Choosing the right Professional Employer Organization (PEO) for your business is a critical decision. This choice requires you to understand your specific HR needs and evaluate the unique offerings of various PEOs.

Selecting a PEO involves checking for key accreditations like ESAC and IRS certifications, examining the PEO’s services and technology, and evaluating customer support and cost-effectiveness. This approach ensures you select a PEO that aligns with your business' goals and requirements.

This guide aims to simplify your decision-making process by highlighting critical steps and considerations in choosing a PEO.

Step 1: Identify What Your Business is Looking to Gain From a PEO Partnership

Partnering with a PEO can significantly streamline your human resources and payroll processes. Identifying your specific needs is the first and most crucial step in choosing a PEO.

Every business has unique HR challenges. Whether it's simplifying payroll, managing benefits, ensuring employment law compliance, or enhancing employee training, understanding your specific needs is key to selecting the right PEO.

By pinpointing your specific HR requirements, you can lead your business to the perfect PEO partner, tailored to your unique needs. Knowing what your business needs from a PEO partner will ensure that you’re asking the right questions when engaging potential partners.

For more information, check out our complete guide on “How Does a PEO Work?” 

Step 2: Check for Important Licenses and Accreditations

When choosing a PEO, verifying their credentials is critical. This step is about ensuring the PEO you select adheres to high standards of professionalism, compliance, and reliability.

Key Credentials to Look For:
  • ESAC Bonded and Accredited: The Employer Services Assurance Corporation (ESAC) is an independent agency that monitors PEOs for adherence to important financial, ethical, and operational standards. Being ESAC bonded and accredited is a mark of trustworthiness in the PEO industry. Approximately 73% of wages within the PEO sector are distributed by PEOs that are ESAC accredited.
  • Certified by the IRS: A Professional Employer Organization recognized as a Certified PEO (CPEO) by the Internal Revenue Service (IRS) meets specific tax status requirements. This certification is a reassurance of the PEO's capability to handle tax-related matters effectively.
  • Membership in NAPEO: The National Association of Professional Employer Organizations (NAPEO) offers membership that signifies a commitment to industry best practices and ongoing education and collaboration.
LandrumHR's Credentials:

At LandrumHR, we take pride in our high standards and adherence to industry best practices. We are ESAC bonded and accredited, recognized as a certified PEO by the IRS, and are an active and engaged member of NAPEO. These credentials reflect our dedication to providing reliable and compliant PEO services to our clients.


Step 3: Evaluate the Standard and Value-Added Services Offered by PEOs


Selecting the right PEO is akin to choosing a new car: options vary in features, costs, and approaches. Understanding the range of services PEOs offer and aligning them with your business needs is key to finding the perfect fit.

PEOs differ in their approach to human resources. While some offer automated or self-service models, others provide hands-on, more personalized experiences with dedicated support personnel. This spectrum ranges from high-touch, personalized service to more technology-driven solutions.

Consider these key areas of service:
  1. Human Resources: The core of a PEO's offering, human resources services vary in delivery. Evaluate if you need in-depth HR support, policy development, or a more automated self-service approach.
  2. Benefits Administration: A primary draw for many businesses is the competitive benefits packages available due to a PEO’s larger pool of employees. Look at the types of health plans, dental, vision, and 401(k) options available and how they align with your needs. Also, consider and discuss how much of the benefits enrollment and other administration processes the PEO will manage. Inquire about any additional ancillary benefits the PEO offers and what the cost may be. Examples include adoption insurance, pet insurance, short- and long-term disability, life insurance, tuition assistance, and other benefits that can help you attract and retain the right talent.
  3. Workers' Compensation and Risk Management: PEOs can provide competitive workers' compensation insurance and risk management services. Assess the PEO's experience in your industry and their approach to safety and compliance. Again, discuss with the PEO whether they simply provide workers’ comp insurance or will also manage claims as part of their services.
  4. Payroll Administration: Most PEOs have robust systems for payroll processing. Ensure the PEO's technology for payroll management aligns with your preferences and check their credentials for handling sensitive information. Check to ensure that the PEO has a SOC Audit report available to show their commitment to data security and protocols.
When considering these services, balance the level of personal customer service against automation, and weigh the costs against the potential savings and efficiencies gained. Each business' needs will dictate the ideal mix of services and technology.

For more information, check out our complete guide What is a PEO? 

Step 4: Review the Technology and Integration

In today's digital age, the technology offered by a PEO is a critical aspect of their service. It's not just about having the latest tools, but also about how these tools integrate into your existing systems and processes.

When evaluating a PEO's technology, consider the following:
  1. HRIS System: The Human Resource Information System (HRIS) is the backbone of a PEO's technology offering. It should be robust, user-friendly, and capable of handling various HR tasks efficiently.
  2. Additional Systems: Look for PEOs that offer additoinal HRIS modules such as Learning Management Systems (LMS) for employee training, Performance Management Systems (PMS) for tracking employee progress, and Applicant Tracking Systems (ATS) for recruitment.
  3. Demo and Support: Request a demo of the PEO's technology. This will give you a feel for the user experience and functionality. Pay attention to how the PEO addresses your queries during the demo. A rushed or dismissive attitude might indicate potential issues with future support.
According to MarketSplash, 73% of companies in the U.S. are utilizing HRIS software, which highlights the increasing reliance on HR technology and the importance of a PEO’s technological capabilities.

Working with a PEO that offers a comprehensive suite of technology solutions, like LandrumHR, provides the flexibility to scale as your business evolves. LandrumHR's full suite, including a Learning Management System (LMS), Performance Management System (PMS), and Applicant Tracking System (ATS), caters to growing and changing business needs. With these tools, businesses can efficiently manage employee development, track performance, and streamline recruitment, ensuring they have the right resources to adapt and thrive at every stage of their growth.

Step 5: Discuss the Level of Support Available

The level of support a PEO provides is a critical factor in your partnership. It's not just about resolving issues your business is facing but also about the guidance and assistance the PEO offers to help your business thrive.

Consider these key points when evaluating a PEO's support:
  1. Accessibility: Determine how easy it is to reach the PEO's support team. Do you have a dedicated HR Partner to contact, or is it a general support 800 number? Look at the various ways you can communicate with the PEO. Do they offer phone support, email, live chat, or in-person meetings? Consider your preferred method of communication and how easy it is to communicate with the PEO in that method.
  2. Expertise: Assess the expertise of the PEO’s team. Do they have qualified professionals who understand your industry and specific HR needs?
  3. Responsiveness: Consider how quickly the PEO responds to inquiries and resolves issues. Prompt support is essential in HR-related matters where time is often critical.
The right level of support can significantly impact your experience with a PEO. A PEO that offers responsive, knowledgeable, and personalized support can be a valuable asset to your business.


Step 6: Understand the Financial and Legal Aspects

When selecting a PEO, understanding the financial and legal aspects is crucial. These factors not only affect the cost of services but also the security and compliance of your business operations.

Financial Considerations:
  1. Cost Structure: Examine how the PEO structures its fees. Is it a flat rate, per-employee cost, or percentage of payroll? Understanding this will help you gauge the overall expense of the services provided.
  2. Value vs. Cost: Lower upfront costs may be attractive, but assess the value against the level of services and support. A large, national PEO may offer a lower upfront cost, but the direct level of support could be limited compared to a more comprehensive, local provider. For information on the differences between local and national PEOs, check out our guide on local vs. national PEOs.
  3. Internal Cost Analysis: Consider the costs of managing HR functions internally versus outsourcing to a PEO. Often, the internal resource allocation and time spent can outweigh the cost of a PEO service.
Legal Considerations:
  1. Compliance and Regulations: Ensure that the PEO is adept at handling compliance with local, state, and federal employment laws. Their expertise can be invaluable in avoiding costly legal pitfalls.
  2. Contract Terms: Pay close attention to the contract's details, including service level agreements, termination clauses, renewal periods, and any additional costs.

Understanding these financial and legal aspects will help you make an informed decision. Ultimately, this ensures that the PEO partnership is not only beneficial but also cost-effective and compliant with legal standards.

Need Help Figuring Out How to Choose the Best PEO?

Choosing the right PEO is a decision that can profoundly affect your business's efficiency and growth. Selecting the ideal PEO can streamline your HR processes, improve employee satisfaction, and significantly contribute to your organization's success.
LandrumHR is here to provide expert guidance and support in this crucial decision-making process. With our comprehensive experience and bespoke solutions, we are well-equipped to assess your unique business needs and steer you toward the most appropriate PEO solution.
Contact our team to discover how our services can enhance your HR operations and drive your business forward.