February 15 2018 0comment
Small Business Owner

Why Must Small Business Owners Avoid Large PEOs and Instead Opt for Smaller PEOs

As a small business owner, you care a lot about your business, right?

When you’re looking to hire a Professional Employer Organization (PEO) you want them to care just as much about your business as you do.

It makes sense.

You have a unique business with very specific needs and practices that work for you.

If you’re considering hiring a PEO, consider the size of the company since that could affect the service you get.

In this article, I’ll tell you why you should care about the size of the PEO, discuss a case example, and the benefits of a small PEO.

Large PEOs Don’t Work for Small Businesses

You already know that small businesses operate differently and have different needs than big ones.

A PEO should adapt to different businesses sizes, but not all can do that.

A large PEO has several disadvantages for you as a small business owner:

  • Large PEOs have a cookie-cutter approach to every business they help. They don’t pay attention to what a small business owner needs.
  • Large PEOs take on too many clients, whose business requirements and needs they don’t take the time to learn.
  • When PEOs take on such a large clientele and big company account names, the needs and concerns of small businesses often are swept aside.

A small PEO gives a more personable and humanistic touch to their services since they’re more in touch with their clientele. Large PEOs simply do not have the capacity for personable touches.

Take this following example concerning the hurricane in Florida:

When hurricanes occurred in Florida, many small and mid-sized businesses closed down due to the weather. However, the weather didn’t mean all business operations were down temporarily. These businesses still needed to make payments for salaries, workers compensation, health insurance, and utility bills.

The PEOs that work with these businesses paid for these payments out of their own pockets. Afterwards, they made a repayment plan that worked for their clients so they could still run their businesses.

This is just one example of how a small PEO and a small business work well together. The PEO knew how the hurricane affects Florida businesses and was aware of their payment schedule. The PEO took the initiative to take care of their clients first.

A big PEO wouldn’t take the initiative if they know one of their clients is facing challenges since they have too many clients. 

Why Should You Care Who Handles Your HR Operations?

HR Operations

Who do you want to handle your HR operations?

Ideally, a company who has a friendly face to whom you can make an appointment with, discuss company values and needs, explain your HR problems, and get a quick solution.

The ideal PEO company comes in a small size with big benefits.

Here are a few scenarios where a large PEO may not be much help:

  • A large PEO may not report your distinct payroll and request history for a rating bureau. This can cause issues when you’re looking for insurance carrier-it reduces the number available to you.
  • A large PEO may not be able to keep track of your payroll and request history. This would affect how your own employees get paid and how often.
  • In general, PEOs have a difficulty keeping track of payroll and benefits for their own employees. This is emphasized when a PEO happens to be a large entity. If they run into their own payroll problems, they don’t give you much notice.
  • Large PEOs have a one-size-fits-all template so they won’t work with your unique small business model. This could cause problems with your hiring and firing process since it would be on the PEO’s terms, not yours. Another issue you might face is with HR since you have to adapt to the PEO’s policies instead of your own.
  • When you hire a large PEO, you lose some control over your central business operations and even important people. This is also because a large company cannot easily adapt its policies.
  • When you hire a large PEO, it could potentially influence your business practices and even culture.

These are just a few of the disadvantages you could face if you decide to hire a large PEO to do your HR operations.

A large PEO might charge a lower rate, but you could face larger charges down the line such as missed payroll or utility payments.

Case Example: ADP

Let’s take ADP for example, as a PEO that serviced HR management software for small to mid-sized businesses and homeowners.

ADP manages more than 500,000 employees. If they had been an independent employer, they would be the second among the private sector employers in the United States.

With so many employees and large accounts to handle, do they have the capacity to give as much attention to the small to mid-sized businesses owners as they deserve?

The likelihood that ADP will take the time to understand your unique small business is quite small.

Here are several examples that back up a few of the points I made in the previous section:

  • One customer wanted to buy a health insurance quote for his company of ten employees. He talks to the head of the district at the beginning of the month and gives him all the information that is needed. At the end of the month, ADP still didn’t give him a quote and then when he calls, ADP says they couldn’t help him with healthcare. ADP couldn’t stay on top of the work that they were hired to do since they were busy with other larger accounts.
  • A business who was a customer of ADP soon stopped service with them after a payroll dispute. This business needed to fix its payroll and ADP gave them a fixed time period of when it would be resolved. After the time period was over, the payroll still wasn’t fixed. This delay was due because ADP uses India as a middleman to collect customer complaints and then email them to US offices. ADP couldn’t keep track of this business’ payroll and as a result, it affected when the employees got paid.
  • A small business owner decided to use ADP’s payroll system to make things easier for himself. However, it actually made things harder. The implementation team didn’t help him process payroll and just kept referring him to different people on the team. This made it difficult to pay his own employees on time.
  • One business was actually satisfied with the product; however, it had a poor quality of adapting to his business and the customer service and response service was not effective. This shows that large PEO companies have a one-size-fits-all template. It cannot adjust to accommodate smaller businesses.
  • ADP has repeat complaints about being slow with customer service and response time. This example, again, emphasizes how large companies don’t have the time to keep track of all of their accounts.
  • One small business owner calls the customer service line to help with his complaint. However, he cannot easily get a representative on the phone since none of the phone’s prompts fit his unique complaint. Large PEOs don’t have the adaptability capacity to deal with unique problems small business owners face.

Many of the scenarios described above were from real small businesses owner who left reviews of ADP.

These examples are a clear indication of how a large PEO treats a small business.

You can’t expect too much from a large PEO such as ADP based on scenarios outlined above. 

Hire a Large or Small PEO Company? 

Small PEO Company

Given the information stated earlier, what type of PEO would you choose?

You have two choices

  • A large PEO company with hundreds of clients that they manage.
  • A small PEO company with only a handful of clients that they manage.

Based on what you read earlier, you should be more inclined to pick a small PEO since they can give you the time and attention you need. 

Three Additional Benefits of Working with a Small PEO

Have the previous sections convinced you to hire a small PEO for your small business?

If not, here are three more benefits a small PEO has:

  • More energy can be put into your own business: When you hire a small PEO, you’ll spend less time managing HR problems and more on your day-to-day operations.
  • Better employee benefits: A small PEO can get better employee benefits customized to the needs of your small business at a discounted price.
  • The latest compliance news: A small PEO looks out for a small business owner who doesn’t always have the time to study the new changes to insurance and workman’s compensation. Since PEO specialize in HR administration, you can depend on them to be up-to-date on the latest HR policies.


Remember, as a small business owner you want someone who truly cares about your business and its unique needs.

A small PEO can provide all that is needed for your company and be a friendly face to you when you need a questioned answered.

What type of PEO will you choose?

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