At what size of a company does a PEO or ASO make sense?

Douglas Tarr Entrepreneur and Software Architect

May 8th, 2014

I've got just a few employees at this point and am looking at Trinet for PEO services.  I'm currently using Bank of America's payroll services (which are fine) but the California EDD payroll forms make my head spin.  My receipts are sitting in a pile on my desk as well so it'd be nice to have someone take care of that as well.   I'd also like to get a benefits plan together too.  

Do PEOs or ASOs make financial sense for companies with just a few (ie, under 10) employees?  

Bob Binder Member of Technical Staff at Software Engineering Institute | Carnegie Mellon University

May 9th, 2014

I used Trinet from 2003 to 2008 for my startup, with an average headcount about 10. I would do it again, unless you can find someone who can do all of this adminstriva reliably at a much lower cost. The also can get employee health insurance at large group rates - good luck trying to get that on your own. They also provide a risk shield against employment-related law suits. A PEO will provide typical HR perks that matter to anyone who is used to getting them - that is a factor in recruiting.

I haven't priced these kind of services in a while - it was certainly worthwhile then.  I'm sure there are other PEOs with a story worth listening to - shop around.

I've also used PayChex for a two person boutique. This was just bare bones payroll, although they will get you hooked up with other HR services, a la carte. These hookups weren't worth it, but I continue to use PayChex for basic payroll. 

NB: if you screw up payroll on your own, you will be in world of hurt - big penalties and possible criminal charges.

Rob G

May 9th, 2014

for my second startup it made sense for us from day 1 (2 employees plus 2 principals).  HR/payroll/benefits admin, insurance questions, employee handbook, etc. is a huge distraction... especially if you are allergic to administrative paperwork as i am :- /  .  When we got to about 40 employees, while efficient, it was not exactly cost effective.  at 50 we switched to a direct insurance broker for insurance and benefits admin. and dramatically reduced our insurance costs.  we retained the POE for payroll however which can cause some coordination headaches re benefits admin, onboarding new hires, terminations, etc.  we use a small local firm in WA - customer services is great. happy to connect you if you'd like. we did not have any employees in CA, but i believe they have CA customers - don't quote me on that.  

Andrea Macario CMO / Co-founder

May 8th, 2014

i use trinet and my company has currently 3 employees incl. myself;  i recommend to negotiate heavily on their rates, particularly if you have aggressive growth plans but in general i find that when you get to 3-4 employees the cost ps start to be reasonable. 

i have to say i'm pretty happy with what they provide, on payroll i basically don't have to do anything and i am able to provide pretty competitive benefits to my employees which makes our offers more attractive - not to mention the peace of mind of finally having decent benefits for myself and my family (as a foreigner i got tricked into obamacare for a couple of months and i got pretty desperate when i realized nobody that you'd actually would consider seeing is accepting it)

all in all i would recommend to go for it if you want both payroll and benefits and if you want something that can scale. only for payroll i'm not sure. it's a great service but very expensive.