEO typically provides a range of services similar to those offered by PEOs, including payroll processing, benefits administration, and HR management.
However, unlike a PEO, an AEO typically only takes on a portion of an employer's workforce, rather than all of it. In a PEO, you essentially lease your employees from the PEO (who is their employer) and your insurance rates and premiums are a conglomerate rate of the entire PEO. In an AEO model, you get to maintain your federal EIN for tax filing and your employees are employees of your tax ID number.
You also get the benefit of pricing out your insurance and not including higher or larger risks that are often associated with a PEO. Again, if you’re in a high-risk industry and you need to be able to spread risk out, a PEO is likely a great option for you. However, if you’re a relatively healthy small business employer or like the idea of customizing an insurance package that is ideally suited for your employees and work culture, you would enjoy the benefits of an AEO.
An AEO is often used by companies that need to scale their workforce quickly or do not want to bring internal HR resources in house, such as those in the healthcare, professional white collar companies, tech services, retail, and hospitality industries. By outsourcing the HR work of onboarding, managing insurance, maintaining HR compliance, and employee taxes to an AEO, these companies can quickly and easily expand their workforce without incurring the overhead costs associated with hiring and managing additional employees.
What does an AEO do?
An AEO typically assumes responsibility for all HR-related tasks for the portion of the workforce it manages, including payroll processing, benefits administration, and compliance management. This allows the client company to focus on its core business activities, while still maintaining control over the day-to-day operations of its workforce.
Overall, an AEO provides an alternative outsourcing option for companies looking to scale their workforce quickly and efficiently, while still maintaining control over their workforce operations.
PEOs are great options for small business employers in high risk industries, but other organizations may prefer the benefits of working with an AEO service instead. To explore Whirks AEO services, click here or schedule a time to talk with one of our business development experts.