Is a PEO the same as an employee leasing company?

NAPEO says the term "employee leasing" is an older name for what became the PEO industry, and that PEOs do not supply labor to worksites. They provide services and benefits to an existing workforce.

Do I lose control of my business with a PEO?

NAPEO says the owner keeps ownership and control of operations, while employer responsibilities are shared by contract. In practice, you will follow the PEO's policies and systems for the parts it manages, so read the agreement.

Can I switch from a PEO to fractional HR later, or the other way around?

Yes. Moving in or out of a PEO changes who runs payroll and benefits, so plan the timing around your benefits plan year and payroll calendar.

Can fractional HR replace my payroll provider?

No. Payroll stays with your payroll provider. Fractional HR covers the people side.

Fractional HR vs a PEO

Fractional HR vs a PEO: which one fits your Texas business?

If you have started looking for help with HR, you have probably run into both terms. Fractional HR and a PEO (professional employer organization) can both take work off your plate, but they are very different things. This page explains each one, compares them fairly, and tells you when I think each makes sense. I sell fractional HR, so keep that in mind as you read. I have tried to be straight about where a PEO is the better choice.

The short answer

A PEO is a company that becomes your co-employer. It runs payroll, offers a shared benefits plan, and usually handles workers' compensation, all under one contract.
Fractional HR is a senior person who works for you part-time. You keep your own payroll and benefits setup, and you get judgment, documents, and hands-on help with people decisions.
They are not either/or. Many companies use both.

What a PEO is

The National Association of Professional Employer Organizations (NAPEO) describes a PEO as a company that provides HR services to small and mid-size businesses, paying wages and taxes under the PEO's own employer identification number, offering workers' compensation and risk management services, and providing compliance assistance. PEOs also provide HR technology and access to benefits such as health, dental, and 401(k) plans.

The key idea is co-employment. Under a written client service agreement, the PEO and your company share employer responsibilities for your employees. NAPEO explains that your business stays responsible for day-to-day operations, supervision, job assignments, reviews, and decisions about pay and benefits, while the PEO handles employment-related administration such as payroll, payroll taxes, benefits, and workers' compensation. The PEO typically issues the W-2 under its own EIN.

In Texas, PEOs are regulated. The Texas Department of Licensing and Regulation (TDLR) requires a license for any company that offers professional employer services, if it has even one covered employee in Texas. You can verify a PEO's license with TDLR before you sign.

What fractional HR is

Fractional HR means senior HR leadership, part-time. Instead of a service center, you get a named person who learns your business and is there for the decision in front of you: a hire, a complaint, a pay question, a handbook, a termination. With Quick HR Solutions, you work with me directly. Your payroll provider, your insurance broker, and your attorney stay in place, and I coordinate with them.

Side by side

	PEO	Fractional HR
Relationship	Co-employment: PEO shares employer responsibilities	You remain the only employer
Payroll and payroll taxes	Run under the PEO's EIN	You keep your own payroll provider
Benefits	Shared plan through the PEO	Your own plan and broker, or whatever you choose
Workers' compensation	Usually included or arranged by the PEO	Stays with your own carrier
HR support	Varies by PEO, often a team or service center	One senior person who knows your business
Typical fees	Percentage of payroll or per-employee fee, plus benefits and workers' comp	Monthly retainer or hourly
Best for	Owners who want to hand off administration	Owners who want judgment and a partner for people decisions
Contract	Typically a service agreement with notice terms, so read it	Month-to-month at Quick HR Solutions

How PEO pricing works

PEOs usually charge in one of two ways: a percentage of payroll or a set amount per employee. One large PEO provider, ADP, says administrative fees commonly run from 2% to 12% of total payroll, or about $40 to $160 per employee per month, depending on the provider, the services included, and risk factors such as industry and claims history. Benefits and, at some PEOs, workers' compensation are billed separately, so the administrative fee alone does not tell you the total cost.

That is why the fair comparison is the all-in cost. Ask each PEO for an itemized quote that separates the administrative fee, benefits, workers' compensation, and anything else, and compare it with what you pay today for payroll, benefits administration, workers' comp, and HR help.

Fractional HR is simpler to price. At Quick HR Solutions, plans are month-to-month:

HR Basics: $750 a month for about 4 to 5 hours, for businesses up to 25 employees
Sounding Board: $1,500 a month for about 10 hours
Execution Partner: $3,500 a month for about 20 hours
Embedded Strategic Partner: $6,000 a month for about 40 hours of operational support
Pay-as-you-go projects: $165 an hour

You still pay separately for payroll, benefits, and workers' compensation, because those stay with your current providers. See the pricing page.

Benefits and pooling

The most common reason owners look at a PEO is benefits. NAPEO says a PEO lets small businesses offer larger-company benefits at an affordable cost, and PEO health plans commonly combine employees from many client companies. That pooling can mean more plan choices and better rates for a small employer. It can also mean you do not control the plan, and the plan's renewals reflect the whole pool.

A plan that covers employees of two or more unrelated employers is generally a multiple employer welfare arrangement, or MEWA, and the U.S. Department of Labor publishes a guide on how federal and state rules apply. The DOL has also issued an enforcement alert about mismanaged health arrangements. The practical takeaway: ask how the PEO's health plan is funded, who the carrier is, and how renewals are set. Do not rely on the sales deck alone.

Taxes and liability

Under the IRS certification program, a certified PEO (CPEO) can take over some or all of your federal employment tax responsibilities. For worksite employees, the IRS says the CPEO is generally solely liable for paying the employment taxes on the wages it pays. Not every PEO is certified, so it is fair to ask whether yours is, and to check the IRS public list. Either way, you stay responsible for the business decisions that create employment risk, such as who you hire, how you supervise, and how you handle a complaint. Co-employment shares administration. It does not remove your own duty to manage people fairly.

When a PEO usually fits

You want one vendor for payroll, benefits, workers' compensation, and HR tools, and you value less administrative work over control of each piece.
Your benefits are weak or expensive and you want access to a bigger group plan.
You are growing quickly and need systems more than strategy.
You have roughly 10 to 150 employees. NAPEO says this is the size range of most PEO clients.
You are comfortable with a shared-employer arrangement and a contract you have read closely.

When fractional HR usually fits

You already like your payroll provider, benefits broker, and insurance setup, and you do not want to move them.
Your real problem is judgment: hiring decisions, difficult employees, pay structure, manager training, or a handbook that matches how you work.
You want a person who knows you and your team, not a ticket queue.
You want to stay the sole employer of record, with no co-employment agreement.
You want month-to-month flexibility without a long-term contract.

Using both

A lot of companies end up with both, and it can work well. The PEO runs payroll, benefits, and workers' compensation. A fractional HR partner handles what a PEO's standard service usually does not go deep on: hiring strategy, manager coaching, employee relations, pay design, and a handbook written for your company. If you use a PEO, part of my job is to work with it, not around it.

Questions to ask before you sign with a PEO

What exactly is in the administrative fee, and what is billed separately?
Is the PEO licensed by TDLR, and is it an IRS-certified PEO?
How is the health plan funded, and how are renewals set?
What does the HR support look like in practice, and who will I talk to?
What are the contract term, the notice period, and the process to leave?
What happens to my benefits, payroll history, and tax accounts if I leave?

Texas basics, whichever route you choose

Using a PEO or fractional HR does not change the rules Texas employers follow every day:

Texas Payday Law: Non-exempt employees are paid at least twice a month, exempt employees at least once a month, and paydays are posted. Final pay is due within six calendar days if you let someone go and by the next regular payday if they quit.
New-hire reporting: New hires and rehires are reported to the Texas Attorney General within 20 calendar days of the day they start earning wages. If you use a PEO, confirm in writing who files this report.
At-will employment: Either side can end the job at any time for any reason, or none, unless an agreement says otherwise or the reason is one the law forbids, such as discrimination or retaliation.

Not sure which is right for you?

Tell me what you have in place today and what is keeping you up at night. I will give you an honest opinion, even if that opinion is that a PEO is the better fit for you. I'm not an attorney, and this page is practical HR information, not legal advice.

Book a free call Send me a messageor call or text 817-805-6154

Read how fractional HR compares with a full-time hire, or see my overview of fractional HR in Dallas-Fort Worth. Plano and Frisco · All services

Frequently asked questions

Is a PEO the same as an employee leasing company?: NAPEO says the term "employee leasing" is an older name for what became the PEO industry, and that PEOs do not supply labor to worksites. They provide services and benefits to an existing workforce.
Do I lose control of my business with a PEO?: NAPEO says the owner keeps ownership and control of operations, while employer responsibilities are shared by contract. In practice, you will follow the PEO's policies and systems for the parts it manages, so read the agreement.
Can I switch from a PEO to fractional HR later, or the other way around?: Yes. Moving in or out of a PEO changes who runs payroll and benefits, so plan the timing around your benefits plan year and payroll calendar.
Can fractional HR replace my payroll provider?: No. Payroll stays with your payroll provider. Fractional HR covers the people side.

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