When Should a Business Partner With a PEO?

For many growing businesses, the decision to partner with a Professional Employer Organization (PEO) comes down to one question: Is managing HR, payroll, benefits, and compliance taking too much time and attention away from running the business? 

There is no single employee count or moment when every business should partner with a PEO. However, certain signs may indicate it’s time to consider one. Growing administrative workloads, difficulty competing for talent, expanding into multiple states, and increasing compliance responsibilities are all common reasons businesses explore a PEO. 

What Is a PEO? 

A Professional Employer Organization, or PEO, is a company that partners with businesses to manage and support certain employment-related responsibilities, including payroll, employee benefits, HR administration, risk management, and compliance. 

A PEO relationship typically uses a co-employment model. This means the PEO and the client business share certain employer responsibilities. The PEO generally handles designated administrative and employment-related responsibilities, while the business maintains control over its operations and workforce. 

In practical terms, the business still decides who to hire, who to promote, how to run its organization, and what its workplace culture looks like. The PEO helps manage many of the administrative responsibilities that come with employing those people. 

When Should a Business Consider Partnering With a PEO? 

A business should consider a PEO when managing employees has become more complex than its current HR resources can comfortably support. 

For some companies, that happens as they grow from a small team into a larger workforce. For others, it happens when they begin hiring employees in multiple states, struggle to offer competitive benefits, or realize they’re spending too much time on payroll and HR administration. 

Here are some of the most common signs that it may be time to consider a PEO. 

Is HR and payroll taking too much time away from running the business? 

For many small businesses, HR responsibilities start with the owner, office manager, bookkeeper, or another employee who has several responsibilities. 

At first, that arrangement may work. But as the company grows, so does the administrative workload. Payroll, employee onboarding, tax filings, benefits administration, employment documentation, compliance requirements, and workers’ compensation can quickly become a significant part of someone’s job. 

If your team is spending hours every week managing administrative tasks instead of focusing on customers, employees, or business growth, a PEO may be worth considering. 

Is your business struggling to compete on employee benefits? 

Benefits can be an important part of attracting and retaining employees, but smaller businesses may have fewer options or less buying power than larger employers. 

Health insurance is one example. A small employer may find it challenging to provide the coverage employees want at a cost the business can comfortably manage. 

A PEO can provide access to employee benefit programs and other resources that may be difficult for a smaller business to secure independently. This can help a growing company build a more competitive overall employee offering without creating and managing its own benefits infrastructure. 

Are you hiring employees in multiple states? 

Expanding into new states can create new HR and payroll responsibilities. 

Each state can have its own requirements related to payroll taxes, employment laws, wage and hour rules, paid leave, and other workplace requirements. Tracking those differences can become increasingly difficult as a company expands. 

A PEO can provide support with the administrative and compliance responsibilities associated with a distributed workforce. For a growing business, that support can make expanding into new markets more manageable while reducing the amount of employment administration handled internally. 

Are you worried about HR compliance? 

Employment compliance becomes more complicated as a business grows. Businesses must stay updated with evolving federal, state, and local regulations while ensuring accurate payroll records, employee documentation, and workplace policies. 

That can be especially challenging for businesses without a dedicated HR professional or compliance team. 

A PEO can provide HR and compliance support to help businesses navigate employment requirements and establish more consistent HR processes. 

Are workers’ compensation and workplace safety becoming more difficult to manage? 

Workers’ compensation claims, workplace safety programs, employee injuries, and insurance requirements can create significant administrative responsibilities for business owners and HR teams. 

A PEO can provide resources and guidance related to workers’ compensation and workplace safety, helping businesses take a more proactive approach to managing workplace risk. 

For companies in industries where workplace injuries are a particular concern, having access to risk management support can be especially valuable. 

Do you need more HR support but aren’t ready to build a larger HR department? 

Hiring a full HR department isn’t always practical for a growing business. 

A company might have 25, 50, or 100 employees but still have HR responsibilities handled by one person who is also responsible for recruiting, office administration, payroll, or other functions. 

A PEO can supplement a lean internal team by taking on many of the administrative responsibilities associated with employment. That allows internal HR professionals to spend more time on areas that directly affect the employee experience, such as recruiting, engagement, development, and company culture. 

What Size Business Benefits Most From a PEO? 

No universal employee count determines whether a company needs a PEO. 

However, PEOs are commonly a strong fit for small and midsize businesses with approximately 10 to 150 employees, particularly when the company has limited internal HR resources. 

Larger businesses can also benefit from a PEO, especially when they have lean HR teams, operate across multiple states, or want to outsource specific administrative responsibilities. 

How Do You Know If Your Business Is Ready for a PEO? 

Consider a PEO if several of these statements sound familiar: 

• HR and payroll responsibilities are taking significant time away from core business activities. 
• Payroll and tax administration are becoming increasingly complicated. 
• Your business is hiring employees in multiple states. 
• You are struggling to offer competitive health or retirement benefits. 
• You don’t have a dedicated HR professional or your HR team is stretched thin. 
• Workers’ compensation and workplace safety require more attention than your team can provide. 
• You are concerned about keeping up with changing employment regulations. 
• Your business is growing quickly, and your current HR processes aren’t keeping pace. 
• You want to provide employees with more HR resources without significantly expanding your internal team. 

Is Your Business Ready for a PEO? 

Growth brings opportunities, but it also brings more complexity. If your team is spending too much time managing the administrative side of employment, it may be time to consider a different approach. 

GMS helps businesses manage payroll, HR, benefits, risk management, and other employment responsibilities through a single PEO partnership. 

Want to see if a PEO is right for your business? Talk with GMS about your current HR challenges, growth plans, and the areas where your team needs additional support.