PEO services compared

A professional employer organization, or PEO, takes over a defined set of employer tasks for a small or midsize business under a service agreement. The nine providers on this page each state that they act as a co-employer, give clients access to group benefits plans, and run payroll with HR compliance support. We read each vendor's own pages, and each product page links to the sources we used.

What a PEO does and who it fits

A business that hires its first 10 or 50 employees often finds that payroll tax filings, workers' compensation, health plan enrollment and employment law updates take more time than the work itself. A PEO moves much of that administration to an outside firm. The business keeps hiring, pay decisions, supervision and daily operations, while the PEO handles the paperwork under a contract.

ADP TotalSource, TriNet, Paychex PEO, Rippling PEO, CoAdvantage, G&A Partners, VensureHR, FrankCrum and Landrum HR all describe this split. ADP says co-employment is the legal foundation of TotalSource, and the client keeps control over hiring, firing and pay decisions. Vensure says the PEO becomes the employer of record while the client still assigns work and oversees daily tasks.

Businesses that want payroll alone should look at payroll software first, and those that need to hire abroad belong in employer of record services. A PEO is a bundle of payroll, benefits and compliance that only makes sense when the business wants all three handled together.

How co-employment splits the legal duties

Co-employment is a contract, not a change in who runs the business. The PEO becomes the employer for some purposes, mainly tax reporting and benefits administration, and the client stays the employer for others. G&A Partners puts the compliance split plainly: responsibility is shared between the PEO and the business, and the business remains responsible for complying with employment laws.

For taxes, the PEO usually reports wages under its own tax ID. Paychex says that under its PEO model it files payroll taxes under its own EIN. That detail matters to a finance lead, because the business no longer files its own federal payroll tax returns and cannot see the deposits itself.

The IRS describes the effect of this for businesses that use a certified PEO. It says the certified PEO files aggregate employment tax returns under its own EIN, attaches Schedule R to allocate the information to each customer, and deposits the taxes under its own EIN. Customers cannot see the PEO's federal tax deposits in EFTPS, so a buyer should ask how the PEO will show proof of deposits.

Why IRS certification is the first check

Not every PEO is an IRS certified professional employer organization (CPEO). Under 26 U.S.C. 3511, a CPEO is treated as the employer of the worksite employees it pays for federal employment tax purposes, and no other person is. The IRS says the CPEO is solely liable for paying the customer's employment taxes on that pay. A non-certified PEO does not get this treatment, so the client may still be liable if the PEO fails to pay.

Several vendors on this page make the claim. ADP says it has been an IRS-certified PEO since 2017 and ESAC-accredited since 1995. TriNet says a TriNet subsidiary is classified as a CPEO by the IRS. G&A Partners says a CPEO takes on greater liability and is solely responsible for handling payroll taxes. Paychex, Rippling, VensureHR, FrankCrum and Landrum do not mention CPEO status on the pages we read, and CoAdvantage does not either. That is not proof they lack it, only that we could not verify it from the vendor.

The IRS keeps its own list. It publishes every certified CPEO with its effective date of certification, updates the list by the 15th day of the first month of each calendar quarter, and moves a suspended CPEO to a separate suspended list. A CPEO must notify each customer in writing within 10 days of a suspension. A buyer should check the IRS list for the exact legal entity named in the contract, because the brand name on the website is often a group of separate entities.

A CPEO contract must name the CPEO by its exact name and EIN, according to the IRS guide for customers. Before signing, compare that name against the IRS list and against the license entities on the vendor's site. Paychex, for example, names Paychex Business Solutions, LLC and Oasis Outsourcing, LLC as Florida-licensed service entities.

Benefits access and the health plan question

The main reason small companies join a PEO is access to group benefits. TriNet lists medical, dental and vision plans and a TriNet-sponsored 401(k). ADP lists medical, vision, dental, 401(k), EAP and pet wellness. Rippling lists medical, dental, vision, 401(k), HSA, FSA and commuter plans, and says co-employment lets a small business get benefit rates by pooling employees across its client base.

How that pooling is regulated is less settled than the marketing suggests. The Department of Labor treats an arrangement that provides welfare benefits to the employees of two or more employers as a multiple employer welfare arrangement, which states can regulate. Whether a PEO's health plan counts as a single-employer plan or as one of these arrangements depends on facts such as the PEO's business purpose, and the Department has used a substantial business purpose test for that question. Buyers should ask the PEO which of its health plans are fully insured, which carriers underwrite them, and which state regulates them.

Plan choice is also narrower than with an independent broker. The PEO sets the carriers and plan designs, and an employee's coverage can change if the business leaves. Ask for the plan list for the states where employees live before signing, since carriers and networks differ by location.

Payroll and HR compliance support

All nine providers run payroll as part of the contract. Vensure lists paycheck and direct deposit processing, payroll tax preparation, filing and settlement, and W-2 issuance. FrankCrum's guide says the PEO takes over wage calculation, direct deposits, tax withholding, garnishments and required federal filings.

Compliance help is usually advice and alerts, not a transfer of legal responsibility. Rippling says it tracks federal, state and local requirements and alerts users when rules change. ADP promises ongoing compliance support and proactive outreach. TriNet says it helps businesses comply with local, state and federal employment rules. None of these pages promises that the business will be free of employment law claims, and G&A states the opposite.

What PEOs cost and what the pages show

Price is the weakest point of this category. We found no PEO among the nine that publishes a rate card. ADP says TotalSource pricing is quoted rather than listed and depends on workforce size and demographics, workers' compensation risk and where employees work. Paychex shows a Request Pricing button and no rates. Vensure, FrankCrum, Landrum and CoAdvantage direct buyers to a call or sales contact. Rippling's PEO page links to a pricing page but states no amount.

Two vendors give numbers. G&A Partners states that a typical range for its PEO services is $65 to $150 per month per employee for core HR functions, with employer-paid benefits often billed separately and a one-time implementation fee possible. TriNet explains that it charges a flat monthly fee for each active worksite employee and gives a worked example of 20 employees at a $150 per employee per month rate, which comes to $3,000 a month. TriNet presents that as arithmetic, not a price list, and says its plans vary by region, industry, company size and scope of services.

Generic guides on vendor sites give wider ranges. FrankCrum's guide quotes roughly $40 to $160 per employee per month for administrative services, or 2% to 12% of payroll. Landrum's guide estimates about $750 to $1,500 per employee per year, or $11,250 to $22,500 a year for 15 full-time employees. Paychex and CoAdvantage both cite NAPEO research that PEO clients save about $1,775 per employee per year in HR costs. That figure is an industry association claim published by vendors, and we did not verify it.

A flat fee and a percentage of payroll behave differently when raises happen. TriNet says its fee stays the same when an employee gets a raise, while percentage models rise with pay. TriNet also lists charges that sit outside the fee, including benefit premiums, background checks, drug screening, premium learning courses and a possible one-time onboarding or implementation fee.

Minimums and who is left out

Most PEOs set a minimum headcount. TriNet says it requires a minimum worksite employee count and does not publish it. ADP, G&A, Paychex and Vensure state no minimum on the pages we read. A business with a handful of employees may find that a lower plan fits better. CoAdvantage, for instance, lists two non-PEO plans on the same page, at $55 a month plus $5 per employee and $85 a month plus $6 per employee.

We left out Insperity and Justworks. Their websites returned access denied errors to our automated reading, so we could not verify any statement or price from the vendor. We did not fill the gap from review sites, which disagree with each other. Engage PEO, DecisionHR and Sequoia One were also left out because the pages we could read did not describe co-employment.

Questions to put in writing before signing

• Ask which legal entity signs the contract, and look up that exact name and EIN on the IRS list of certified PEOs.
• Ask for the full fee in dollars per employee per month, the implementation fee, and every add-on in the quote.
• Ask how the business gets proof of each payroll tax deposit made under the PEO's EIN.
• Ask what happens to health coverage, 401(k) accounts and workers' compensation if the business leaves, and how much notice the contract requires.
• Ask for the benefit plan list for the states where employees work and the date the carrier rates are reset.