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PEO vs. HRIS: Which One is Best For Your Business?

by Andrew Sowell, on September 13, 2023
Staying on top of administrative HR tasks can be a strenuous task when trying to focus on growing your business. Luckily, there are solutions to help, like a PEO and an HRIS. The big question is, what are the differences between the two and which one should I use?

PEOs and HRIS’s are both used to help manage HR, benefits, payroll, and more. Both solutions are viable options to simplify the HR workload and give you more time to focus on your business. A PEO provides more resources and support while an HRIS on its’ own is just HR software.

Below, we have explained the differences and similarities between a PEO and HRIS, as well as how to choose which one is best for you.

What is a PEO?

PEO stands for Professional Employer Organization and is a company that enables businesses to outsource the management of administrative HR tasks. The National Association of Professional Employer Organizations (NAPEO) states, “By providing payroll, benefits, and HR services and assisting with compliance issues under state and federal law, PEOs allow small businesses to improve productivity and profitability, to focus on their core mission, and to grow.”

A PEO can serve as a fully outsourced HR resource or as an extension to your internal HR team. Equipped with efficient management tools and up-to-date compliance knowledge, PEOs ensure HR tasks are handled timely and correctly.

What is an HRIS?

An HRIS is a Human Resource Information System. It serves as a centralized database to simplify operations, store information, and help manage HR tasks efficiently. HRIS software provides you with helpful tools to accomplish administrative HR tasks.

The modules within an HRIS will typically include a combination of the following:
  • Employee Data Management
  • Payroll Processing
  • Benefits Administration
  • Time and Attendance Tracking
  • Performance Management
  • Applicant Tracking
  • Recruitment and Onboarding
  • Training and Development
  • Learning Management
  • Reporting and Analytics

What are the Main Differences Between PEO and HRIS?

A PEO is considered an outsourcing partner who handles administrative HR tasks for you while also supporting more complex HR needs. PEOs offer services beyond that of an HRIS, while some PEOs, including LandrumHR, include an HRIS as part of their overall service. PEOs are responsible for managing payroll, HR, employee benefits, workers’ compensation and more to keep you focused on growing your business.

Unlike a PEO, an HRIS is simply a software tool or online platform that gives you the system to manage HR tasks yourself. An HRIS often comes with customizable modules catered to you and your business. The software requires you to have one or more employees to manage these tasks while using the system as an HR management tool.

Summed up, a PEO is a partner who can understand your business needs and support the ever-changing HR environment to help you focus on growing your business while an HRIS is a technology only solution to assist with administrative HR needs. 


Which One to Choose?

When choosing between a PEO and an HRIS, it’s best to look at your specific company’s needs. A simple way to assess your needs is to answer the questions below.

How Big Is Your Company?

It is important to look at how many employees you have and how much time you are spending managing HR needs for each person. If your organization is planning to grow its employee headcount, be sure to factor this into your decision.

An HRIS can help make HR tasks more efficient and easier to manage with an in-house HR department. A PEO is a great option for small to midsize companies to outsource HR or to support an existing team.

How Much Do You Need To Spend?

Budget should always be a consideration when making an important business decision. Of course, what value you get for the cost to be closely analyzed.

A PEO’s pricing model is based on a per-employee cost or a percentage of total wages with discounts available for volume. An HRIS is often an annual or monthly license cost, plus an additional per-employee fee.

On the surface, an HRIS is typically cheaper than a PEO, but what you receive is also far less than what you get with a PEO. It’s important to consider the additional employees and their associated costs when looking at what will be needed to manage an HRIS, not to mention the legal expertise you need in place to ensure compliance with local, state, and federal employment laws.

How Much Control Would You Like?

Running a business leaves you in control of all decision-making. This control can be a double-edged sword, as everything falls on your shoulders.

If you need to offload some of your responsibility, while maintaining control, a PEO is the best option. You’ll get much-needed relief while being able to focus your efforts and time in other areas that are needed.

An HRIS will give you a more efficient way to manage HR tasks, but you or a designated internal HR team will still need to do the work.


How Much Support Do You Need?

HR is a broad term used for several responsibilities. How much support you need with HR tasks is a major factor is choosing either a PEO or an HRIS.

A PEO will provide support and resources for your HR administrative needs and be available to answer your HR employment law compliance and other questions. On the other hand, an HRIS doesn’t really offer much additional support. You’ll simply have access to a tool that will make managing the tasks more efficient, but you’ll still need to do it yourself.

After answering the questions above, you should have a strong indication of which solution will be best for you.

Cost Comparison

Starting out, an HRIS will require an upfront purchase cost. For many HRIS’s, the cost of the system can increase as you hire more employees. Customizations for your business can also lead to additional cost. With an HRIS, you will need administrative support to manage the system.

When working with a PEO, you enter a service agreement. As your partner, a PEO will provide technology resources, support, and guidance on all HR related matters which allows you to grow your business. 

How do you Transition to a PEO or HRIS?

Switching to a PEO or HRIS will require several meetings with your selected provider to set goals, plan data transfers and launch dates, and work through implementation plans. With both options, there will need to be time scheduled to train employees on new software and procedures.

Below is one example of a timeline we use at LandrumHR when partnering with a new PEO client. 

Implementation timelines can be customized to fit the needs of the client including considerations such as company size and payroll cycle frequency. 

Partner with LandrumHR to Get the Best of Both Worlds

While you have the option to choose either a PEO or an HRIS, wouldn’t it be nice to have both?

LandrumHR is a full-service PEO which includes an integrated HRIS system. We are entrusted with payrolls of nearly half a billion dollars and are among the few Professional Employer Organizations to be both certified by the IRS and accredited by Employer Services Assurance Corporation (ESAC).

By partnering with LandrumHR, you get reliable support from a trusted and experienced PEO and the efficiency and simplicity of an HRIS all in one. 

Need more information? Learn more about what makes LandrumHR special.
Ready to get help? Contact us today to offload your time-intensive HR tasks and get back to focusing on your business.
Andrew Sowell

Andrew Sowell currently serves as the Director of Business Development for LandrumHR. He received his degree in Business Marketing from Florida State University and has an extensive background helping business owners solve problems that impact the bottom line. His passion is consulting with business owners and highlighting areas where the company can save money, increase profits, improve employee engagement, and protect the business from compliance issues.

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