The Difference Between PEO Services and Payroll Management Services

There are a number of ways to outsource your payroll or even your entire HR department. There are really two different kinds of services out there. One will handle all of your payroll needs such as paycheck processing, taxes, timekeeping, and document tracking. However, there is another type of service out there.

A professional employer organization or PEO will help you with payroll, but also with benefits, retirement, regulation compliance, and other human resources. So besides the obvious, what are the differences between the two?

Go Farther

Handling payroll is one of the biggest headaches for HR for sure, and so outsourcing payroll is a common solution for many businesses. Various companies offer these services, and even a PEO service like Trinet or Oasis offer either complete HR services or individual services like payroll.

However, a PEO goes farther than just payroll, and can help you with benefits, retirement, government regulation compliances, workman’s compensation, and more.

More Options

Essentially with a PEO you have more options than you do with simple payroll outsourcing. You can have the PEO handle as much or as little of your HR as you choose. This is largely dependent on you and the size of your company.

These services often have a set rate per employee per service. This rate goes down the more employees you have, kind of like a volume discount. This means the more your company grows, the more you can afford to offload to the PEO. This makes sense, as it saves you time as well (more on that in a moment).

The other important thing to remember is that no two businesses are 100% alike. They do not need the same services, so a good PEO will know what to offer you, what you need, and how to customize their approach to your industry. A payroll service alone is usually focused on one service, and a cookie cutter approach. A PEO offers more options and is more flexible.

Share Responsibility

One thing you will learn early on during your startup journey is to share both responsibilities and rewards. Outsourcing your HR to a PEO allows you to share the responsibility for a number of things that makes your efforts easier. Think of it this way: you are not an expert in every field of business, nor do you have the time, energy, and desire to learn everything.

A PEO will help you manage changing government regulations, local taxes, your quarterly filings, and more. Even changes in the health insurance requirements and the ACA have made a huge difference in the way HR operates over the last few years, and more changes are sure to come soon.

When you share responsibility in this area, the PEO will help back you up in the case of payroll or compliance issues, freeing you up to do the things you do best.

Save Time and Effort

Which brings us to the final benefit of outsourcing your HR to a good PEO. As mentioned above, shared responsibility means you don’t have to be an expert in this area and the many facets of HR and payroll. But it also means you are free to engage in more revenue generating activities and building your business.

That is the thing about payroll and HR. Not only are they not what you do best, but they are also taking valuable time and effort away from other more profitable activities. What would you do with an extra eight hours every two weeks if you did not have to do payroll? What about the time spent on other tasks in between?

A good PEO can also help you with recruitment, benefit analysis, and other business services. What this means for you in the simplest terms is that you are free of a huge administrative burden.


Your employees will probably thank you for using a good PEO. It will save them time and trouble, and the experts in the field will probably help them more than you are able to if they have questions or issues. The better benefits they will get from a good PEO will make you are more desirable employer for future employees as well.

Your customers will thank you too. The time and attention you can give them instead of spending time on administrative tasks will reap huge dividends in the long run and will even make your company more profitable.  A PEO is not for everyone, but it is a solution that most businesses should evaluate before they either create their own in house HR department or continue to try to do things themselves.

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