PEO in US [2024]

If you run a small to medium-sized business, you already know how time-consuming administrative human resources duties can be (especially when done manually). One way to lessen the load is by partnering with a professional employer organization (PEO), an entity that helps businesses streamline and automate their HR tasks like payroll services, benefits administration, compliance management, and workers’ compensation coverage—all while helping their employees access better, more affordable benefits.

PEOs work with companies all over the US—from startups to small businesses and nonprofits—helping business owners save time and money through expert HR services. 

But when it comes to choosing the best PEO service for your needs, you have a lot of options. There are more than 500 PEOs operating across the US, so before you start evaluating them, read on—this article will walk you through the benefits of using a PEO and how to choose a PEO company that’s a great fit for your business. For example, Rippling PEO offers remote work-friendly features like automatic state tax registration and remote laptop management, making it easy to hire and onboard top talent anywhere in the US.

Find info on your state

Learn more about how a PEO can help you manage compliance in:

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Colorado
• Connecticut
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Missouri
• Montana
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New Mexico
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Texas
• Utah
• Vermont
• Virginia
• Washington
• West Virginia
• Wisconsin
• Wyoming

Benefits of using a US PEO

Partnering with a PEO can mean reducing administrative tasks, gaining access to affordable and robust benefits, and unlocking reliable and comprehensive HR support from a dedicated team of experts.

Offload administrative HR work

When you partner with a PEO, you and the PEO enter into a co-employment relationship, where you each take on certain employer responsibilities. You become the worksite employer, meaning you retain control over personnel decisions like who to hire and let go, how much to pay your workers, and business and strategy decisions (like research and development, marketing, sales, and customer support).

The PEO, on the other hand, becomes the administrative employer. It employs your workforce under its federal tax identification number (EIN), which allows it to assume legal responsibility for employment-related HR tasks like payroll, benefits administration, compliance work, and more.

PEOs can tap into a combination of technology and expertise to streamline HR management, which allows them to handle those tasks more efficiently than many in-house teams. And by handing over manual administrative work to the PEO, your team frees up time and resources for more strategic work that drives business outcomes and generates revenue for your company. It’s a win-win.

Better employee benefits, at a lower price

The National Association of Professional Employer Organizations (NAPEO) reports there are more than 500 PEOs operating across the US. They co-employ more than 4.5 million workers at 200,000 different businesses. The vast size of each PEO’s workforce gives it the bargaining power to negotiate with insurance providers to help its client companies gain access to lower-cost benefits.

PEOs also leverage these economies of scale to help their client businesses access robust, competitive benefits packages. These often include health insurance, life insurance, disability insurance, worksite benefits, mental health support, retirement plans, commuter benefits, dependent care, and more. Small businesses usually benefit the most: Partnering with a PEO allows small businesses to offer their employees access to big-company benefits plans they’d likely otherwise struggle to afford.

The Affordable Care Act (ACA) requires all businesses across the US with 50 or more full-time employees to provide healthcare benefits. A PEO is a great way for businesses to ensure ACA compliance by helping them offer access to health insurance plans that meet the federal mandate—plus additional, optional benefits that help attract and retain top talent.

Worry-free compliance with US laws—at the federal level and in every state

The ACA isn’t the only law a PEO can help your business comply with. PEOs help businesses of all sizes manage their risk and compliance with regulations at the federal, state, and local levels, depending on where they and their employees are located.

Minimum wage is a good example of how a PEO can help you manage compliance, particularly if you have a remote, distributed workforce. Minimum wage laws vary by state (and even by county or city, in some cases). As of Jan. 1, 2024, 30 states and Washington, DC, have minimum wages above the federal minimum wage of $7.25, but they range from $8.75 to $17.00 per hour—and minimum wage laws are updated frequently, so you need to be vigilant about staying on top of changes.

If your workforce is distributed throughout the US, keeping up with all the minimum wages where every employee works can be cumbersome. A PEO like Rippling automatically flags minimum wage violations based on employees’ locations so you can be sure you’re always compliant.

Here are some other ways PEOs offer compliance support:

• Payroll regulations: PEOs can help you classify workers correctly; issue and file tax forms; report, collect, and deposit payroll taxes with the right authorities at the correct times; and comply with other wage and hour laws, like overtime regulations.
• Benefits laws: PEOs can help you follow benefits regulations that vary from state to state, plus federal laws like COBRA, FSA, HSA, and any other benefits-related regulations.
• Labor laws: PEOs can help you access workers’ compensation insurance, follow Equal Employment Opportunity (EEO) laws, display state-required labor posters, conduct safety audits, and undergo Occupational Safety and Health Administration (OSHA) inspections.

It can be costly to violate any of these laws—and according to IRS estimates, 40% of small businesses face payroll penalties every year. By partnering with a PEO and taking advantage of its compliance support services, you can avoid fines and penalties.

Dedicated support team

PEOs are expert HR professionals. When you partner with a PEO, you can take advantage of its expertise, which can be especially beneficial for small businesses without extensive resources of their own internally. You can look to your PEO partner for guidance on topics like employee training, safety process reviews, handbook writing, and any other HR challenges your business faces.

What to consider when evaluating a PEO service in the US

With so many PEO service providers operating across the US, it’s a good idea to carefully choose the right option for your business. Here’s what to consider when evaluating PEO candidates:

• Your business needs. What do you need from a PEO partner? Some of the most common PEO offerings include:
• 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. Typically, PEOs charge either a flat fee per employee or a percentage of each payroll run. Keep in mind that if you plan to grow your business, you’ll need to account for extra costs as you add new hires since the cost of the PEO will likely increase proportionately according to your number of employees.
• Experience and reputation. Does the PEO have a good reputation? Check review sites to see how past and current client companies describe their experiences working with the PEO.
• Benefits. Explore the benefits plans the PEO can help your employees access.
• Benefits renewal rates. Is the PEO transparent about the future costs of its benefits plans? Some PEOs unexpectedly raise renewal rates after the first year, sticking their client companies with unexpected costs.
• Integrations. How will the PEO integrate with your existing tech stack?
• Does the PEO specialize in certain industries? If your business is in a niche industry, consider a PEO that has relevant experience.

• Does the PEO specialize in certain legal or compliance issues? If you have specific legal needs, like special certifications or regulatory requirements, you may want to consider finding a PEO familiar with those processes.
• Your exit strategy. Eventually, you may want to bring your HR processes back in-house—or move to a different solution. Some PEOs make this process painful and disruptive, requiring you to rip out their systems and start over from scratch. It’s a good idea to think about this eventuality before joining a PEO to save yourself a headache down the road.

Why Rippling PEO is the right choice for your US business

Rippling PEO is the first to sync HR, IT, and Finance into one platform, making all your busy work streamlined and straightforward. From 90-second onboarding to remote IT management, Rippling is fast and user-friendly; its modern, easy-to-use software is a big step up from most PEOs that run on software built in the 1980s (yes, really).

With Rippling, you get:

• HR, IT, and Finance in one platform
• Powerful and customizable reporting on any employee data
• Remote team management features, including state and local tax registration, digital onboarding, and app and device management
• Access to top-notch benefits plans with below-average, predictable renewal rates
• Automatic flagging for federal, state, and local compliance infractions, along with recommended action plans 
• Automated risk management processes, including ACA and COBRA administration, anti-harassment training, and distributing digital labor law posters to your employees
• Access to hundreds of comprehensive HR resources, guides, and templates

Rippling also makes it easy to switch if you ever decide to bring HR back in-house. Unlike other PEOs that make this process painfully difficult, all you have to do is switch off Rippling PEO and transition seamlessly to our all-in-one workforce management platform. All your HR, payroll, and employee data stays safely stored in your account, and your integrations with other tools stay intact. Your employees can even keep using Rippling with the same logins as before, so there’s no interruption to their work.

FAQs about PEOs in the US

What is a PEO, and how does it work?

A PEO (professional employer organization) provides HR solutions to businesses, often including payroll, benefits administration, compliance, workers’ compensation, and other services. When a business joins a PEO, it enters into a co-employment relationship where the PEO legally employs the business’s workforce for tax purposes.

How does a PEO arrangement affect control over my employees?

Your business retains complete control over daily operations and personnel decisions, like who to hire and terminate and how much to pay employees and contractors.

What is a Certified PEO?

A Certified PEO (CPEO) is a PEO that has satisfied certain IRS criteria related to its background, expertise, finances, and reporting. Certification is voluntary and doesn’t mean the IRS endorses the PEO—just that the PEO has passed certification assessments. In the past, CPEOs could offer their client businesses extra tax benefits, but today—due to changes in tax laws—those benefits are largely outdated.

What size company can benefit from a PEO?

PEOs work with businesses of all sizes, but typically, small to mid-sized businesses benefit the most. This is because the cost of a PEO typically increases proportionally to your employee headcount, so a PEO stops being cost-effective for larger businesses. PEOs also help small businesses access comprehensive benefits plans at more affordable rates than they can typically secure on their own.

How does a PEO charge for its services?

Costs for PEO services vary depending on the provider, the services, the number of employees, and other factors. However, most PEOs use one of two pricing models: either a flat fee per employee or a percentage of each payroll run.

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

Typically, the PEO provider will start by collecting your company’s employee and HR data. Then, if needed, the provider will integrate their technology into your systems and set up their tools to handle your HR, payroll, and benefits administration. The PEO may onboard your employees to teach them any new processes and explain their new benefits. PEOs may also provide ongoing training and support for using their technology and systems.

The implementation process can take anywhere between a few weeks to a few months, depending on the provider, your business size, and the complexity of the services the PEO is providing for you.

Are PEOs regulated?

Yes. PEOs are subject to both federal and state regulations regarding employer-employee relationships. Some also choose to seek industry accreditation (for example, from the Employer Services Assurance Corporation (ESAC)) for additional credibility. 

Are PEOs required to have special certifications or licenses?

Regulations around PEO certification and licensure requirements typically exist at the state level, so they vary depending on where the PEO operates. Here’s an overview of the laws, as of 2024:

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

With most PEOs, ending the relationship can be messy—they often require you to rip out all their systems and find new ones to handle all your HR processes like payroll, Ben Admin, and compliance.

With Rippling PEO, you can switch on and off the PEO any time you want, moving seamlessly onto our workforce management platform. All your data and integrations stay intact in your account.

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.