A PEO works alongside your business by hiring people who work for both you and them. You are still in charge of the culture, hiring, pay rates, and day-to-day operations. The PEO takes care of the hard HR job, like processing payroll, paying payroll taxes, managing benefits, workers’ compensation, compliance support, and building the HR infrastructure. It’s like adding a whole HR department without having to hire one.
A prevalent myth is that PEOs are only for extremely tiny businesses. In actuality, the ideal size for a PEO is usually somewhere in these ranges:
At this stage, businesses often:
A PEO lets small teams use enterprise-level benefits, automated payroll, and compliance oversight without having to hire their own HR personnel.
This is the sweet spot for PEO adoption.
Growth brings:
Even companies with internal HR teams use PEOs strategically. In these cases, PEOs often:
The PEO takes care of the day-to-day tasks, while the internal HR staff concentrates on culture and leadership.
Any firm can employ a PEO, but some industries get more out of it than others because of the risks, complexity, or structure of their staff.
These industries consistently rank at the top of industries that benefit from PEO companies.
Why?
A PEO can minimize workers’ comp premiums by a lot, handle claims, and offer safety initiatives that lower risk and expenses over time.
Physicians, dentists, chiropractors, and other medical professionals have their own particular problems when it comes to finding work. To get qualified workers, they need to offer a full range of perks. Healthcare companies have to deal with:
A PEO helps medical offices stay legal and offers benefits that are better than those of other companies, which draws in skilled workers.
Professional services companies charge by the hour. Every hour spent on HR work is an hour that clients don’t have to pay for. PEOs help consulting, accounting, legal, engineering, and IT organizations in the following ways:
The full range of perks helps smaller companies compete with bigger ones for the best workers. For these companies, a PEO is primarily about creating a flexible infrastructure that can grow with them.
These businesses often struggle with:
PEOs make onboarding easier, which means new employees can get into the system quickly. They make sure that the complicated rules for tip credits, overtime, and breaks are followed. They offer cheap advantages that make it easier for people to stay with the company, especially in industries with a lot of turnover. For organizations in the hotel industry, cutting turnover by even a few percentage points can save them thousands of dollars in hiring and training expenditures.
Founders wear every hat. HR shouldn’t be one of them.
For startups, a PEO:
This allows leadership to focus on revenue, not regulations.
If you answered “yes” to even two of these, a PEO is worth serious consideration.
Several trends make PEOs more relevant now than in previous years:
For more than 25 years, we’ve helped businesses that can benefit from PEO companies in Connecticut and beyond. What we’ve found is that good PEO relationships are based on knowing what your problems are and giving you solutions that really work for you.
Reduced workers' comp expenses (15–20% lower premiums) and safety initiatives are a huge help to the construction, plumbing, HVAC, and electrical trades. Healthcare and medical practices have a lot of benefits that assist them in hiring clinical staff and staying compliant. Professional services organizations (including law, accounting, engineering, and consulting) get the most billable hours by outsourcing HR tasks. Companies that make things get help with complicated payroll and following OSHA rules. Real estate companies appropriately handle a wide range of employee types. Even though their profit margins are small, hospitality businesses keep their employees longer by offering greater benefits.
It depends on your position, not just how many employees you have. Very small enterprises (less than 10 employees) in one state with simple needs may not be able to afford the price of a PEO. Small businesses, on the other hand, can benefit from PEOs when they have problems like running operations in multiple states that require compliance across jurisdictions, needing competitive benefits to attract specialized talent, high workers' comp exposure in industries like construction, plans for rapid growth that will quickly make things more complicated, or not having enough time or expertise to manage HR themselves.
PEOs can help firms in almost every field. The PEO market is mostly made up of construction, healthcare, professional services, and manufacturing. This is because these industries have problems that PEOs can help with, not because PEOs can't help other industries. PEOs work well for a lot of different types of organizations, including technology startups, nonprofits, shops, wholesalers, farms, schools, and many more.
Some common inflection points are when a company hires its 10th employee, which makes HR much more complicated; when the company expands into a second or third state, which creates multi-state compliance requirements; when the company has trouble hiring talent because its benefits aren't competitive; when the company gets its first workers' comp claim and realizes the cost and risk; when the company spends more than 10 hours a week on HR administration instead of business strategy; when it hits regulatory thresholds that trigger new requirements (like the ACA at 50+ employees); when it plans rapid expansion and needs HR infrastructure that scales; or when it faces a compliance concern or audit that shows knowledge gaps.
Instead of replacing existing HR resources, PEOs can add to them. A lot of medium-sized organizations have one HR person who works on culture, employee relations, and strategic initiatives. The PEO takes care of payroll, benefits, compliance, and risk management. This mix of approaches lets you get human help with employee-facing concerns while also using the PEO's technical HR skills.