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PEOsShould we stay on a PEO or build our own HR setup?
There's no universal employee count where a PEO becomes the wrong answer. The right decision depends on what the PEO costs, how competitive its benefits are, how much administration it removes, the quality of its service, where your employees work, and how much control you want. Compare it against owning your own payroll, benefits and insurance with outside HR support, not just against hiring an HR person.
Answered by Steve Taylor, founder of Thinq HR & Insurance Services. 15 years across benefits, HR, payroll, PEOs and insurance.
The three options
A PEO
Co-employs your staff and bundles payroll, benefits from its master plan, workers' comp and some compliance. You pay an administrative fee plus premiums.
An in-house HR hire
A person on your payroll, plus the tools and vendors they'll need. They own everything, including work they may not have done before.
Your own stack, with the HR operation managed
Your own payroll/HRIS, your own benefits and insurance, and outside support to run the HR operation around them. This is the option most comparisons skip, and it's what many companies leaving a PEO move to.
What to compare, line by line
| Line | Inside a PEO | Your own setup |
|---|---|---|
| Payroll platform | Included in the admin fee | Your own subscription |
| Benefits premium | The PEO's plan rates | Your own group rates |
| Administration and HR | Admin fee, percentage of payroll or per employee | Internal time plus outside support |
| Workers' comp and employer taxes | Through the PEO | Your own policy and accounts |
| Control of plans and vendors | Limited | Full |
The point of the table is what to compare, not a price list. Pricing varies by provider, state and group. Run the PEO fee check
When the economics start to change
A larger or fast-growing payroll, headcount concentrated in one or two states, a desire to choose your own plans, or service that isn't keeping up can make your own setup more attractive. A wide multi-state footprint, strong PEO benefits pricing for your group, or a real preference to hand off administration can keep the PEO competitive.
Signs the PEO may not have been the right fit
- A single-state company that joined mainly for benefits it could have bought directly.
- A service contact that changes every few months.
- No one has ever shown you the admin fee separated from the premium.
Common questions
How do we compare PEO pricing between providers?
Normalize everything to an all-in cost per employee per month for your actual employees: admin fee, plus premiums for the plans your people would choose, plus workers' comp. Then compare that with the same coverage outside a PEO.
Is my company too small to need a broker?
The value of independent advice grows with complexity: more employees, more states, more plans and more vendors. For very small groups a PEO or a simple bundled plan can be fine; the call tells you which.
Can we have a PEO and our own HR person?
Yes, and many companies do. The PEO keeps administration and the HR person owns culture, performance and decisions. Check whether you're then paying twice for administration.
What's the biggest risk in leaving a PEO?
A gap in coverage or payroll at the transition. Your own plan effective the day the PEO plan ends, and a parallel payroll first, remove most of it.
Not sure what you need? Good. That's where we come in.
Most companies come to us knowing something isn't working, not knowing which service to buy. We'll help you figure it out first.