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Paychex Review: Best PEO for Startups

Our 2017 research and analysis of professional employer organizations (PEO) leads us to again recommend Paychex as the best PEO for startups.

We chose Paychex from the dozens of PEOs we considered. To understand how we selected our best picks, see our methodology and a comprehensive list of PEOs on our best picks page.

Paychex offers a complete collection of human resources services that startups can take advantage of before ever hiring their first employees. The company also has an easy-to-use online human resources management system and excellent customer service. Here is a breakdown of why Paychex is our best pick for startups.

From hiring and training to payroll and benefit administration, Paychex offers a comprehensive array of services that startups will find valuable. Most of those services come in one standard package, as Paychex likes to include everything it has to offer to all of its clients. While you might not take advantage of all these services immediately, Paychex believes having the option to use them is an advantage to growing businesses.

We like, however, that there are times when Paychex can make an exception. A representative told us that if there is a major portion of the services you truly don't want, depending on what it is, Paychex can carve that piece out of the plan for you.

The PEO services Paychex offers include the following:

  • Benefits administration: Paychex professionals help with enrollment and setting up the infrastructure of your benefits program.
  • Insurance plans: You can offer employees medical, dental, vision, life, and short- and long-term disability insurance.
  • Section 125 plans: You can offer employees the option to pay for out-of-pocket medical expenses with pretax dollars.
  • 401(k) retirement plans: You can offer a variety of retirement savings plans, including traditional, safe harbor and owner-only plans.
  • Payroll administration: Paychex handles all payroll and payroll tax responsibilities.
  • Safety programs (OSHA): You have a dedicated safety-control representative to assure you are complying with safety regulations.
  • COBRA: This allows you to offer certain employees and their qualified beneficiaries the option to continue their group health coverage following termination, loss of hours or other qualifying events.
  • Workers' compensation: Paychex helps you choose the right policy for your business and provides advice on effective ways of managing it.
  • HR services: Paychex conducts employee and management training, creates employee handbooks, develops job descriptions, and handles pre-employment testing and risk assessments.

Other PEO services Paychex offers include recruiting and applicant tracking, employee screening, and the onboarding of new staff members.

Editor's Note: Looking for information on PEOs? Use the questionnaire below, and our vendor partners will contact you to provide you with the information you need:

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Paychex pricing is determined on a per-employee basis. We like this cost structure much better than pricing based on a percentage of payroll, which some other PEOs use. Payroll-based pricing doesn't allow you to get a good handle on what your PEO costs will be each month. For example, if any of your employees earn commission, your PEO costs will fluctuate each month depending on the number of sales each employee makes.

To really understand what Paychex's costs would be, you need to ask for a formal proposal that outlines pricing based on your specific needs.

What makes Paychex so attractive for startups, especially those that haven't yet launched their ventures, is the ability to use some human resources services as part of the company's administrative service organization (ASO) plan. While many of the specific services are the same, the ASO differs from the PEO in that there is no co-employment arrangement. Since startups still in the creation stage likely don't have any employees, they can use the ASO services, such as creating employee handbooks and developing job descriptions, that they will need immediately when employees are hired.

This allows startups to outsource some human resources tasks that will help ensure they are set up for success, without having to pay for some of the services that are only needed once employees are brought on board, like payroll and insurance. Not all of the PEO providers we examined offer this option.

We were very pleased with the service we received from Paychex. To test the customer support, we called the company and communicated via live chat, posing as a small business owner interested in PEO services.

The representatives we spoke with both over the phone and through the live chat system on Paychex's website were knowledgeable and able to answer all of the questions we asked. They weren't overly salesy and didn't try to get us to sign up for their service; instead, they made sure to address all of our questions and concerns.

Businesses that use Paychex PEO service are provided with an on-site location specialist who visits each business in person, so you know exactly who is handling your HR services. If you have a problem, you can call your HR professional directly. We like the added personal touch that this provides.

Your personal HR specialist will help you create a custom employee handbook, handle all regulatory and legal compliance issues, take care of your Affordable Care Act documentation, make sure all of your employees are properly classified, terminate an employee if necessary, and conduct on-site employee training.

In addition to a personal HR professional, each business gets a team of payroll, workplace-safety and insurance specialists who can help with any issues that arise.

The Paychex website is filled with resources that small business owners will find valuable. It includes various articles on startups, finances, marketing, management, payroll and taxes, human resources, employee benefits, health care reform, and human capital management.

A big plus of Paychex is its accreditation by the Employer Services Assurance Corporation (ESAC). Earning accreditation demonstrates a PEO's financial stability, ethical business conduct, and adherence to operational standards and regulatory requirements.

Paychex was originally accredited in 2015 and is currently in good standing, according to the ESAC website. Not all of the PEOs we examined earned this recognition.

The Better Business Bureau has also accredited Paychex. According to the BBB website, 199 complaints were filed against Paychex over the past three years. Of those, 52 were resolved to the satisfaction of the complaints, with 147 still awaiting resolution. It's important to note that nearly all of the PEOs we reviewed had some criticisms levied against them with the BBB. Despite the complaints, Paychex has a BBB rating of A+. The majority of the PEOs we investigated are not BBB-accredited and do not have such a high rating.

One potential downside with Paychex is that its services aren't available on an a la carte basis. Some of the other PEO providers we looked into give customers the option to pick and choose the services they use. Since we weren't able to obtain exact pricing, we aren't sure how this model affects costs. However, it could mean that you end up paying for services you aren't using.

Another concern we had is the large number of BBB complaints. However, it is important to take into consideration how large the company is and how many customers it has. Paychex serves more than 500,000 small and midsize businesses nationwide. When you factor in how many employees each of those businesses has, the number of complaints is small.

In addition, not all of the complaints are in regards to Paychex's PEO services. The BBB complaints include all of those filed against the company, which offers a variety of services in addition to PEO. However, if the complaints do give you pause, we would encourage you to consider using Insperity, our choice as the best PEO for small businesses, which has only a handful of BBB complaints.

Want to know more about choosing a PEO? Here’s a breakdown of our full coverage:

Editor's Note: Looking for information on PEOs? Use the questionnaire below, and our vendor partners will contact you to provide you with the information you need:

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Additional reporting by Chad Brooks.

Jill Bowers

Jill Bowers is a technical writer by day and a fantasy author by night. She has more than 10 years of writing experience for both B2C and B2B content, focusing on topics like travel writing, consumer finance, business marketing, social media marketing and other business categories. She spends an inordinate amount of time singing love songs to her dog, composes handbell music and writes YA fantasy novels.