7 Reasons PEO Services Are Beneficial For Small Business

As a business owner, you have so many different items to attend to on a daily basis. You are concerned about marketing, clients, customers, competition, finances, employees and so much more. Even with a strong Human Resources department, finding and managing competent, qualified employees can be the toughest of business challenges. If you would like to learn about PEO services, here are the benefits of hiring a professional employer organization for your business.

What Is A PEO?

A PEO, or Professional Employer Organization, is an organization that will partner with businesses to provide high-quality HR through co-employment. That means that you do not have to worry about HR recruitment, payroll, benefits or regulation compliance, leaving you more time to spend in other areas of business that you see fit. If this sounds good, which it surely does, keep reading. In this post you will find out why you need to partner up with a PEO right now. By the end of this, you will wonder why you never thought of this solution before.

Outsource Employee Management

Save time and energy as a business owner by hiring a Professional Employer Organization. PEO companies specialize in handling all of the responsibilities, from beginning to end, that comes along with HR recruitment. Since they are experts, they can handle all aspects of the hiring process, giving you lots more time to focus your attention on other aspects of your business. You will no longer have to schedule interview on the phone or in person, worry about performance reviews or other details regarding employees. You can still stay in the loop by communicating with them frequently, but a lot of the time consuming work such as sifting through resumes will be covered for you.

Lower HR Legal Risks

Reduce your legal liabilities with co-employment. When you hire a PEO company, they are actually employing your staff as well. This means some responsibilities such as payroll, taxes or workers compensation will be their responsibility, while other obligations regarding employees with be shared between your business and the company. This can be a legal liability if not done properly. However, PEO services can take care of all of this for you.

PEO Services Are Widely Used

PEO companies are great for small businesses. PEO’s actually prefer to work with small businesses typically with a maximum of 150 employees, but more commonly, the businesses they work with only have about 20 people employed. Using PEO services enables small businesses to enjoy success since they make it possible for employees to receive benefits and insurance. The business would not be responsible for this, but the PEO service would, and being a larger organization, it would be easier for them to obtain these benefits and insurance policies for employees. This is great for technical employees like a medical transcriptionist or risk certification analyst.

The model is especially popular because the service is paid as a percent of the total payroll. This percentage usually ranges from 3% to 10% while other services may ask for more. However, if you are already using a payroll service, this could be a nice alternative to those costs. And, most small business owners do not want to deal with all the details of payroll processing to begin with.

Avoid The Government Red-Tape

PEO companies can help small businesses navigate both state and federal regulations. As a small business owner it is often difficult to keep up with changes and policies, however PEO services are on top of these items and stay current, helping your business to succeed. The service would also take a lot of the responsibility for these legal factors in regards to employee workers’ compensation insurance, state unemployment insurance and other business tax regulations. Once you sign a partnership agreement with the PEO company, they can take many risks of hiring away from your company.

Let Them Do The Firing

Since the service has the right to hire employees, it also has the right to fire them. In some cases this is helpful, since it reduces the amount of unpleasant interactions a business owner has to deal with in regard to employees. Or, if you hire an employee and it doesn’t work out, you do not have to let them go personally. On the down side, some small business owners may be irritated by this if there is an employee that is not working up to par. A business owner cannot simply fire this person, but must take additional steps to go through the PEO services and receive approval which can take extra time and therefore money.

Rely On PEO Services For Compensation

Additionally, a professional employer specializes in planning compensation for the company. You can have experience professionals design compensation plans that align employee incentives with the company missions and goals. Moreover, they can provide services that assist with determining your base salary, bonuses, benefits and other remuneration for employees. Ask your potential PEO services partner about how they can improve your compensation structure.

While PEO services can provide many benefits to your company, it is always important to review any and all terms ahead of time before deciding upon a legal business agreement. Once you find the right professional employer organization, you will enjoy less HR responsibilities, and reduced liability regarding employees.


  1. You’ve made some decent points there. I looked on the internet for more info about the issue and found most people will go along with your views on this website.

  2. Interesting entrepreneur blog! Is your theme custom made? You definitely have a good mix of content and design.

  3. Great article. I am dealing with a few of these issues as well.

    • Hello Denis,

      If you have more questions about the PEO industry, please feel free to reach out. I am the Marketing Coordinator at Group Management Services, headquartered in Richfield, Ohio. I can get you in touch with one of our experts that can give you a full breakdown of services and a free quote.

      ph# 330-659-0581

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