What’s a PEO, and Can it help your Business?

A Professional employer organization is probably best known for offering corporate level benefits to its clients, but did you know that their service goes far beyond just that? PEO’s are able to assist businesses with payroll and compliance just to name a few things!  

Heard the term PEO? If you have not you’re actually in the majority.

PEO’s may not be well known but their service provides extreme levels of value that is being realized more and more. This has been shown by the continued uptick in the amount of companies using PEO’s.

What is a PEO?

The acronym PEO stands for Professional Employer Organization. PEOs work with small businesses to help them manage payroll-related taxes, access to benefits, certain human resources functions, and other employer-related administrative aspects that are necessary to run a successful business. A PEO takes care of all of the nitty gritty so that you can spend your time on what matters the most: expanding your business.

Here are some of things PEOs will be able to help with:

Compliance Support

A PEO will support all of your employer-related compliance needs for payroll taxes, employee tax forms, and reporting forms.

Compliance support that PEOs offer includes:

  • Workers’ compensation
  • Unemployment Filings
  • W-2 and 1099 filings
  • Employment Practices Liability Insurance (EPLI)
  • New hires


Automated deposits, one time payoffs, bonuses just to name a few of the payroll related needs that PEO’s can assist with. PEOs help administer payments to full-time and part-time employees (salaried and hourly), and sometimes vendors and contractors as well. They will handle all of the hard stuff when it comes to payroll.


A PEO can help with multiple types of benefit administration, for example, onboarding, claims, and other benefits-related paperwork.

PEO’s can help you access medical, dental and vision coverage for your team at rates inaccessible  to smaller businesses. That’s because the PEO model usually conglomerates the employees of many small businesses together to harness the buying power typically reserved for significantly larger businesses.

Additional Perks

Many PEOs also provide access to additional perks for their customers. These can include access to 401(k) or other perks. At AllianceHR we can find just about any perk our clients want.

Whatever perks a PEO provides for their clients, they are generally aimed at creating a healthy, happy team and helping employers make great places to work and grow.

Here is a video about the PEO business if that is more your style of learning.

How Does A PEO Work?

PEOs can take on these tasks for you because of a practice called co-employment.

According to the National Association of PEOs, co-employment is “a contractual allocation and sharing of certain employer responsibilities between the PEO and the client.”

PEO’s assist small businesses in achieving corporate level benefits they otherwise would never be able to access.

The contract between your business and a PEO dictates exactly how your agreement will work. By this contract, a PEO as employer of record will take care of payroll administration and related tax filing, and provide HR support and access to benefits, while your company maintains responsibility for day-to-day operations and management of your firm’s employees. This sharing of responsibilities, allows your company to leverage economies of scale in the HR division and allows you more time to focus on your core business.

How Can a PEO Help My Business?

Although it is up to each individual to decide if a PEO will be a good fit for their company, there are a few advantages that PEOs can bring to your business.

Cost Savings on Employee Benefits

By working with a PEO, employees are grouped together with the rest of the PEO’s co-employees to form one large group. This means that the PEO can provide the employees access to health coverage and rates on par with those of a large corporation, even though they work for a much smaller operation.

Cost Savings through Hiring

Because a PEO will assist in managing a lot of your employment-related paperwork for you, as well as provide HR support, most companies can delay making hires to handle this in-house. When your business does make an HR hire, utilizing the the PEO’s tools can help free that person’s time to focus on making your company an amazing place to work.

A PEO can provide employees access to health coverage and rates on par with those of a large corporation.

Protect Against Risk

More than 33% of small businesses receive fines every year for making payroll mistakes. And that’s only for payroll! The reality is that compliance can be complicated and there is a lot of paperwork to file and insurances to secure. You could attempt to do this on your own, but you probably didn’t start your company to become an expert on compliance and the cost of getting things wrong can be substantial.

PEOs are the top experts on employment-related compliance. They know the paperwork you need to file and, in certain cases, they can file it for you.

Get Hours Back in Your Day

Running your own business feel like a race against the clock. There is always more to do and not enough time to get it done.

If you join a PEO, there’s a lot they can take on from you when it comes to employment-related administrative work, which means you can get dozens of hours of your week back so you can focus on yourself and your business again.

What a PEO Doesn’t Do

Clearly PEOs can take on tons of a business’s administrative burden. But they do have their limitations. It’s important to note what a PEO generally does not do.

First, although co-employment allows the PEO to take over many responsibilities for their customers, they won’t take over the running of your business. It remains up to each employer to manage their team and their operations.

Although a PEO can take over many responsibilities for their customers, they won’t take over the running of your business.

Also, as a general rule, PEOs aren’t legal or tax advisors. While they can help with any number of forms and filings, as well as support, each company still needs to be familiar with the laws applicable to their business and be responsible for compliance.

How much does a PEO cost?

The way that a PEO makes money is by charging you to handle these services. Honest companies will charge you a flat rate so you know you will never get hidden fees, however, some companies charge per employee or a general rate and then tack on dozens of additional fees. You need to be careful when selecting a PEO because you may think you are getting a good deal but you will get charged more because of hidden fees. For example, if you have a 10 person team with

At AlliaceHR for example, our fee is a flat rate per month making it easy to understand what you are really paying for. Customers often save hundreds per month by getting access to less expensive employee benefits as well!

Contact AllianceHR to learn more about PEO’s and to get signed up today!

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