Should You Use a PEO? The Cost/Benefit for Early-Stage Companies

What a PEO gives you

A Professional Employer Organization bundles payroll, benefits, HR compliance, and workers' comp under a co-employment arrangement. For a sub-25-person company, it's often the fastest way to offer competitive benefits without building an HR function.

When it stops making sense

PEO pricing is usually a per-employee-per-month fee plus a benefits markup. As headcount grows past ~30–50, the premium you pay for outsourcing starts to exceed the cost of bringing it in-house — especially if your risk profile improves and you can self-insure some benefits.

The decision framework

• Under ~25 employees: PEO usually wins on speed and compliance
• 25–50: run the numbers annually; the crossover is real
• 50+: a direct carrier relationship often beats the PEO bundle

Review it every year as part of the benefits cycle. The right answer at 15 people is rarely the right answer at 60.