Top Considerations When Choosing a PEO Provider

Growing a business is exciting but it comes with plenty of challenges—and managing HR is definitely one of them. While it’s crucial, it’s also time-consuming. Imagine being able to focus on your big ideas, knowing that all the behind-the-scenes tasks like payroll, benefits, and compliance are sorted out without you having to lift a finger. That’s what a Professional Employer Organization (PEO) can do for you.

But finding the right PEO isn’t just about ticking off boxes. It’s about choosing a partner who really understands your business and aligns with your values. We’ve put together a simple guide to help you identify the key factors that matter.

Plus, we’ve got a handy PEO Checklist you can download to make your decision-making even easier!

1. First things first—do they “get” your company?

Cultural fit matters. A good cultural fit can make all the difference. In fact, a study by PwC found that 86% of leaders believe that getting the right culture match is essential for business success. If your PEO provider doesn’t mesh well with your team’s way of working, you might run into misunderstandings, and it could feel like you’re constantly on different pages.

Ask yourself:

• Shared Values: Do they value the same things in their approach to employee management as your company does?
• Flexibility: Are they flexible enough to adapt to your needs, or do they stick to a rigid process?

Tip: Schedule a chat with the PEO’s team and see if their working style clicks with yours. It’s much easier to work with partners who speak your language, both literally and figuratively!

2. Not all PEOs are created equal

According to the NAPEO (National Association of Professional Employer Organizations), 15% of small businesses reported a 10-14% productivity boost after signing up with a PEO. But—not all PEOs offer the same services.

Some cover only the basics, like payroll and compliance, while others throw in extra perks like employee development programs or advanced HR tech tools. Take your time to check their quality!

Make sure the PEO provides:

• Core services: Do they handle the essentials like payroll, benefits administration, and compliance?
• Extras: Some PEOs go the extra mile with things like employee development or training programs. Does that matter to your business?

Tip: Make a list of the HR tasks you need help with and see if the PEO can cover all the bases. It’s like getting a tailored suit—everything should fit just right!

3. Just like hiring someone new, you want to check out your PEO’s reputation before you sign on

How do other businesses rate the PEO? Reputation really counts. According to research by Staffing Industry Analysts, 96% of businesses that use a PEO recommend it to others. High client satisfaction is a strong indicator that a PEO knows what they’re doing.

Check for:

• Client testimonials: What are current customers saying? Look for case studies or reviews.
• Experience in your industry: Do they have a history of working with companies similar to yours?
• Retention rates: A high retention rate is a sign that clients are happy with their service. NAPEO reports that up to 98% of companies renew their contracts with a PEO provider.

4. Let’s talk dollars and cents—understanding the cost structure is key to avoiding surprises down the road

According to NAPEO, businesses using PEOs save about $1,775 per employee each year by reducing HR costs and avoiding non-compliance penalties. And, PEOs typically charge either a flat fee per employee or a percentage of your total payroll.

Of course, pricing is always a big part of the decision. You want to understand the full cost of working with a PEO without any surprises. Always ask for a full breakdown of the costs upfront. This way, you can compare and make sure you’re getting the best value for your money.

Things to consider:

• Pricing models: Flat fee or payroll percentage? Which one works better for your budget?
• Hidden fees: Watch out for extra charges like onboarding fees or termination costs.

5. You want a PEO that’s got your back when you need them

You want to make sure that if anything goes wrong (or if you just have a quick question), the PEO will be there to help quickly. Great customer support makes all the difference, especially when things don’t go as planned. Research by Deloitte found that 94% of executives believe a positive employee experience—including good HR support—leads to higher engagement and productivity.

Look for:

• Dedicated support: Will you have a go-to person for help, or will you be passed around to different reps?
• Response time: How quickly do they get back to you when issues pop up?
• Proactive Advice: Do they keep you updated on new regulations and best practices, or do you have to chase them for answers?

Tip: Pay attention to how fast they respond to your initial enquiries. If they’re slow now, that might not change once you’re signed up.

6. Compliance and Risk Management

A big reason companies turn to PEOs is for help with compliance and reducing risk. A NAPEO study found that businesses using a PEO are 50% less likely to face compliance penalties. So, make sure your PEO knows the ins and outs of employment laws, especially if you’re operating in multiple locations.

• Local Compliance: Are they knowledgeable about local employment laws and regulations? This is especially important if you’re operating in multiple countries.
• Risk Management: How do they handle legal risks, like employee disputes or wrongful termination claims?

Tip: Ask for specific examples of how the PEO has helped other companies avoid compliance issues. A good PEO will have plenty of success stories to share.

Read Related Article : Scaling Your Business into Southeast Asia: Why You Need an EOR

Wrapping Up: Make the Right Choice

Choosing the right PEO provider can make all the difference in managing your HR smoothly and efficiently. By keeping these considerations in mind—cultural fit, service quality, reputation, cost, and support—you’ll be well on your way to finding the perfect partner for your business.

Need more guidance? Download our PEO Checklist to help you evaluate your options in detail and make the best choice for your team.