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What is a PEO and Why Should Businesses Consider Joining One?

Human Resources

What is a PEO and how can joining one benefit your small business? A professional employer organization (PEO) is an efficient way to outsource key human resources functions (payroll, employee benefits, workers' compensation, etc.), and enables business owners to maintain focus on running and growing their organization.

Employee Benefits Similar to Fortune 500 Companies

As part of this professional relationship, a PEO offers:

  • Best practices from a dedicated HR professional
  • Human resource management
  • Benefits administration
  • Insurance plans
  • Time and attendance
  • Benefit accounts
  • State unemployment insurance (SUI) administration
  • 401(k) retirement plans
  • Payroll administration

Under this arrangement, business owners retain key responsibilities for daily operations management, including supervision and management.

"Businesses may want to consider investing in a PEO because they offer a full suite of benefits usually associated with large corporations and Fortune 500 companies," notes Paychex HR generalist Shannon Britton. "Having these benefits can also help businesses attract and retain top employees. Additionally, being involved with a PEO generally includes support and assistance on HR-related compliance issues."

PEO benefits

NAPEO Survey Highlights Small Business Benefits

A recent report by the National Association of Professional Employer Organizations (NAPEO) highlights the benefits of a PEO. A broad survey of small business owners found that:

  • 98 percent of respondents would recommend a PEO to a small business colleague;
  • 70 percent reported increased revenues since becoming a PEO client; and
  • 66 percent reported increased profitability since becoming a PEO client.

The report also notes that businesses partnering with a PEO saw "median revenue growth from 2015 to 2016, [twice] that of comparable non-PEO firms," and that these businesses' anticipated median growth from 2016 to 2017 "was 40 percent greater than that of comparable non-PEO firms."

More Compelling PEO Benefits to Your Small Business

Paychex HR generalist Christy Rangel notes, "In addition to helping small businesses to compete with large, established corporations, many of a small business's administrative tasks associated with payroll, taxes, and benefits management, as well as some business and human resources initiatives, can be handled by the PEO."

There are also potential benefits from joining a PEO around support for your company’s compliance program with regard to employment-related regulations, which many small businesses spend valuable time grappling with on their own.

"Businesses that are part of a PEO may find peace of mind knowing they have support from their PEO to assist them in their efforts to understand and comply with related federal, state and local regulations," says Paychex HR consultant Michelle M. White. "Business owners can focus on what they do best – driving revenue."

Now that you’ve learned about what a PEO is and how your company could benefit from such a partnership, learn more by downloading this free white paper.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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