Q&A: What Are the Benefits of a PEO for Startups?

Startups operate in a world defined by constant risk, speed and the need to build from scratch. For ambitious founders, focusing internal energy on innovation is critical, which means the complexities of HR can be a distraction.

This is where professional employer organizations can deliver transformative value, enabling them to scale faster while managing the details of compliance, payroll and talent acquisition.

Here are the answers to some of the most common questions about the services of a PEO for startups.

What Is a PEO and How Does It Help Startups?

A professional employer organization (PEO) is an HR solutions  provider that, through a client service agreement, is the employer of record for certain purposes, such as payroll taxes. PEOs can provide a comprehensive range of HR services including payroll, access to benefits, compliance support, risk mitigation and HR administration.

The client company retains management control over day-to-day business and controlling its workforce, including hiring and making decisions for its workforce. It also could gain access to a wide range of benefits through a PEO. 

This arrangement is particularly beneficial for startups because benefits are an important draw for top talent. In addition, startups prize rapid scalability, so a PEO's depth of resources can be of great service in providing critical HR services without slowing growth. A startup also could streamline operations as its PEO helps it to optimize HR inefficiencies with the PEO’s HR systems.

A startup's leaders need to focus on core strategic initiatives and rapid growth, and a PEO can free them from many HR tasks.

How Much Does a PEO Cost for Startups?

PEO fees typically follow one of two administrative fee models: per employee per month (PEPM) or as a percentage of payroll. 

TotalHR solutions costs depend on several factors which can include the complexity of employee benefit packages, the number of worksite employees, and client’s profile and industry. For very small teams, minimum employee requirements from some PEOs could affect overall cost-effectiveness. 

A startups' costs can be difficult to manage. However, startups often find significant ROI in saving time, allowing resource allocation to strategic projects instead of overhead.

According to the National Association of Professional Employer Organizations (NAPEO), the estimated annual return on investment (ROI), just from cost savings alone, from using a PEO averages 27%.* 

What Are the Key Benefits of PEOs for Startups?

Growth-focused startups often need to hire top talent as fast as possible. PEOs provide access to competitive employee benefits packages that usually are the reserve of large companies.

This can help to level the playing field asstartups compete to survive and thrive. It may also boost employee retention, because premium benefits are very important to employees, and could strengthen employer branding.

Other key benefits include:

• Streamlined hiring process and talent acquisition. Enhanced recruiting resources can help accelerate time to hire.
• Administrative tasks support. Administration of payroll, PEO-sponsored employee benefits administration and paperwork to HR professionals.
• Support for remote teams and expansion. PEOs can help support remote workers and multi-state payroll tax administration.
• Compliance support with employment-related laws and requirements. PEOs can support in navigating complex and ever-changing HR requirements, staying on top of employment-related laws, and mitigating potential HR risks.

How Do PEOs Support Payroll Administration?

PEOs provide payroll administration services, including payroll processing, payroll taxes administration for payroll paid through the PEO’s platform, and support for multi-state workforce.

Startups benefit by streamlined payroll processing and aligned payroll requirements, no matter where their teams are based. This is essential for increasingly popular remote teams and distributed business models that are part of the startup ecosystem.

Can PEOs Support International Markets and Global Expansion?

PEOs support startups’global expansion goals by providing referrals to global workforce partners. These partners may integrate with the PEO platform, allowing startups to access certain information directly. In addition, global workforce partners can offer specialized services to help with international hiring and administration. Such services from these partners may include:

• International employment law compliance support to help startups navigate requirements in new territories.
• Global payroll capabilities that can pay employees across countries.
• Local benefits administration that align with country-specific standards for employee benefits.
• Immigration and visa support and guidance for cross-border hiring.
• Cultural integration assistance to help with onboarding processes and team cohesion in new regions.

How Do PEOs Enhance Talent Acquisition and Onboarding Process?

For startups, speed in talent acquisition and onboarding is an essential of rapid business growth. PEOs provide access to applicant tracking systems and streamlined onboarding process solutions.

A professional onboarding process can help new employees get off to a great start and get acclimated quickly to your startup culture.

These toools could givebusinesses that are just starting out a real competitive advantage in the race for talent. It also can help reduce hiring friction and support employee retention.

How Do PEOs Help with Risk Mitigation and Compliance?

Startups leveraging a PEO gain access to risk mitigation professionals and support, which is essential for compliance with employment-related laws in every market. Services can often include:

• Expertise on employment-related laws and compliance support.
• Workers' compensation and unemployment insurance administration.
• Documentation and review support for HR reviews.

PEO Support for Startups

TriNet’s HR solutions are purpose-built for startup businesses seeking cost-effective, scalable and comprehensive support for workforce management, onboarding and expansion.

With TriNet, startups not only gain access to competitive employee benefits and world-class payroll administration, but also best practices guidance on HR, support for HR tasks and compliance, and risk mitigation.

As the startup grows, our PEO solutions scale right alongside them, supporting remote teams and international growth with advanced technology, deep HR expertise and partnerships withglobal workforce providers.

Every business has unique HR needs. Use ourfree, interactive tool to find the best aligned HR solution for your company.

* Individual business results may vary, including results of TriNet clients.