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PEOs offer four core services.













PEO Insurance Shop Logo.

















  PEO Core Services:

  • Payroll
  • Work Comp
  • Human Resources
  • Employee Benefits











PEO payroll only.

The Four Core PEO Services


Choosing a PEO is a big deal.  There are numerous different types of PEOs and different contractual arrangements available.  Before making the change to a PEO make sure you understand the pros and cons of PEOs and make sure the PEO you choose will actually help solve your unique employer challenges.

There are basically four core services integrated into the PEO co-employment relationship:

  • PEO payroll and tax administration

  • PEO workers compensation insurance and risk management administration

  • PEO human resources assistance

  • PEO employee benefits

The fact is most employers rarely suffer or have issues in all four of these core PEO service areas and are also unlikely to utilize all PEO services to address each area.  Furthermore, very few PEOs actually have the ability to provide real value in all of these service areas because they often focus in only one or two of the core areas as part of their focus.  For example, PEO who work with higher risk companies like contractors who have had some losses may not operate a good health program or have quality HR services.  Conversely, PEOs with strong HR services or perhaps a great health program may not have the work comp programs available to help companies with prior claims.  Understand what you want to accomplish before choosing a PEO.


Scenarios Where PEOs Can Help?


Below is a list of employer related problems that may help you determine if you're fit for a PEO relationship:


Workers Compensation Insurance

Some PEOs have good programs in place to reduce employer costs associated with workers compensation and help create better risk management and claims administration programs.  PEOs with master work comp policies may be a good fit for employers who are in a higher risk industry and/or have an workers compensation experience modifier above 1.00.


Reasoning: PEOs may be able to purchase workers compensation insurance at a significantly lower rate per $100.

Warnings: 1) Potential for PEOs rates to increase, 2) Policy termination by carrier, 3) PEO may misclassify employees, 4) PEO deception by decreasing advertised work comp rates and increasing PEO administration charges.


High Unemployment Tax Rates

Employers who have higher turnover and have significantly higher state unemployment tax rates caused by unemployment claims might benefit from a PEO relationship.


Reasoning: The PEO may have a lower SUTA tax rate and a better ability to absorb more unemployment claims than a smaller employer.  * Some states do not allow PEOs to utilize their own SUTA rate.

Warnings: 1) PEOs tax rate could increase as the ratio of claims to tax payments increase.  2) SUTA dumping could get PEO in trouble or create liability for employer-  More on PEO SUTA dumping.


Health Insurance

Some PEOs maintain a master health insurance plan that may benefit employers and small groups where one or more employee has had health issues.  These master policies may reduce the cost of health insurance for the employer and employees by becoming part of a larger group.


Reasoning: The law of large numbers is the basic theory of insurance- many spreading the cost for others.  When managed correctly, PEOs can provide a stable platform for groups.

Warnings: 1) Today many PEO health plans have multiple tiers of classifications to better price groups with the carrier which may lead to higher rates for groups with health claims, 2) PEO could be non-renewed on its health plan leaving the employer scrambling for coverage, 3) Adverse selection- PEOs that place too many unhealthy groups may be susceptible to rate increases.


Human Resource Issues

Any employer who has experienced a discrimination or harassment lawsuit can attest to the value of good HR procedures.  Some PEOs provide hands on assistance with HR programs and procedures designed to reduce employer HR liability.


Reasoning: The PEO becomes your co-employment partner which in and of itself provides some protection.  PEOs with good HR practices should insist on implementing employee handbooks, acknowledgement forms, and job descriptions as part of the PEO service.

Warnings: 1) Employers should carefully review the PEO agreements to make sure the PEO provides assistance and understand any legal language with regard to human resource related advise, 2) Potential for poor advice.


  PEOs. the growing burden of employment laws


Logistics and Multi-State Issues

Employers with multi-state operations may be a good fit for a PEOs payroll and tax administration services coupled with good HR assistance. 


Reasoning: Payroll, tax laws, and HR issues vary tremendously by state.  PEOs who already have a good deal of experience in the states you do business in may help increase operating efficiency or eliminate the need for costly specialized employees.

Warnings: 1) Payroll service providers may be able to provide equal services at a lower price point.


Government Compliance

Government laws have changed considerably over the past 30 years and continue to change at a rapid pace today.  PEOs who have certified HR professionals on staff are more likely to help employer remain in compliance with new laws.


Reasoning: Most employers do not have true HR professionals on staff because they are cost prohibitive, but many PEOs do have one or more HR professional on staff and the cost of these professionals is spread between all clients which helps make it more affordable for all PEO clients.

Warnings: 1) If HR is a priority to your company, ask to speak with one or more of the people in charge of HR and  government compliance for the PEO and make sure you feel confident in their skill level.


   PEOs. the growing burden of employment laws



By integrating some of these four core services, a PEO may help make employer related processes and employee administration less burdensome for employers


Reasoning: Being an employer is not easy.  PEOs can help simplify the process because they have access to important payroll data and information that helps them assist with insurance, HR, benefits, and more.

Warnings: 1) Be sure to understand your expectations from a PEO and determine if the PEOs you are considering can provide the best solutions for your unique situation.




A PEO might be a good fit for employers with one or more of the issues listed above.  Other employers without one or more of these issues or concerns are likely a better fit for a payroll only service, ASO service, or stand alone insurance policies with in-house payroll.  Click below to learn about all of our PEO, payroll, and insurance programs.



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