Skip to content

How Professional Employment Outsourcing Can Improve Your Business

Professional Employment Outsourcing (PEO) is a type of business service where a company outsources certain human resources tasks to a third-party provider.

PEO providers take on the legal responsibility of being the employer of record for the employees they manage. At the same time, the client company retains control over the day-to-day activities of its employees.

PEO can also help small and medium-sized businesses gain access to larger benefits packages, which can help them attract and retain top talent.

In addition, PEO providers can assist with compliance and regulatory issues related to employment, reducing the risk of legal complications for the client company.

Consequently, the question can be asked, “Can Professional Employment Outsourcing Help Your Business?”

Professional Employment Outsourcing can help businesses reduce costs and improve efficiency by providing access to experienced professionals to handle administrative tasks and other complex projects. This can help businesses save time, money, and resources, allowing them to focus on their core operations.

Let’s get this conversation started right away!

Can Professional Employment Outsourcing Help Your Business

Professional Employment Outsourcing (PEO) can help your business in many ways. It can provide cost savings by outsourcing HR functions to a PEO provider, which can save money on salaries and benefits for in-house HR personnel.

Additionally, PEO providers can leverage group buying power to offer cost savings on employee benefits like healthcare and retirement plans.

PEO providers are experts in HR compliance, ensuring that your business is compliant with federal and state employment regulations, which can help reduce the risk of costly fines and penalties for non-compliance.

Outsourcing HR functions to a PEO provider allows your business to focus on its core competencies and revenue-generating activities while leaving HR administration to experts. 

However, PEO services are often scalable, which means that they can adapt to the changing needs of your business, making it an excellent option for companies looking to expand or contract.

In 2022, firms will have spent more than $700 billion on outsourcing. PEO outsourcing spending is expected to reach $519 billion in 2023, a 22% increase over 2019. Spending on business process outsourcing is expected to reach $212 billion in 2023, representing a 19% increase over 2019.

Challenges of Professional Employment Outsourcing

While Professional Employment Outsourcing (PEO) can bring many benefits to a business, there are also some challenges associated with it. Here are some of the most common challenges that businesses may face when outsourcing their HR functions to a PEO provider:

1. Loss of control

When a business outsources HR functions to a PEO provider, it may feel like they are losing control over certain aspects of its business.

2. Communication issues

Clear and effective communication is essential when outsourcing any business function, and HR is no exception. If there are communication breakdowns between the PEO provider and the client business, it can lead to problems and misunderstandings.

3. Integration with existing systems

PEO providers may use their own HR software and systems, which can make integration with the client business’ existing systems difficult. This can lead to issues with data transfer, reporting, and analysis.

4. Cultural differences

PEO providers may be located in different countries or regions and may have different cultural norms and practices. This can lead to misunderstandings and conflicts if not addressed properly.

5. Legal and compliance issues

PEO providers are responsible for compliance with employment regulations, but it is still important for the client business to understand and be aware of the regulations that apply to their employees.

How to Overcome the Challenges of PEO

Here are some strategies for overcoming the challenges associated with Professional Employment Outsourcing (PEO):

1. Loss of control

To overcome the feeling of losing control over certain aspects of their business, businesses should clearly define their expectations and communicate them to the PEO provider.

2. Communication issues

Effective communication is key to any successful outsourcing relationship. Businesses should establish clear communication channels, agree on response times, and ensure that both parties have access to the information they need to do their jobs effectively.

3. Integration with existing systems

Businesses should work closely with their PEO provider to ensure that their HR software and systems can integrate smoothly with their existing systems.

4. Cultural differences

Businesses should take the time to understand the cultural norms and practices of their PEO provider and work to bridge any cultural differences.

5. Legal and compliance issues

While PEO providers are responsible for compliance with employment regulations, businesses should still educate themselves on the regulations that apply to their employees.

How Much Do PEO Services Cost

The cost of Professional Employment Outsourcing (PEO) services can vary depending on several factors, including the size of the business, the number of employees, the level of HR services required, and the PEO provider.

Generally, PEOs charge a percentage of payroll or a flat fee per employee per month. The cost of Professional Employment Outsourcing Services can vary depending on the services required. Generally, the cost of these services can range from $1,000 to $20,000 per month.

According to the National Association of Professional Employer Organizations (NAPEO), the average cost of PEO services is around 2-3% of the total payroll. However, this can vary depending on the specific services and the size of the business.

5 Advantages Professional Employment Outsourcing Services

Sure, here are some advantages of Professional Employment Outsourcing (PEO) services:

1. HR expertise

PEOs provide access to HR professionals who can help with compliance, legal issues, employee relations, and other HR-related tasks.

2. Cost savings

PEOs can help businesses save money on HR-related expenses such as payroll processing, benefits administration, and workers’ compensation insurance.

3. Risk management

PEOs can help businesses manage risk by ensuring compliance with employment laws and regulations, providing safety training, and helping with workers’ compensation claims.

4. Time savings

PEOs can handle many administrative HR tasks, allowing business owners and managers to focus on other aspects of running the business.

5. Improved productivity

PEOs can help businesses improve productivity by providing training and development programs, performance management tools, and other resources to help employees excel in their roles.

Tax Efficiency with Professional Employment Outsourcing

Professional Employment Outsourcing (PEO) services can provide tax efficiency for businesses. One way that PEOs can do this is by assuming responsibility for payroll taxes. PEOs handle payroll processing, including withholding and remitting payroll taxes to the government.

In addition, PEOs can help businesses with other tax-related tasks, such as filing and paying state and federal unemployment taxes, workers’ compensation insurance premiums, and other taxes and fees.

Overall, working with a PEO can help businesses achieve tax efficiency by streamlining payroll and tax compliance, providing access to employee benefits, and freeing up time and resources to focus on other important aspects of their operations.

Who Makes Use of PEO Services in Business

Sure, here are some bullet points on who makes use of PEO services in business:

  1. Small and medium-sized businesses (SMBs)
  2. Startups and new businesses
  3. Businesses looking to reduce HR administrative burden
  4. Companies seeking to improve HR compliance and risk management
  5. Businesses looking for cost-effective HR solutions
  6. Companies that want to provide competitive employee benefits
  7. Enterprises expanding into new states or countries
  8. Businesses that need HR expertise and support
  9. Companies that want to streamline payroll and benefits administration
  10. Businesses that want to attract and retain top talent


Professional Employment Outsourcing (PEO) services offer many benefits to businesses, including access to HR expertise, cost savings, risk management, employee benefits, scalability, time savings, and improved productivity.

When choosing a PEO provider, it’s important to assess your HR needs, research providers, understand the contract, communicate effectively, and evaluate performance regularly


Who is responsible for compliance when using a PEO?

The PEO is responsible for compliance with employment laws and regulations. However, businesses should still keep an eye on compliance issues and make sure that they are following all relevant laws and regulations.

Do businesses lose control over HR functions when using a PEO?

No, businesses do not lose control over HR functions when using a PEO. They still have control over hiring, firing, and other HR-related decisions. However, the PEO handles the administrative tasks associated with HR.

What happens if a business wants to end its relationship with a PEO?

If a business wants to end its relationship with a PEO, it can terminate the contract. However, it’s important to review the contract beforehand to understand any termination clauses or fees.