As small- and mid-sized businesses navigate increasing operational demands, many are turning to Professional Employer Organizations (PEOs) to reduce administrative burden and gain access to scalable HR infrastructure. Far more than just an outsourced HR provider, a PEO can be a powerful partner in supporting growth, mitigating risk and elevating employee experience.
What is a PEO?
A PEO partners with businesses through a “co-employment” model. In this relationship, the PEO becomes the employer of record for certain tax and benefits purposes, while the business retains full control over daily operations and employee management. This setup allows companies to leverage the PEO’s established tax ID and gain access to large-group benefits, including healthcare, workers’ compensation and retirement plans.
In essence, PEOs enable growing organizations to offer competitive, enterprise-level benefits — without needing a large HR team or extensive internal infrastructure.
How PEOs drive business growth
PEOs handle critical human resources functions, including payroll, benefits administration, tax compliance, onboarding, employee training and regulatory guidance. Many also provide digital platforms that streamline tasks like applicant tracking, performance reviews and learning management.
For business owners, this means spending less time on paperwork and compliance and more time on growth strategy, customer engagement and revenue generation.
In today’s complex employment landscape, PEOs also offer invaluable support navigating multi-state employment laws, developing compliant handbooks and implementing essential employee policies and procedures. They ensure organizations are equipped to scale without exposing themselves to legal or regulatory pitfalls.
Risk management and compliance support
Many PEOs include workplace safety and risk management services, particularly important for industries with physical job requirements. Their teams of compliance experts help minimize exposure to OSHA violations, improve injury prevention strategies and assist with managing workers' compensation claims.
Additionally, PEOs provide guidance on managing unemployment insurance and help defend against inappropriate unemployment claims. Their ability to group clients under different legal entities can lead to more favorable State Unemployment Tax Act (SUTA) rates.
Financial benefits and operational efficiency
Partnering with a PEO can yield measurable cost savings. By offering access to Section 125 cafeteria plans, businesses can allow employees to make pre-tax contributions to eligible benefits, reducing both taxable income and payroll tax obligations.
PEOs also negotiate group rates with insurers and benefit providers — rates that small businesses would typically be unable to access independently. This enhances the overall value of compensation packages while keeping benefit costs manageable.
Important considerations
Before selecting a PEO partner, it’s important to understand its fee structure, service agreement terms and liability policies. PEOs typically charge either a per-employee monthly fee or a percentage of total payroll. Service agreements may include early termination penalties or auto-renew clauses. Additionally, while PEOs offer guidance on compliance matters, employers may still bear responsibility for certain legal obligations.
A scalable solution for modern businesses
For organizations looking to simplify operations, enhance their HR capabilities and compete for top talent, partnering with a PEO can be a strategic advantage. The right PEO can provide the infrastructure and expertise needed to support sustainable growth, improve compliance and create a better employee experience.
Contact HUB International’s employee benefits specialists to learn how PEOs can help your organization grow.