How to choose the right PEO for your business

A Professional Employer Organization (PEO) provides robust HR services to small and medium sized businesses via a co-employment relationship. It provides employees access to big-company benefits while handling crucial administrative HR functions like payroll processing, compliance management, workers’ compensation, benefits administration, and other administrative tasks. Meanwhile, business owners maintain control over the operational aspects of their business, like business strategy, hiring, and building company culture.

In the past, companies would need to fully outsource HR services to a PEO. But with modern technology, businesses can now automate HR services and keep their most important information in-house, while still benefiting from time savings, advisory services, and better benefits.

If you’ve decided a PEO is right for your business, your work isn’t done just yet—you still need to find the right PEO. The best PEO for any business is the one that supports your unique business needs and goals. The five considerations below will help you make the right decision. Let’s get started.

1. Evaluate if the pricing structure fits into your budget

First things first: Find out the cost of the PEO and what services it covers, so you can evaluate whether its pricing structure fits into your budget. 

Typically, PEOs follow one of the following pricing structures:

• Percentage of total payroll: You pay a percentage of your total employee payroll as a service fee. In this case, a growing payroll means increasing costs. While this may be a good option for smaller companies with limited budgets, it can quickly become expensive as your workforce expands.
• Flat per-employee-per-year fee: You pay a fixed annual fee for each employee, so your expenses stay predictable as your workforce (and payroll) grow. This kind of predictability is beneficial for scaling businesses that may see rapid growth.

In both cases, the exact PEO cost depends on their pricing structure and your service agreement. Before committing to any PEO, make sure the costs align with your budget, now and for your organization’s foreseeable future growth.

2. Ensure the PEO services align with your business needs

One of the hardest parts of choosing a PEO is understanding which people management tasks your business needs help with. That’s why, before you even talk to a PEO, you should assess your business needs in areas like payroll, HR, and compliance to get an understanding of how you can maximize the value you’ll get from a PEO service provider. Think about your current challenges, but also about any future changes that might impact your HR needs.

In more detail, here’s what to consider:

• Payroll and taxes: Payroll services can be a significant expense for small businesses, which often pay per employee to manage payroll and file taxes (and may incur additional costs in penalties and interest for noncompliance if anything goes wrong). Outsourcing payroll to a PEO can help automate the process, which translates to significant time and cost savings for small and mid-sized businesses.
• Human resources: The HR demands of running a business—especially in the age of remote work—are huge. From recruitment and onboarding to retention, benefits administration, compliance across state (and sometimes international) borders, and more, people management takes a lot of time and effort. Outsourcing some of these tasks to a PEO is the HR solution many modern companies need, freeing up their time and resources so they can focus on growing their business.
• Employee benefits: PEOs can help businesses save money through economies of scale. Because PEOs co-employ your workforce, they can “employ” workers from thousands of businesses, letting them negotiate with healthcare providers to secure cheaper, higher-quality benefits than small businesses can afford on their own. This means small businesses who join a PEO can offer better benefits at a lower rate, which in turn helps them attract and retain top talent.
• Compliance and risk management: Managing your company’s compliance and risk on your own can be time-consuming and costly, particularly if you’re a global company with remote workers. Outsourcing compliance to a PEO like Rippling can help keep your company—and workforce—more secure by ensuring compliance with local laws and regulations, no matter where your workers are located.

On top of these considerations, meet with any PEO you’re considering—and the team that would serve your needs—to get clarity on the services they’d bring to the table for your company. Find out the following:

• Who would be your point of contact at the PEO?
• Who would be the HR advisors or PEO specialists you’d get to work with?
• Would you have an account manager or payroll specialist? How would you reach them if needed?

With Rippling PEO, support and guidance are available for both you and your employees. HR admins are supported by Rippling account managers and PEO HR advisors, while employees can contact Rightway Health Guides, a concierge service that can help with healthcare and benefits-related topics—like finding care, scheduling appointments, or reviewing bills—who are always just a call or chat away to educate, advise, and advocate on dozens of healthcare topics.

3. Consider if the PEO software integrates with your other tools

The PEO you choose should make your life easier, so the next question is this: Does the software the PEO is built on integrate with other tools you use?

Having all your systems work together is key to an efficient workflow. If your PEO doesn’t integrate with your existing tools—like spend management, G-Suite, Slack, and Salesforce—you risk data inconsistencies, inefficiencies, errors, and frustration.

One thing to be wary of: Many PEOs and HRIS providers claim to be “all-in-one.” But in reality, all-in-one is not always equivalent to integrated, and even systems that share the same logo may be disconnected on the back end, siloing data and slowing your business down.

The truth is there’s only one truly integrated PEO provider: Rippling. Compared to other outdated systems, Rippling offers a next-generation platform for growing businesses—and you can turn Rippling’s PEO product on or off as it suits your needs. Plus, Rippling has over 500 integrations with the most popular apps and tools, fitting seamlessly into whatever systems and workflows your team has in place.

4. Understand what employee benefits the PEO offers

Today's top talent craves more than just a paycheck—they're after high-quality, affordable benefits like top-tier health insurance, retirement plans, and more. In fact, a survey of 1,165 employees showed that 32% of job seekers say benefits are as important to them as salary when they’re looking for a new job.

So not only is it critical to offer competitive benefits that attract top talent—your benefits must align with the unique needs of your workforce. That’s why, when comparing PEOs, one of your top considerations should be the employee benefits plans they can offer your employees.

It’s typical for PEOs to be able to offer some combination of these:

• Health insurance plans 
• Dental and vision plans
• Life insurance 
• Disability insurance
• Worksite benefits
• HSA and/or FSA
• Corporate wellness programs
• Commuter benefits
• Employee assistance program

When talking to PEOs, you’ll want to ask about the benefits carriers they partner with and the types of plans they offer. You’ll also want to find out if you can pick and choose from their benefits to create custom benefits packages to meet your employees’ needs and expectations.

With Rippling PEO, you can access big-company benefits, including Fortune 500-caliber medical, dental, and vision insurance, pay-as-you-go workers’ compensation plans, EPLI coverage, HSA, FSA, and more—likely for less than you’re paying now. Your employees will also get free access to concierge, on-demand benefit navigation services via Rightway to help them pick benefit plans, schedule appointments, understand bills, find in-network providers, and more.

5. See how the PEO mitigates compliance risks

Under a co-employment relationship, the PEO assumes liability and responsibility for payroll taxes, employment taxes, and adherence to federal, state, and local labor laws. Neglecting compliance can lead to costly fines and even litigation, which is why compliance should be your top priority.

The average employment case costs a business $160,000 after defense and settlement. That’s why complying with employment and tax laws should be a top priority for your business—and a PEO can help with that. With today’s technology, reputable PEOs should be automating processes to help you ensure compliance, like filing tax returns by their deadlines, calculating final paychecks, ensuring employees meet minimum wage requirements based on their locations, and more.

How do you know if a PEO is reputable? One way is to see if it’s been independently audited. According to the US Chamber of Commerce, you should “look for third-party assessments of financial statements by CPAs or risk management practices from the Certification Institute. The Employer Services Assurance Corporation (ESAC) audits PEOs for financial reliability and best practices.”

You can also see if they’re a member of the National Association of Professional Employer Organizations (NAPEO), a professional organization that encourages its member PEOs to follow a code of ethics and best practices.

Here are a few other tips:

• Evaluate their strategies for handling payroll taxes and legal requirements
• Ensure they understand your unique compliance needs and can assist in simplifying compliance through efficient systems and processes
• Confirm their commitment to staying updated on regulatory changes and ensuring your business consistently adheres to them
• Assess their expertise in handling complex tax matters and staying current with evolving tax laws

Rippling PEO offers automated compliance monitoring that covers local, state, and federal levels. It provides real-time alerts regarding labor law changes and offers actionable guidance to promptly address any compliance issues. Rippling PEO also automatically sends electronic labor law posters to your employees—directly to their Rippling account. This proactive approach streamlines compliance management and, in turn, safeguards your business from potential legal and financial consequences.

See how Rippling PEO stacks up

Rippling PEO is a modern, all-in-one, integrated solution—the easiest way to manage HR for startups & high-growth companies.

With Rippling PEO, you can:

• Provide better HR and benefits, including large group health plans, 401(k) retirement plans, HSA, FSA, and commuter flex benefits, for less than you pay now. You can also pay as you go for workers’ compensation insurance and get EPLI coverage to protect your growing business.
• Protect your business with automated, worry-free compliance. Rippling PEO supports your federal, state, and local labor compliance with ACA and COBRA administration, mandatory workplace posters, minimum wage compliance, and more. It also handles automatic state and local payroll tax account creation and ongoing annual SUI rate management for you.
• Manage a distributed team from anywhere. From automatic state tax registration to remote laptop management, Rippling PEO makes it easy to hire and onboard people anywhere.
• Easily move on and off Rippling PEO. Someday you may grow to the point that it makes more sense to bring HR in-house instead of using a PEO. With other PEOs, that requires a painful switching process. With Rippling, all you need to do is turn off the PEO and transition seamlessly to our integrated HR platform. All your data and systems stay intact and your employees keep using Rippling the same way they did before. Rippling PEO is the only PEO made to scale with your growing business.

Here's how Rippling compares to other leading PEOs according to G2:

Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.