Why Should Your Company Partner With a PEO?
By Chris PetersonUpdated
The short answer
Two reasons stand out. A PEO puts your employees on its own master health plans, priced for a large pooled group rather than one small company, and as co-employer it takes on most of the employer paperwork so you can focus on customers and growth.
How does a PEO affect health insurance costs?
Cost is a major reason. Each PEO has its own master health insurance policy with its own premiums, and because a PEO covers the employees of many companies, it can reach plans and pricing that one small company usually can't on its own.
Your result depends on your group. In Colorado, for example, a PEO's plan that covers more than 50 employees in total follows large-employer rules (C.R.S. 8-70-114), so it can be priced using the group's health and claims. A healthy group may price better; a group with large claims may price worse. That's why the comparison is plan by plan.
What else changes when you partner with a PEO?
You get time back for what you love most: your customers. Your energy goes into growing the business, and as you grow, so does your need for HR. Your PEO takes most of that on as your co-employer, and your company keeps the responsibilities tied directly to operations, sales and production.
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.