By What five questions matter more than headcount?
When people ask for the number, these are the questions Steve asks back.
| Question | Why it matters |
|---|---|
| How many states are you in? | More states add payroll and compliance complexity. |
| How fast are you hiring? | Hiring speed changes how much administration lands on you. |
| How customized are your benefits? | The more your package differs from a standard offering, the harder a PEO's bundle is to fit around it. |
| Do you have unique workers' compensation needs? | For example, you may need the PEO to carve out workers' comp, or need specific policies or payroll reports that show prevailing wages. |
| How much management overhead already exists? | If you already have managers and structure, you need different things from a PEO than a founder doing everything. |
These factors matter significantly more than employee count.
Who owns the outcome when you use a PEO?
The real question behind "should we leave our PEO" is usually who is actually owning the outcome. A PEO runs the system. Someone inside the company still has to own HR decisions and spot problems early. If you are assuming the PEO does that, it doesn't.
What if the problem isn't the PEO?
Sometimes the PEO is working fine and the company has changed. One Thinq client grew rapidly, less in headcount than in revenue, going from a few million dollars to roughly $20 million in about six months.
What changed wasn't their PEO. What changed was the founders. They stopped working inside the business every day and had to become operators and executives. They needed an operating system where they weren't touching day-to-day HR, and eventually there weren't enough hours left for "I need to change my benefits," "we have a new hire," or "did we do the I-9?"
The PEO hadn't stopped working. The founders no longer had time to own HR and spot the problems the tool could solve. That is a very different problem from "do we need a PEO" or "is our headcount too high." Before you switch providers, check which problem you actually have.
Adapted from Steve's video PEO vs In-House HR, chapters 4:19-7:42.
Common questions
Is there a headcount where a PEO stops making sense?
No single number. A simple company can stay on a PEO at 1,500 covered lives; a complicated one may outgrow it at 20 employees.
What makes a company too complex for a PEO?
Many states, fast hiring, highly customized benefits, special workers' comp needs like carve-outs or prevailing wage reporting, and how much management structure already exists.
Our PEO isn't working. Should we leave?
First ask whether the PEO is failing, or whether nobody inside the company has time to own HR anymore. Those need different fixes.
What should I ask before leaving a PEO?
Ask how many states you operate in, how fast you are hiring, how customized your benefits are, whether you have unique workers' comp needs, and how much management overhead already exists.
Steve Taylor, founder of Thinq HR & Insurance Services, has 15 years in employee benefits, HR, payroll, PEOs and insurance, including time inside Paychex, ADP and TriNet.