Why choose a PEO (Professional Employer Organization)?

First you might be asking yourself what is a PEO? Also known as a Professional Employer Organization or Professional Employment Organization, a PEO is a service that allows employers to outsource their human resources tasks. The top reasons your company might choose a PEO is for payroll administration, employee benefits (especially health insurance), workers’ compensation and liability insurances, and monetary savings. Read on to find out exactly what these services can do for your business.


For most small businesses, the hassle of administering payroll is rarely worth the investment in time and energy. If you take into consideration all of the parts of your business that are affected by your payroll function, you will see that payroll is much more than just cutting paychecks. When using a PEO, you’ll enjoy the benefit of easier compliance including lowering the risk of health care reform penalties. In addition, a PEO company will possess a higher level understanding of tax and compliance matters that you may not be aware of. Over time, your business will have the ability to more efficiently manage cash flow and offer employees multiple options for payment including Electronic Pay Cards and Efficient Funds Transfer.

Affordable Health Insurance

When you use a PEO, you gain access to a larger pool of employees to be quoted for health insurance with. Therefore, if your employee group is small, comprised with older employees, or has many individuals who are sick, the larger pool gives you access to more affordable health insurance. With better access to more affordable plans, you will be able to offer your employees more comprehensive health insurance coverage for better rates. Employee Leasing Companies specialize in benefits administration as well, assisting your business with enrollment and claims. They can also help with compliance issues in this area, while keeping you benefits costs in line with the Affordable Care Act’s thresholds and requirements.

Shift of Liability

Through most PEO arrangements, your business can obtain workers’ compensation insurance, commercial auto insurances, umbrella policies, and business owner’s policies. Any or all of these types of insurance may be right for your business and depending on your agreement with the Professional Employer Organization, you may choose to take all or none of them in addition to the payroll and health insurance options. One of the main attractors to a PEO is that liability is shifted from the organization to the Employee Leasing Company.

Less Expensive than Employing a Full Time HR Person

The single most convincing reason to use a PEO is that in most cases (depending on company size), it is less expensive than hiring a full time Human Resources Professional. The PEO takes care of all of the functions that an employee could perform in-house, and in some cases for as low as a quarter of the cost. Alternatively, if a business owner has been focusing on these responsibilities, other areas of the business may be suffering – areas like new business development and operations management – which are vital to any business. Working with a PEO may have a ripple effect across your business, with better employee management as well as more time for other business operations.

All in all, working with a PEO is a big decision for any business, but can stand to benefit you in many ways. Further research and obtaining quotes from several companies will give you a better perspective on if a Professional Employer Organization is right for you.