6 Guidelines to Help Business Owners Choose a PEO
By Chris PetersonFirst published Updated
The short answer
Check six things: whether the PEO tailors its program to you, whether it offers every service you need, whether its team knows federal, state and local labor law, what online access you and your employees get, its credentials (IRS CPEO certification, ESAC accreditation and state licensing), and references from clients like you.
Federal and state compliance and tax laws change fast, and they're hard for owners to keep up with. A co-employment relationship with a qualified professional employer organization (PEO) helps keep your business compliant and your employees well cared for. The hard part is choosing the right one.
What should you look for in a PEO?
1. A program that fits
Can the PEO tailor a program to your needs, or does every client get the same package? If your business grows, you want a PEO that grows with you.
2. Full service
Does the PEO offer everything you want: HR management, benefits administration, payroll, unemployment administration? Do you also need workers' comp, safety programs and training? Make sure it covers what you need now and what you may need later.
3. Labor law expertise
Does the PEO's team know federal, state and local labor law? Compliance is a top concern for owners, and rightly so: mistakes are expensive and time-consuming.
4. Online access
Will you and your employees be able to see payroll and benefits information online? If not, how will employees get what they need?
5. Credentials
Clients hand a PEO critical information and money, so check its credentials yourself. The IRS publishes its list of Certified PEOs (CPEOs); a CPEO is solely liable for federal employment taxes on the wages it pays. ESAC accredits PEOs and checks every quarter that payroll taxes, insurance premiums and retirement contributions were paid. Many states license PEOs, and in Colorado a PEO must be certified by the Department of Labor and Employment. NAPEO membership shows a PEO belongs to the industry association, but it isn't an audit or accreditation.
6. Good references
Talk to the PEO's current and former clients. A PEO with experience serving companies like yours in industry, size and goals will help you get the most from the partnership.
Why does choosing well matter?
In NAPEO's 2024 study (the PEO industry association sponsored it; the economists at McBassi & Company used data from January 2023 to January 2024), PEO clients grew 4.3% a year against about 1.9% for similar companies, had 12% lower employee turnover, and were 50% less likely to go out of business.
Those outcomes depend on picking a PEO that fits. That's the work PEO Consultants does: a one-on-one look at your needs, a comparison across the market, and help putting your choice in place.