Growing a tech startup is messy and fast. You need product-market fit, customers, and cash — and somewhere in the center of that churn is payroll, benefits, compliance, and hiring. That’s why a lot of software company entrepreneurs opt for a PEO to take care of HR tasks so their teams can focus on building.
In this blog, we’ll show you what tech teams should look for in a partner, how to analyze different possibilities, and a useful checklist you can use while you’re making your choice.
Here are some things to remember about the industry: Data from 2025 shows that one in three new businesses has to deal with compliance concerns or HR problems in their first three years. PEOs today help hundreds of thousands of small and medium-sized firms and millions of workers at their sites across the U.S. Research demonstrates that businesses that use PEO services get good results.
A good PEO gives you all of the following with minimal overhead:
For software companies, especially those that hire remote engineers, designers, or product managers from other states, being able to stay compliant and give competitive perks can make the difference between acquiring a candidate and losing them to a bigger company. According to a new study from NAPEO, IT startups that use PEO services grow 7–9% quicker than those that try to handle HR on their own.
The world of PEO technology has changed a lot. Gone are the days when PEOs meant clunky interfaces and endless phone calls.
According to current industry data, there are more than 500 PEO providers in the US. They manage about 4.5 million worksite employees at 208,000 small and medium-sized firms. In 2024, the value of the global market reached $70 billion and is still expanding at a rate of about 11% per year.
The finest PEO for tech startups knows that your sales staff in New York and your engineering team in Austin have different demands. They know a lot about IT, such as equal pay, remote-first cultures, and the problems that come with growing a business quickly.
Not all PEO services for tech companies are created equal. Here’s what matters.
Your engineers will only accept one more dashboard if it looks good. Find a PEO software platform that lets employees do things on their own, has modern onboarding, works on mobile devices, and connects with the resources you already use (such as Slack, Gusto alternatives, and payroll feeds). You’ll be sorry if reporting and payroll exports are hard.
Ask for the full picture: fees per employee each month, any percentage of payroll expenses, setup fees, benefit markups, and termination prices. The best professional employer organization for new businesses will be open about their fees and give examples that indicate how much it would cost each month for a few different numbers of employees.
Healthcare, 401(k) alternatives, and leave rules can make early-stage firms lose prospects. The PEO should offer group health plans that are competitive in your area and easy-to-use tools to help employees comprehend and sign up. This is where comparisons are important: the appropriate PEO can help you compete with much bigger organizations.
Remote-first startups often get payroll taxes and withholding requirements wrong. Find out how the PEO deals with employees who live in another state, registering for payroll in that state, and withholding taxes for employees who live in another state. This is a key part of PEO services for tech companies and can help them avoid expensive fines.
You want a reliable point of contact, such as an account team or an HR business partner who knows how tech companies work. Stay away from providers that see minor accounts as “tickets.” The finest PEOs offer personalized help and advice that adds value during times of development.
When you’re getting proposals, use this quick scorecard (scale 1–5) to compare apples to apples:
Add the scores. If a provider scores low on tech or compliance, don’t proceed without remediation.
Costs vary, but typical ranges for PEOs in the U.S. market are:
These are planning statistics. Always ask for a sample invoice and a cost model for your existing number of employees and for hiring plans.
Independent research on the PEO market and PEO trade shows that organizations that deal with PEOs tend to enjoy real benefits, such as higher employee retention, faster expansion, and lower costs for HR activities. Research that has been published and summarized in the industry shows that organizations that work with PEOs can save a lot of money per employee and get a good return on investment. These numbers are based on surveys of clients and the industry as a whole.
There are times not to pick a PEO:
If any of the above apply, do the math: sometimes a PEO still wins on cost and time saved; sometimes it doesn’t.
If you decide to move forward, here are the practical steps to make the onboarding painless:
A good PEO for software firms can give your startup the same HR power as a big corporation without the extra costs. Find a provider that knows how to work with product teams, has up-to-date technology, and gives you clear, honest prices. Before you sign, use the scorecard above and demand payroll simulations and client references.
If you want professional help comparing PEOs, make an appointment with OEM America to start saving money and getting your time back. OEM will provide you up to four hours of help, a free benchmarking analysis, and a plan that can help you save up to $1,000 per employee (terms apply). Want to know more? You can either fill out the contact form or call 860.528.5555. OEM America is a member of NAPEO and has been accredited by the BBB. We can help you save money, lower your risk, find hidden costs, and develop a stronger, more productive team.
A: The best PEO for tech startups offers a modern HR platform with integrations, competitive benefits for engineers and product talent, strong multi-state compliance support, transparent pricing, and a dedicated account team that understands startup speed and culture.
A: Typical ranges are $100–$200 per employee per month (PEPM) or 2–6% of payroll, depending on services and benefit richness. Always request a detailed cost model from vendors.
A: Yes. One of the main benefits of partnering with a PEO is multi-state payroll and compliance support. Confirm the PEO’s experience in your employees’ states and ask for examples of handling state tax registrations.
A: A PEO uses a co-employment model for companies that already have a legal entity in the country and want to outsource HR functions. An EOR becomes the legal employer and is used when you need to hire in a country/state without an entity.
A: Request: sample invoices, a list of integrations, benefits comparison, implementation timeline, payroll simulation, client references (especially other startups), and full fee disclosures (setup, exit, benefit markups).