What to Look for In a PEO

When you’re looking to enlist the services of a Professional Employer Organization or PEO, you don’t want to sign your business up with just any PEO. There are certain credentials and assets you’ll want the PEO to have to better serve your business. To ensure you find the right PEO service, follow this short guide on what to look for in a PEO.

First and Foremost; Credentials

Did you know there is an entire organization dedicated to monitoring and accrediting PEO organizations? It’s called ESAC, or The Employer Services Assurance Corporation. ESAC is a non-profit organization dedicated to quality in the PEO industry and is managed by a group of individuals that includes PEO attorneys.

The ESAC’s mission includes:

  • Establishing standards for ethical conduct
  • Providing services to keep PEOs in compliance with all state, federal, and local law
  • Providing a credible accreditation program so PEOs have a standard to adhere to

For more information on the ESAC’s mission, go here.

Having a standard of conduct for PEOs ensures that quality is a top concern among these organizations. Industry standards help separate the top providers from their less-than-reliable counterparts.

When you look for a PEO to partner your business with, don’t forget to ask if the organization has been accredited by ESAC. While not having the accreditation isn’t necessarily an indicator of poor conduct, it’s better to stick with organizations who have verifiable standards to adhere to.


The IRS also provides a voluntary certification program for PEOs, since they handle payroll taxes and other IRS-related information. The accreditation from the IRS’s program is yet another credential to ask for when choosing a PEO.

The IRS has specific requirements for PEOs to participate in the certification program, which include:

  • Must be a business entity
  • Must have one physical business location in the US
  • History of tax compliance
  • Managed by individuals with tax compliance experience

Applications are accepted on the IRS website, with a quick and easy application process. Applications should only take a few business days to process but can take up to a few weeks depending on the workload (specifically during tax return time).

A Good Reputation

Let’s say the PEO you’ve chosen is an accredited organization, both by the IRS and ESAC. That’s all you need, right? While accreditation is certainly a good indicator that the organization cares about the quality of their work, it’s not the only thing you should look for.

Previous or current customers will have a deep insight into the quality of services that PEOs provide. It’s crucial that you take the time to look up and read the reviews of whichever PEO you’re considering partnering with. If there are trends in complaints (or compliments), it can be a good indicator of how the organization does business.

You can also check the organization’s rating with The Better Business Bureau. The BBB has a rating system for businesses that provides information on their conduct. An A rating or higher (up to an A+) is a good rating and means the business performs the services they claim to with care and respect for their customers.

Since you’ll be entrusting things like payroll and tax compliance to a PEO, checking the reviews is of vital importance. Never leave your employee’s compensation and benefits to an organization without good credentials and reviews.

For our California readers, you can find a PEO in California in this article from Carefulcents.com.

A Good Pricing Structure

Pricing is an important aspect of choosing a PEO for your business. Price structures will vary among PEOs, and depend on certain factors such as the number of employees your business has. Some PEOs have a specific number of employees your organization must employ before they’ll do business with you.

Pricing normally comes in three different variations: a “per employee” price, a yearly rate, or a percentage of payroll managed rate. Before you worry about these options being too pricey, consider the cost of employing a full-time payroll/HR staff.

Labor is almost always a business’s largest expense, so if instead of employing an HR staff you choose to utilize a PEO, you’ll likely be saving money. Be sure to check with your PEO before signing any contracts to be sure you’re aware of all of the details of their pricing structure. Hidden fees are definitely not a welcome sight down the road.


While you shouldn’t shy away from a newer PEO, an organization that’s been around for a few years will have invaluable experience in comparison to a freshly formed PEO. Experience can help a business navigate tricky obstacles and learn to solve problems quickly and accurately.

Experience in the PEO industry will undoubtedly be a beneficial asset to your business should any complex issues arise. The tax system is often confusing for those who aren’t familiar with it, which is why you’re entrusting payroll deductions to your PEO in the first place. Be sure the company employs experts on the subject, so you can be sure that your employees’ payroll is being managed responsibly.


PEOs can be incredibly beneficial to your business, provided they are accredited and focused on quality customer service. Always ask for credentials, check reviews, and be sure you’re aware of the company’s pricing structure to avoid any confusion or issues later on. Awareness is your best tool for finding the right PEO for your business.


Updated September 13, 2020

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