The Truth About Professional Employer Organizations

For many business owners, partnering with a professional employer organization (PEO) can raise questions and misconceptions. Myths about control, cost, and risk often prevent businesses from exploring solutions that could actually simplify operations and support long-term growth. The reality is that a PEO is designed to strengthen your business, not replace it.

Let’s break down some of the most common PEO myths and uncover the facts business leaders should understand before deciding whether a PEO partnership is right for them.

Myth 1: A PEO Takes Control of Your Business

One of the most common misconceptions is that partnering with a PEO means giving up control. In reality, business owners maintain full authority over daily operations, company culture, and strategic decision-making.

A PEO operates under a co-employment relationship, which allows the PEO to handle administrative human resources (HR) responsibilities such as payroll processing, benefits administration, and compliance support. You remain in charge of managing your workforce and running your business. The PEO simply works behind the scenes to support those efforts.

Myth 2: A PEO Controls Hiring and Termination Decisions

Some business owners worry that a PEO will dictate who they can hire or fire. This is not the case. All hiring, promotion, and termination decisions remain solely with the business owner.

While a PEO may provide guidance on best practices, onboarding support, and compliance considerations, the final decisions always rest with your leadership team. The goal is to help ensure that decisions are well-documented and compliant, not to make them for you.

Myth 3: PEOs Are Only for Large Companies

PEOs are often assumed to be a solution only for large organizations, but small and midsize businesses frequently see the greatest impact from a PEO partnership.

Many growing businesses lack dedicated HR staff or the resources to keep up with changing employment regulations. A PEO helps level the playing field by giving smaller organizations access to experienced HR professionals, modern technology, and Fortune 500-level employee benefits that would otherwise be difficult to secure.

Myth 4: Partnering With a PEO Is Too Expensive

While partnering with a PEO does involve a service fee, the cost is often offset by savings in other areas. Businesses may reduce expenses related to benefits administration, payroll errors, compliance penalties, and workers’ compensation claims.

Beyond direct savings, a PEO can also deliver value by reducing administrative burdens, allowing leadership teams to focus more time on growth, productivity, and employee engagement. When viewed holistically, many businesses find that a PEO partnership delivers a strong return on investment.

Myth 5: A PEO Negatively Impacts Company Culture

Some business owners fear that outsourcing HR functions will make their company feel less personal. In practice, the opposite is often true.

By offering better benefits, clearer policies, and structured HR support, a PEO can enhance the employee experience. When HR processes run smoothly and employees feel supported, businesses are better positioned to build a positive and consistent workplace culture that reflects their values.

Myth 6: Co-Employment Creates More Risk for Employers

The term co-employment is often misunderstood. Rather than increasing risk, it is designed to help reduce it.

In a co-employment relationship, the PEO assumes responsibility for many HR related administrative and compliance functions, including payroll tax filing and benefits administration. This added layer of expertise helps businesses stay compliant with employment laws while maintaining full control over business operations and employee management.

Understanding the Real Value of a PEO

When the myths are stripped away, the benefits of a PEO become clear. PEOs offer businesses HR expertise, compliance assistance, employee benefits, and technology to manage their workforce more efficiently and minimize risks.

Rather than replacing internal leadership or culture, a PEO strengthens your foundation, enabling your business to grow with confidence and stability.

Partner With GMS

PEOs like GMS offer a range of benefits while saving you time and money in the long term. Over the past 25+ years, GMS has helped over 3,500 companies manage their HR functions. As HR experts, we take on the administrative burdens that companies don’t have the time or expertise to manage effectively, including: