What is a PEO and Does Your Business Need One?

Ad Blocker Detected

Our website is made possible by displaying online advertisements to our visitors. Please consider supporting us by disabling your ad blocker.

As the business landscape is transforming around the world, many business owners are struggling to keep up. It seems like every day new products, technology, software and apps are introduced to the market in the hopes of making the day to day operations of your business easier.

One such service is something that not a lot of people have heard of. If they have, they aren’t entirely sure what it means. Have YOU heard of a PEO before?

Today we’ll be taking a look at what a PEO is, the services they offer, the pros and cons associated with using them and the kind of questions to ask before hiring one for your own business.

What is a PEO?

The letters P, E and O stand for professional employer organization. A PEO is an outsourcing firm that provides essential human resources services to small and medium-sized businesses for a fee per employee. By entering into a co-employment contract with a PEO company you’re able to hand over the administrative HR side of your business, while you focus on the core offering of your business.

The types of services typically offered by PEO companies include the following:

  • Payroll and tax
  • Compliance
  • Workers’ compensation insurance
  • Employee benefits
  • Development of employee policies

Outsourcing certain tasks can sound scary, especially to new business owners. But it can increase your business’ overall efficiency and allow you to focus on building your new business.

Pros and Cons of PEOs

There are many ways to increase your productivity, efficiency and effectiveness as a business owner and utilizing a PEO is just one of them—but is it the right tool for you and your business? Let’s take a look at some of the pros and cons associated with PEO companies.


  • Using a PEO will provide your employees with better benefits at a lower cost
  • A PEO will share your responsibilities, lightening your load
  • PEO companies handle any legal and compliance issues
  • Your employees gain easy access to information if they have a question about their benefit plans; this enables them to plan more effectively and enjoy more beneficial retirement outcomes


  • PEOs won’t always share the same management style as you
  • Most PEO companies charge bundle fees; this may not be ideal for your needs or budget

Questions to Ask Before Hiring a PEO Company

Before hiring a PEO company it’s important to ask the right questions to ensure you pick wisely. Here are four of the most important questions to ask your potential PEO company:

  1. What is the average tenure of your clients?
  2. Can I pick and choose which services I need?
  3. Will I have a dedicated account manager to help me?
  4. Do you provide training for employees?

Final Thoughts

Now that you know all about PEOs and what they can do for your business, will you be making use of such a service to better your business? Let us know in the comments section below.

Photo by Nik MacMillan