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PEO Services

What is a PEO? Debunking Common Misconceptions About What PEOs Do

by FrankCrum on February 7, 2023

A PEO, or Professional Employer Organization, supports business owners by taking on key administrative burdens and helping to reduce risk so they can focus on what matters most – core business functions. Unlike a la carte solutions that answer a single employer need, PEOs take a comprehensive approach, providing services such as payroll, workers’ compensation insurance, HR services, risk management, employee benefits, and more.

Often misunderstood, we’re here to debunk some common myths and misconceptions about what a PEO is and what it can do for you and your business.

How do PEOs work?

The unique arrangement known as “co-employment” is at the heart of the PEO model. In co-employment, the PEO and its client formally divide administrative functions and liability. For example, the PEO assumes responsibility for HR support, payroll processing and payroll tax administration, workers’ compensation, and employment practices liability insurance, and often employee benefits, while the client company continues to direct employees and control daily operations.

The client’s employees are added to the PEO's payroll, and the PEO becomes the employer of record, issuing paychecks, withholding taxes, and handling other payroll-related tasks. In some cases, the PEO is also responsible for handling employee benefits, such as health insurance and retirement plans, and supporting the company to maintain compliance with all applicable employment laws.

The client company retains control over its own operations and makes all decisions related to its business. The company's leadership team continues to manage and supervise their employees, set policies and procedures, and make decisions about hiring, firing, and promotions. The PEO's role is to provide the necessary HR services and support, with the company remaining fully in control of its own operations.

It's also important to note that many PEOs, like FrankCrum, are able to provide additional services like HR consultation and employee training that can improve the overall management and performance of the company.

What are some misconceptions about PEOs?

Some misconceptions about PEOs include:

1. PEOs take over your company.

Many mistakenly believe that PEOs completely take over the management and decision-making of their client’s businesses. However, this is not the case. The co-employment agreement clearly stipulates where the PEO’s responsibilities begin and end. The client company retains control of its own operations and makes all decisions related to its business.

In fact, with a PEO by your side handling things on the backend, you can focus on the most important activities that only you can do, like generating sales and growing your business.

2. PEOs are only for small businesses.

Some assume that PEOs are only for small businesses that lack the resources to handle their own HR functions. However, PEOs can be beneficial for companies of all sizes, including medium and large organizations. As companies grow, so do the complexities of their administrative and compliance needs. In many cases, companies find that the expertise required and the associated expense are better outsourced than kept in-house.

3. PEOs are expensive.

PEO costs vary based on business priorities, number of employees, size of payroll, and workers’ compensation claim history. There’s also significant price variation across providers. With that said, there is a lot of value associated with PEOs. According to research by the National Association of Professional Employer Organizations (NAPEO), PEO clients save 21% on administration costs. Their HR and risk management support helps their clients maintain compliance and avoid penalties, while also reducing their risk of costly lawsuits. In addition, PEOs negotiate lower rates on benefits and insurance through economies of scale. Although there are costs associated with PEOs, they typically save their clients money in the long run.

4. Employees don’t like working with a PEO.

It’s true that employees can fear change. However, employees leaving because their employer partnered with a PEO is virtually unheard of. In fact, hiring the right PEO can actually increase employee morale and reduce turnover.

Working with a PEO strengthens your HR capabilities and provides guidance on enhancing employee relations. If you choose to offer benefits through your PEO, your staff may gain access to health insurance, retirement plans and other ancillary benefits like vision and dental insurance and perks that rival that of a Fortune 500 company. There’s a lot for employees to love in a PEO relationship.

5. All PEOs are the same.

It is important to note that each PEO company works differently and has different packages, so it is important to thoroughly research and understand the services offered by a PEO before partnering with one.

Whether you’re on the hunt for a good PEO partner or looking to make a long-awaited change, finding one that meets the needs of your particular business and your goals is important.

Partnering with a PEO: How FrankCrum is different

What services does FrankCrum offer?

FrankCrum is a PEO that provides a range of human resource services to small and medium-sized businesses, including:

  • Payroll processing: We handle payroll, including the issuance of paychecks, withholding taxes, and other payroll-related tasks.
  • Employee benefits: We offer employee benefits such as health insurance, retirement plans, and other ancillary benefits options, such as dental, vision, disability and life insurance that require no employer contribution.
  • Compliance: We help our clients stay compliant with state and federal employment and labor laws, including OSHA and ACA compliance.
  • Risk management: We offer workers' compensation insurance and custom risk management and safety programs.
  • Human resources support: We provide human resources support and guidance, including employee handbooks, employee training, and much more.
  • Time and attendance management: We can assist with tracking and monitoring the hours worked by employees, ensuring they are getting paid correctly and on time.
  • Recruiting and hiring: We can assist with the recruiting and hiring process, such as background checks, drug testing, and candidate pre-screening.

What makes us different?

When you work with FrankCrum, you gain a true partner. Your risk becomes our risk, making success a shared interest. Our goal is to help our clients thrive, and we offer unmatched service and expertise in our full-service client experience to help you succeed.

In business for more than four decades, FrankCrum is independently owned and has an affiliated AM Best-rated (B++) workers’ compensation carrier. We have our own proprietary HR Information System (HRIS) that allows clients to submit simple payroll, request a Certificate of Insurance, and more online or from a mobile device. With us, size doesn’t matter – FrankCrum has flexible product and service delivery models to meet the unique needs of small, medium, and large companies.

By outsourcing these functions to FrankCrum, you can focus on your company’s core business and leave the administrative burdens to us.

At FrankCrum, our mission is to help businesses become the best they can be. To learn more about our comprehensive services, contact us today.


FrankCrum is a professional employer organization (PEO), founded in 1981 dedicated to helping business owners boost HR capabilities and broaden convenient services and benefits to employees. The origin of FrankCrum dates back to 1981, when Frank W. Crum, Jr. and his father, Frank Crum, Sr., founded the Great American Temporary Service. With a passion for helping small business owners succeed, the company has evolved and grown over several decades.