Comparison
PEO vs Payroll Company: What's Actually Different?
A payroll company runs your payroll. A PEO runs your payroll, sponsors your benefits, holds your workers' comp, and shares HR liability through co-employment. The decision is about scope, not just price.
What's included by default
- Payroll company: Pay runs, direct deposit, federal/state/local tax filings, year-end W-2s. HR is usually an add-on module.
- PEO: All payroll services plus medical/dental/vision/life, 401(k) MEP, workers' comp, EPLI, HR advisory, and compliance support — bundled under co-employment.
How they price
Payroll companies charge per pay run plus per-employee fees. Total cost is small but scope is narrow. PEOs charge PEPM or a percentage of payroll. The headline number is bigger because the bundle is bigger.
Can I use a payroll company alongside a benefits broker?
Yes. The classic stack is payroll company + outside benefits broker + outside WC carrier + HR consultant. You assemble the components yourself. PEOs sell the assembled stack.
Is HR support better with a PEO?
Usually yes for SMBs without an in-house HR team, because it's bundled and the PEO has compliance liability. Larger employers with real HR functions often prefer payroll + standalone HRIS for control.
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