5 Myths About PEOs

Myth 1: Do you give up control of your employees?

No. The business owner keeps ownership of the company and control of its operations. As co-employers, the PEO and the client split employer responsibilities in a client service agreement (CSA). The PEO generally takes on the administrative employer role: benefits, payroll and payroll taxes, and often employee records. The client keeps responsibility for the worksite, safety and the business itself. Because the PEO may provide workers' comp coverage, many PEOs also help with safety and compliance. In short, the PEO focuses on employment administration and you run the business.

Myth 2: Do PEO fees cancel out the savings?

Not necessarily, but it depends on your company. Researching and paying for the benefits and insurance a company needs is costly and time-consuming, and a PEO can often provide them for less than a small company pays going it alone. Much of the value is time saved and benefits pricing rather than a low admin fee. No one can promise savings before your census is underwritten, so the honest test is your full invoice side by side with real quotes.

According to NAPEO, the PEO industry association, there were 502 PEOs in the U.S. at the end of 2025, serving about 233,000 client businesses and 5.4 million worksite employees.

Myth 3: If the PEO gets sued, is my company part of the suit?

Not because of that alone. The PEO is a separate company with its own insurance, including employment practices liability insurance (EPLI), and a lawsuit against the PEO over its own business is the PEO's matter. Claims tied to your own worksite are a different question, and your contract spells out who handles what. Your attorney can walk through it with you.

Myth 4: Is a PEO just a glorified staffing company?

No. A PEO doesn't staff your company; you do. A PEO has HR, benefits and payroll specialists who support you through the whole life of an employee, plus master health plans and workers' comp programs. Depending on the state and the PEO, it may also report state unemployment under its own account and rate. In Colorado, each PEO elects whether to report under its own accounts or under each client's (C.R.S. 8-70-114).

Myth 5: Am I locked in, even if I'm unhappy?

Usually not. No one wants unhappy employees. Sometimes renegotiating your contract is all you need, and if it isn't, a PEO that fits better can fix the problem. Plan the exit around your contract's terms.

Most PEO contracts need written notice before you leave, commonly 30, 60 or 90 days, and many renew on their own if you miss the window. January 1 or the first day of a quarter is usually the cleanest start date.

If you want to see what else is out there, the comparison is free to you; the PEO you select pays PEO Consultants.