PEO in Arizona [2024]

A professional employer organization (PEO) is a firm that helps small to mid-sized businesses reduce the administrative demands of handling their own HR processes—typically by streamlining and automating manual HR tasks like payroll services, benefits administration, compliance and risk management, and workers’ compensation insurance. Alongside these HR solutions, PEOs provide their client companies’ employees with access to better, more affordable benefits.

From Phoenix to Scottsdale (and everywhere in between), many Arizona-based based businesses take advantage of the benefits of partnering with a PEO. Will yours be next? Whether your business is based in Arizona or you employ remote workers there, a PEO helps you comply with state and local Arizona laws, navigate complex HR challenges, and attract top talent with access to high-quality benefits plans at affordable rates.

Before you choose a PEO, though, there’s a lot to consider. Different PEOs have different pricing structures, offerings, specialties, and more. This article will guide you through the benefits they offer and how to choose a PEO that suits your business needs—like Rippling PEO, which offers features like remote laptop management and automatic state tax registration, making it easy to hire and onboard people in Arizona and across the US.

Benefits of using a PEO in Arizona

Arizona PEOs offer many benefits, from reduced administrative HR workload to access to cost-effective benefits plans, support and expertise, and more. Let’s explore them in more detail below.

Offload administrative HR work

Joining a PEO means entering into a co-employment relationship—which means you and the PEO divide employment responsibilities for your workers.

You become the worksite employer, which means you keep your existing authority over who you hire and fire, how much you pay your workers, and day-to-day strategic decisions like company research and development, sales, marketing, and customer support.

The PEO becomes the administrative employer, which means they employ your workers under their federal tax identification number (EIN). This allows them to take over employment-related human resources tasks like running payroll, administering and managing benefits, and handling compliance.

PEOs are well-positioned for this because of their combination of experience, expertise, technology, and established HR processes and workflows, which allows them to streamline (and automate) the tasks they take off your team’s plate. And with the time they free up for your HR team, you can focus on more important, strategic work that drives business outcomes for your company.

Better employee benefits, at a lower price

According to the National Association of Professional Employer Organizations (NAPEO), in the US alone, there are more than 500 PEOs. They co-employ 4.5 million workers across 200,000 businesses. Because each PEO “employs” so many individual workers, they have the bargaining power to negotiate with insurance companies to secure better rates and provide your employees with access to lower-cost benefits.

That’s not all. PEOs can also use these economies of scale to provide access to more comprehensive benefits plans. The plans PEOs provide access to often include health insurance, life and disability insurance, worksite benefits, mental health support, retirement plans, commuter benefits, and dependent care—typically more than many small businesses can offer in benefits packages on their own. Having access to such comprehensive plans can help small to mid-sized businesses compete with larger companies when it comes to attracting and retaining top talent.

It’s also important to note that the Affordable Care Act (ACA) requires businesses with 50 or more full-time employees to provide healthcare coverage to those employees. While Arizona doesn’t have any state laws that require additional coverage, a PEO can still help you comply with federal regulations by giving your employees access to high-quality health insurance plans that meet federal mandates—at affordable prices.

Worry-free compliance with Arizona laws

The ACA and other federal regulations aren’t the only laws a PEO can help you stay in compliance with. It will also help you maintain your compliance with state-level and local Arizona laws, which are complex and constantly changing. One example is Arizona’s minimum wage law. Under Arizona’s Fair Wages and Healthy Families Act, the state’s minimum wage is $14.35 an hour in 2024.

Not only is Arizona’s minimum wage much higher than the federal minimum, but it’s set to change each Jan. 1 based on the consumer price index, which is difficult to keep up with if you have employees in Arizona—or remote employees in different locations across the US where minimum wage laws differ. A PEO like Rippling automatically flags minimum wage violations based on employees’ locations, so you can rest assured that you’re always in compliance with local laws.

But PEOs can help you stay compliant with much more than just minimum wage laws. They also support compliance with:

• Payroll regulations, like classifying employees and contractors correctly; issuing and filing tax forms; reporting, collecting, and depositing payroll taxes with the correct authorities at the right times; and complying with other wage laws, such as overtime requirements
• Benefits laws, like COBRA, FSA, HSA, and any other benefits-related regulations
• Labor laws, like providing workers comp insurance, helping you follow Equal Employment Opportunity (EEO) laws, and displaying state-required labor posters

If your business violates any of these laws—even unintentionally—you could face steep fines and penalties. The IRS estimates that 40% of small businesses pay payroll tax penalties every year, which only highlights how valuable the compliance support a PEO provides can be.

Dedicated support team

Finally, PEOs are tried and tested HR experts. This can be a huge benefit for small to mid-sized businesses who don’t have that kind of expertise on their in-house teams. When you join a PEO, you gain access to an expert team that will help you save time and money. They can also provide support and guidance as you navigate any number of HR obstacles and challenges—for example, streamlining your benefits administration, creating an employee handbook, training managers, and reviewing your safety practices.

What to consider when evaluating a PEO service in Arizona

There are many PEO companies in Arizona. When evaluating different providers, use the criteria below to find the one that’s the best fit for your business:

• Your business needs. First, think about the HR services you need your PEO to provide. Most PEOs offer some combination of:
• Payroll processing
• Tax filing and compliance
• Benefits administration
• Recruiting and onboarding
• Safety compliance and risk management
• Time and attendance tracking
• Regulatory compliance
• HR outsourcing
• Your budget. Different PEOs may use different pricing structures, but the most common ways for them to charge are either flat rates per-employee, or a percentage of each payroll run. Don’t forget that you aren’t just considering your budget now; if you plan to grow or scale your business in the future, you need to consider whether you can afford the PEO you choose as your headcount increases over time.
• Experience and reputation. Consider whether the PEO has worked with other Arizona companies or other businesses in your industry or niche, and what its reputation is like among your peers. You may also want to look at review websites like G2 or Capterra to get a sense of what current and past clients think about their experiences working with the PEO company.
• Benefits. Explore the range, quality, and cost of the benefits the PEO can provide access to. Gauge whether they align with what your employees want and need.
• Benefits renewal rates. Make sure to also look into whether the PEO is transparent about how much the cost of benefits will increase after your first year. Some PEOs jack up renewal rates, leading to unexpectedly high costs for their clients after the first year, often forcing them to switch to a new PEO. Look for a PEO that’s honest and straightforward about renewal costs, so you can predict how your costs will change over time.
• Integrations. Consider the PEO’s technology, systems, and platform. Does it integrate with the tools you and your teams use?
• Does the PEO specialize in certain industries? If your business operates within a certain niche or a specific industry, you might want to consider seeking out a PEO with specialized expertise so it's better positioned to meet your needs.
• Does the PEO specialize in certain legal or compliance issues? If you need specialized legal or compliance services, or help meeting a specific federal or state regulation, look for a PEO that has experience or expertise in that field.
• Your exit strategy. Before joining a PEO, it’s a good idea to think about the future—like when you might eventually want to leave the PEO and take your HR processes back in-house or move to another solution. Many PEOs make this process difficult, requiring you to painfully rip out all their systems and start over from scratch. Find out what will be required to move off any PEO you’re considering before you join.

Why Rippling PEO is the right choice for your Arizona business

Rippling PEO is the first of its kind: It syncs HR, IT, and Finance in one platform, so all your busy work is simple and streamlined, from 90-second employee onboarding to remote IT and device management. Unlike most other PEOs that run on software built in the 1980s, Rippling runs on fast, easy-to-use, modern software.

Rippling also handles all of your most critical compliance work, from automatically setting up and maintaining your local tax accounts to flagging wage and hours law violations to save you from costly fines and penalties before they happen. And we give your employees access to Fortune 500-quality benefits at affordable rates.

With Rippling, you get:

• HR, IT, and Finance in one platform
• Powerful and customizable reporting on any employee data
• Tools for managing remote teams, including state and local tax registration, paperless onboarding, and app and device management
• Access to superior benefits plans, plus below-average, predictable renewal rates
• Automatic flagging for federal, state, and local compliance infractions, along with recommended plans to fix each one
• Automated risk management processes, including ACA and COBRA administration, anti-harassment training, and sending digital labor law posters to your employees
• Access to hundreds of HR resources, guides, and templates

If you ever decide to bring HR in-house, Rippling makes it easy. Instead of the painful rip-and-replace process other PEOs require, with Rippling, you can just switch off the PEO and move seamlessly onto our all-in-one workforce management platform. All your HR, payroll, and employee data stays stored in your account. Plus, your integrations with other systems stay intact and your employees keep their same Rippling logins, so they just keep using the system the same way as before.

FAQs about PEOs in Arizona

What is a PEO and how does it work?

A professional employer organization (PEO) is a firm that partners with businesses to provide comprehensive HR solutions, including payroll, benefits administration, HR management, and compliance assistance with state and federal laws. When a business joins a PEO, they typically co-employ the business’ workers. The PEO becomes their administrative employer for tax purposes and is responsible for certain bureaucratic HR and employment tasks, like running payroll and registering for taxes. Meanwhile, the client company retains control over day-to-day operations and management of employees. This partnership allows businesses, especially small and medium-sized ones, to outsource complex HR tasks, gain access to better benefits, and ensure compliance with employment laws, all while focusing on their core business activities.

How does a PEO arrangement affect control over my employees?

In a PEO (Professional Employer Organization) arrangement, your company retains primary control over the management and day-to-day operations of your employees. 

What is a Certified PEO?

A Certified PEO (CPEO) is a type of PEO that has met certification requirements set by the IRS. The certification process involves thorough financial reporting, background checks, and compliance with various tax and employment laws. Certification is voluntary and doesn’t represent an endorsement from the IRS. In the past, CPEOs could provide certain additional tax benefits to their client businesses. Today, however, the benefits of certification are largely obsolete.

What size company can benefit from a PEO?

A PEO offers many benefits to businesses of all sizes—but small business owners in particular may be drawn to PEOs because of their ability to manage complex HR tasks, provide access to comprehensive employee benefits, and ensure compliance with employment laws. This helps small to mid-sized businesses compete more effectively for talent and focus on their core business activities.

How does a PEO charge for its services?

Pricing structures can vary across the PEO industry; however, PEOs typically charge for their services using one of two main pricing models: a percentage of payroll or a per-employee-per-month (PEPM) fee.

What is the implementation process and how long does it take to go live?

The implementation process for partnering with a PEO typically involves several stages, including initial consultation, data collection, system setup, employee onboarding, and training. The entire process can take anywhere from a few weeks to several months, depending on the complexity and size of the business and what you need from the PEO.

Are PEOs regulated?

Yes. PEOs are subject to both federal and state regulations. These regulations ensure that PEOs operate responsibly and protect the interests of their client companies and employees.

Are PEOs in Arizona required to have special certifications or licenses?

Arizona doesn’t require PEOs to have special certifications or licenses to operate, but as of June 30, 2023, they are required to register with the Arizona state government. Details can be requested from the Arizona Secretary of State.

What happens if I want to terminate my relationship with a PEO?

With most PEOs, it’s difficult to end your relationship—they require you to remove all their systems from your business, which can be disruptive, inefficient, and painful. Then, you have to put new systems in place for payroll, benefits administration, and anything else the PEO took care of.

But with Rippling PEO, it’s easy to move on and off—simply switch off the PEO and move seamlessly onto our all-in-one workforce management platform. All your data, systems, and integrations stay intact.

In what states is Rippling PEO available?

Rippling PEO is available in all US states.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.