A professional employer organization (PEO) is a human resources solution for many small and midsize businesses that don't have an internal human resources staff or employees. A PEO takes the place of an internal human resources department by handling your HR, payroll and employee benefits. When selecting a PEO for your business, there are several factors to consider. Additionally, many PEOs require that your business have a certain minimum number of employees. This minimum can range from five to 10 employees. We spent several weeks researching nearly 60 PEOs, analyzing and comparing features, and testing their customer support to determine the best PEOs for small businesses.
Our Best Picks
Editor's note: Looking for the right PEO service for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.
Oasis, a Paychex company, is an ideal PEO solution for startups that have at least five worksite employees. Oasis is available in all 50 states and offers customized plans with customized pricing. Oasis requires a one-year contract. It is a completely scalable platform that has the ability to grow with your business. You can add and remove services as needed, which is great for small startups that may have unpredictable employee growth. Clients of Oasis receive help with human resource administration, payroll administration, employee benefits, health insurance and risk management.
Businesses that partner with Oasis receive dedicated customer support. You're assigned a payroll account manager and human resource generalist. Having a payroll and human resources expert who can answer your HR questions is ideal for startups that are navigating the world of business. Oasis is an ESAC-, IRS- and BBB-accredited PEO, so you can rest assured that you are partnering with a trustworthy company. These accreditations are given to PEOs that have undergone strict scrutiny of their finances and have demonstrated they comply with federal, state and local employment tax laws and best practices.
ADP TotalSource can help your small business with risk management, benefits administration, payroll and HR outsourcing. To qualify for ADP TotalSource, you need a minimum of five employees. Two standout features of this company are its payroll offering, which is employee self-service, and its HR support. It can also securely handle company data and help you plan several aspects of your business.
ADP offers exceptional customer support. In our interactions with ADP TotalSource, the company went above and beyond our expectations in all areas. ADP's reputation and customer service are impressive. Its features and PEO services are also top-notch. It's a flexible service that can work with businesses of any size, and it provides one of the most robust PEO services of any company we reviewed. TotalSource is accredited by ESAC, the IRS and BBB, putting it among the top players in the PEO industry.
Insperity provides small businesses that have at least five employees with flexible coverage and comprehensive service options. Businesses that partner with Insperity have access to more than 5,000 training resources, as well as payroll processing, benefits administration, HR solutions and risk management. It has extensive services for human resources, workers' compensation, employee onboarding, government compliance and workforce optimization. Insperity provides small businesses and employees with reliable services. Additionally, it can help you analyze and overhaul various business processes to make your company more efficient.
Insperity provides one of the most robust service selections of any PEO we reviewed without sacrificing personalized support. Insperity offers a dedicated support team, including an HR manager, client liaison, HR specialist, payroll specialist, performance specialist, benefits specialist, recruiting specialist and a safety consultant. Since Insperity is an ESAC-, IRS- and BBB-accredited PEO, you can feel a sense of reassurance that you are partnering with a reputable PEO.
TriNet is the best option for businesses in tailored, or specialized industries. TriNet offers a range of services, like workers' compensation, payroll, human resources support, employee benefits, retirement plans and 401(k) options, employee onboarding, and additional benefit programs like commuter benefits. PEO plans are flexible and scalable, with per-employee pricing. Every PEO plan comes with access to TriNet's intuitive online platform and mobile apps.
TriNet has partnered with several thousand companies, but its support remains highly personalized. It's one of the few companies that provides industry-specific customer service teams. Many PEOs we evaluated provide a team of experts to answer your questions and facilitate services – TriNet not only offers these experts but also segments them into different industries. (Industries include manufacturing, legal, finance, retail and wholesale, and consulting services.) This specialization means you'll get advice from an expert who is not only knowledgeable in the general service area (such as HR, payroll, benefits or compliance), but who also has expertise in your specific industry. TriNet is accredited by ESAC and the IRS, and has an A+ rating with the BBB.
How Much Does a PEO Service Cost?
PEOs typically charge for their services based on one of two ways: on a per-employee basis (the average cost ranges from $40 to $160 per month) or based on a percentage of your payroll. (In our research, the average ranged from 3% to 12% of total payroll per month).
The best type of pricing structure for your company depends on several factors, such as the number of employees you have, whether you employ part-time or full-time employees, employee salary levels and expected company growth. PEOs rarely give you the option of choosing your pricing structure. Before you embark on finding a PEO for your company, weigh the pros and cons of each structure and how the costs may change as your business scales. It is also useful to run the numbers. Calculate what may be more cost-effective for your business. Is a PEO that you pay for per employee more financially manageable than a percentage of your payroll, or will you save more by paying a percentage of total payroll?
Most PEOs bundle their features into their per-employee or monthly rate, but several offer the option to customize the services your business receives. In some cases, you can choose which services you want to include, such as HR documentation or onboarding, and it won't increase your costs. In other cases, like with certain add-ons, such as payroll or workers' compensation, for instance, you'll pay for these additional services on top of your usual PEO fees.
Another caveat small business owners should be aware of is that some PEOs require a one-year contract, but most give you the option to cancel with 30 days' notice.
What Is a Professional Employer Organization?
A PEO operates through a co-employment model, which means your employees are on the PEO's books, but they are still under your management.
Most PEOs can manage HR functions like payroll, HR administration, employee benefits, risk and compliance, workers' compensation, and employee training and development. When choosing a PEO, make sure it can perform all of the HR functions you need and can scale with your business.
It is important to find a trustworthy and certified PEO since it will be deeply integrated with your company. There are certain certifications and accreditations that PEOs can achieve to demonstrate they abide by best practices, meet strict financial guidelines, and comply with employment laws and regulations. The Employer Services Assurance Corporation (ESAC), the Internal Revenue Service (IRS) and the Better Business Bureau (BBB) all have accrediting programs for qualifying PEOs.
Benefits of Using a PEO Service
PEOs provide several advantages for both small business employers and their employees. One significant benefit is that small businesses can offer affordable health insurance benefits to their employees that they otherwise might not have access to. This is because PEOs technically employ thousands of employees and can receive discounted rates. Similarly, PEOs offer other employee benefits like disability and life insurance plans, retirement plans, transportation reimbursement, and other fringe benefits your employees may want. Offering your employees competitive benefits makes you more desirable as a company, which helps you attract and retain top talent.
An additional appealing quality of PEOs is that they offer reputable administrative services, which is beneficial for small business owners that don't want to be bogged down with paperwork. Since PEOs are experienced in managing human resource functions and administrative tasks, you have more time to focus on other aspects of running your business and can rest assured that your employees are being taken care of. PEOs also help you comply with current payroll tax regulations, they provide unemployment insurance and workers' compensation coverage, and they offer workplace training.
To learn more about PEO benefits and how to choose the right one for your business, read our PEO buying guide.
How a PEO Can Help Your Business as It Grows
Many small businesses find it helpful to partner with a PEO that can handle the critical HR functions that are essential to hiring and keeping employees. This convenience only becomes more magnified as your business grows.
As your business expands and you need to hire more workers, it becomes critical to offer benefits, like healthcare, that are harder to find. Offering quality benefits helps you attract and retain competent, hard-working staff. For business owners, PEOs relieve the stress and burden that comes with the legal paperwork of hiring and onboarding new employees. PEOs also help your business comply with federal and state regulations.
Below is more about the various features that the best PEOs offer that help small business owners as their companies – and staff – grow.
The primary function of a PEO is to take care of human resource functions so that business owners don't have to. PEOs can provide as much or as little HR assistance as you need. They can manage HR tasks like employee handbook and policy creation, employee onboarding and termination, unemployment assistance, compliance reporting and more. Their features are typically accessible through intuitive online platforms and mobile-friendly applications. These platforms make it easy to access all of your HR features in one place.
One major function that most PEOs perform is payroll processing. Since your employees are on the PEO's books, they track employee time and attendance, and help prepare and issue employee paychecks. The PEO tracks hours worked, paid time off, sick time and vacation days. Additionally, PEOs can process employee liens and garnishments, if needed. Many PEOs manage and report on quarterly and year-end state and federal deposits and filings. Having a PEO take care of your payroll can ultimately save you time and money. Reputable PEOs pay employees accurately and on time, which can improve your company culture.
Risk and Compliance
PEOs are often well versed in the laws and regulations that your company has to abide by, and they can help you manage risk and compliance functions for your business. This can be especially beneficial if you operate in multiple states or regions. PEOs can help manage compliance with the Affordable Care Act, the Health Insurance and Portability and Accountability Act, and the Occupational Safety and Health Administration. In some cases, they can conduct employee accident investigations and perform onsite safety inspections and job hazard analyses.
Since PEOs employ a large number of employees, they have access to affordable, desirable employee benefits. These benefits can include medical, dental insurance, vision and life insurance. Some even offer additional plans like health savings accounts, flexible spending accounts and heath reimbursement arrangements. They often provide long- and short-term disability, an employee assistance program, and retirement plan options like 401(k). Many PEOs offer a choice of additional benefits like commuter benefits and parking discounts, to name a few.
Workplace Training and Employee Development
Most PEOs offer standard workplace training on topics like sexual harassment and discrimination. However, many PEOs offer additional onsite and virtual training on topics like leadership, communication, workplace technology, recruitment, disciplinary actions and social media. Some even offer industry-specific training. Having access to employee training and development materials is a great way to encourage employee growth and skill advancement. PEOs that offer training and development typically have an online platform to track and report employee course results.
Community Expert Insight
To better understand what PEO features are crucial for small businesses, we reached out to several small business owners.
When Max Prokell, founder and CEO of Venta, was choosing a PEO for his marketing team of 15 employees, he looked for one that provided a seamless user experience and dedicated HR support.
"The first sign of a great PEO comes down to their technology and the implementation of a great user experience," said Prokell. "Any PEO could have the most advanced platform on the market, but if my employees hate the interface, then the technology loses its value. We selected [TriNet] because I knew that my employees would appreciate their technology and a mobile-first approach to HR services."
Aaron Bailey, general manager at DZone and previous chief operating officer of business.com, placed a high importance on user experience and customer support. When he had to choose a PEO for his team of 80 employees, he chose Insperity.
"[Insperity's] user experience was better than its competitors, the training and development options were very good, and their mobile app was very easy to use and had frequent improvements to it," said Bailey.
Since every small business is unique, it is important to choose a PEO that can customize its HR features to fit your unique needs. Some PEOs specialize in different industries, business size, etc., which can be especially beneficial for those who don't want a standard one-size-fits-all PEO approach.
Anh Trinh, founder and CEO of the two-year-old media startup, GeekWithLaptop, said he selected Oasis for his team of eight employees because it is a reliable PEO that specializes in small businesses and startups. Trinh's parting advice to his fellow small business owners is you first identify the PEO features your small business needs and then choose a PEO that specializes in those areas.
To determine the PEO services we think are best for small businesses, we spent dozens of hours researching the top companies. Here is an explanation of our selection process.
Locating the Best Services
To determine the best PEOs for 2020, we started with 60 companies. We found these companies by considering the top industry players, searching the National Association of Professional Employer Organizations' website and conducting an extensive internet search. Some of the PEO services on our initial list had contacted us, asking to be considered for our PEO review.
Choosing the Best Services
We whittled this initial list of 60 down to roughly 30 companies. We reviewed their service offerings, pored over company websites, determined whether they were national PEOs, and verified whether they were accredited by the IRS and the Employer Services Assurance Corporation. From this list, 10 stood out as potential best picks: ADP TotalSource, Engage PEO, G&A Partners, Insperity, Justworks, Oasis, Paychex, Tandem HR, TriNet and XcelHR.
Researching Each Service
We took a deep dive into the 10 remaining companies with an in-depth look at their available services, contract structure, pricing, online and mobile access, personalized customer experience, and any standout features. We posed as small business owners, interacting with the PEOs by email, live chat, and phone to determine what the sales experience was like and grade their overall customer service.
Analyzing Each Service
Of these 10 companies, four would be our best picks for startups, small businesses, customer service and businesses in specialized industries. Oasis, Insperity, ADP TotalSource and TriNet all withstood our rounds of testing and earned best-pick status. We analyzed each for the following features and services: payroll services, benefit options, HR guidance and support, pricing structure, online and mobile employee access, customer service, accreditation, number of states served, training resources, company size and standout features.
What to Expect in 2020
The PEO industry is growing. We expect that growth to continue in 2020 and that the number of businesses partnering with PEOs will increase, or at the very least, continue at a steady rate.
As the number of PEOs increases, we also expect to see increased regulations at the state and federal level. Several regulations have been enacted in recent years, including passage of the Certified Professional Employment Organization program and the PEO Model Act. The CPEO program was created to regulate the number of PEOs certified by the IRS. (IRS accreditation provides assurance the PEO pays federal employment tax and complies with other employment tax laws and regulations).
As competition increases, we predict more differentiation between PEOs with the specific services and features they offer to certain companies. For example, we expect more PEOs to offer specific HR services like advanced employee learning programs that incorporate interactive courses, digital books and even live or virtual seminars.
Ahead Human Resources
Arch Resources Group
Best Employment Solutions Team
Employee Management Services
Genesis HR Solutions
Group Management Services
Impact Workforce Solutions
Modern Business Associates
OneSource Business Solutions
Optimum Employer Solutions
Premier Employer Services
Prestige Employee Administrators
Resource Management Inc.
Siracusa Staffing & Leasing
Synuity Smarter HR
Total Team Solutions
Vensure Employer Services
Editor's note: Looking for the right PEO service for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.