What key performance indicators (KPIs) determine the success or failure of a PEO’s accounting department? Timely and accurate numbers are definitely at the forefront. The PEO space can be a dynamic environment to operate in. The risk and margins are ever-changing and keeping our finger on the pulse is imperative to our success.


When I’m performing due diligence on a target company, especially in the PEO space, there are common areas that sellers miss. Below are the top five most missed opportunities for sellers, counting down to the most commonly missed opportunity.


The benefits of EWA extend to both employees and employers in many ways. EWA provides employees with greater control over their finances, enabling them to access their earnings when needed most. This flexibility empowers individuals to navigate financial challenges with confidence, whether it’s covering unexpected expenses or managing cash flow between pay periods.


In the evolving realm of PEOs, the adoption of strategic tax solutions marks a pivotal advancement in serving small and medium-sized businesses (SMBs). This innovative approach to better serve their clients not only boosts the value provided to SMB clients by enhancing their financial performance and compliance, but it also further solidifies PEOs as essential and indispensable partners.


For years, the PEO industry has empowered businesses of all sizes to navigate HR complexities. However, in today’s dynamic market, organizations are ever evolving, and PEOs are not an exception. As companies adapt to technological disruptions, a global market, and other challenges, professional employer organizations are also changing to meet their clients’ needs.

As we delve into the artificial intelligence era, there’s one pressing question in all our minds—what does the future hold for PEOs?

AI is not the only factor that is going to revolutionize the industry; changing workforce demographics, regulatory landscapes, and sustainability are some of the several factors that can influence the industry. These factors are not challenges; they can unlock opportunities for growth and innovation.


Technology integration is one of the trends that is here to stay. AI, data analytics, and machine learning can transform a business into a tech-driven superpower. How can PEOs leverage these tools to streamline their operations? PEOs can:

  • Automate payroll processing and other redundant administrative functions
  • Enhance the efficiency of employee acquisition through AI-powered recruitment and onboarding
  • Use advanced machine learning algorithms to identify the connection between turnover, workload, and other factors
  • Provide personalized employee engagement strategies
  • Leverage data to identify patterns in workplace accidents and create safety measures
  • Reduce fraudulent claims and make risk management more efficient

AI-powered algorithms can also help small businesses find PEOs with just a few clicks. Depending on a business’s size, industry, and needs, AI-enabled platforms can link them to the ideal PEOs for them.


Thanks to digitalization, marketing has evolved from a product/service-centric approach to a customer-centric approach. If used effectively, digital media platforms can help PEOs personalize their marketing efforts and reach a wider target audience with minimal effort.

The integration of AI, machine learning, and data analytics into marketing makes it easier for PEOs to find small businesses that precisely match their ideal customer profile (ICP). Through AI-enabled platforms, PEOs can identify qualified leads in just a few clicks. They can also generate a quote within minutes and increase their conversion rates.

From email campaigns to social media marketing, the PEO of tomorrow needs to have a holistic marketing approach to become an industry leader.


A study by Glassdoor revealed that, in early 2024, Gen Z will replace Baby Boomers as the largest generation in the full-time workforce. How is this change relevant to PEOs? With a changing workforce comes new demands. For instance, the four-day workweek has gained overwhelming support from the younger generations. Understanding the workforce’s needs will help PEOs improve employee engagement and retention.


The COVID-19 pandemic accelerated the adoption of remote and hybrid work. It’s been three years since the pandemic, and remote work is still popular among employees. From virtual onboarding and training programs to digital collaboration platforms, PEOs can play a crucial role in helping businesses navigate the complexities of remote work. Providing innovative solutions for managing distributed global teams effectively could make a PEO indispensable to their clients.


The gig economy is another workforce shift that needs to be on a PEO’s radar. Statista research projects that 50.9% of the total US workforce will be freelancers in 2027. PEOs can expand their reach and add value to this growing segment of the workforce.


With the world becoming a global market, organizations have employees working from different parts of the globe. Modifying their services to manage international employees, and ensure compliance in various countries can expand a PEO’s scope and help them scale up.


Employment, data privacy, and compliance laws are constantly changing.  PEOs, with their expertise in HR compliance, are well-positioned to help businesses navigate this complex regulatory landscape. Staying ahead of legislative changes and providing tailored compliance solutions is crucial for a PEO’s success.


We live in a digital age where businesses need to modify their processes to comply with data privacy laws. Since PEOs have sensitive HR data, investing in secure technology infrastructure is essential to building trust and maintaining compliance.


Sustainability and social responsibility are being embraced by several businesses to play their part in building a better future. PEOs could implement sustainable practices through paperless HR practices, employee well-being initiatives, and contributing to local communities.


Most businesses prefer customized solutions, rather than a cookie-cutter approach. Modern PEOs partner with their clients to understand their unique needs and industry trends and offer services that align with their strategic goals.

Effective communication and transparency in pricing are also major factors in strengthening client relationships.

The future of work is fluid and unpredictable. PEOs need to be agile and adaptable, readily responding to evolving regulations, workforce trends, and client needs. Continuous learning and innovation could help us stay ahead of the curve.

As businesses manage the complexities of the modern workplace, PEOs will continue to serve as their trusted partners. Embracing digital transformation, adapting to remote work environments, and fostering a culture of innovation play a major role in the industry’s growth.

Understanding and adapting to these trends is essential to not just survive, but to thrive in an ever-changing landscape. It can also assist us in shaping the future of work and redefining the HR landscape for years to come.


What is a SOC examination?

A System and Organization Controls (SOC) examination, is an audit of the controls and processes implemented by a service organization to ensure the security, availability, processing integrity, confidentiality, and privacy of the data it processes. These examinations are conducted by independent third-party auditors and are based on standards developed by the American Institute of Certified Public Accountants (AICPA). The results of SOC examinations are provided in a SOC report, which includes an independent opinion report, management’s assertions, a description of the system, testing procedures and the results of the testing.

There are three main types of SOC Examinations, each of which has a different focus:

A SOC 1 examination provides independent assurance about the effectiveness of a service organization’s internal controls relevant to financial reporting. SOC 1 examination reports are typically required by organizations that outsource key business processes to service providers, where those processes impact the financial statements of the client organization. These service providers are often referred to as “service organizations.” Typical industries that obtain SOC 1 Examinations are:
• Payroll processing providers.
• Financial transaction processors.
• Third-party administrators (TPAs).
• Employee benefit plan administrators.
• Data centers and cloud service providers.

A SOC 2 examination assesses a service organization’s controls related to the security, availability, processing integrity, confidentiality, and privacy of information. SOC 2 examination reports are typically by those vendors that handle sensitive information.
Typical industries that obtain SOC 2 Examinations are:
• Software-as-a-Service (SaaS), cloud service, and other technology solution providers.
• Data centers and hosting providers.
• Healthcare organizations
• Payment processors
• Legal and other professional service firms.

Both SOC 1 and SOC 2 examinations may be either a Type I or Type II report. Type I reports on the suitability of design of controls and Type II reports cover the operational effectiveness of controls.

SOC 3 examination provides a summary report that is used to communicate the organization’s commitment to information security and privacy to a broader audience. This type of report is generally used for marketing purposes.

For the purposes of this article, we’ll primarily focus on SOC 1 and SOC 2, due to the highly summarized nature of the SOC 3.

So, now that we’ve covered what SOC examinations are, how can a PEO benefit from undergoing one?

The nature of services a PEO provides involve handling sensitive, personal employee data, and financial data. A SOC examination can benefit a PEO in many ways. A few examples of these benefits are:

Client Assurance:
SOC 1 and SOC 2 examinations provide assurance to clients that the PEO has implemented and maintains effective controls over these processes, ensuring the accuracy and reliability of financial information.

Trust and Credibility:
A SOC 1 examination demonstrates the PEO’s commitment to maintaining strong internal controls, giving them confidence in the security and integrity of the PEO’s services.

Competitive Advantage:
SOC 1 and SOC 2 reports serve as a demonstration of the organization’s commitment to security and reliability, providing a competitive edge over other PEOs.

Risk Mitigation:
SOC examinations are geared toward identifying and assessing potential risks in the PEO’s processes related to financial reporting (SOC 1), and information security practices (SOC 2). By undergoing a SOC 1 examination, the PEO can mitigate the chance of errors, fraud, deficiencies, material weaknesses in internal control, and other issues that could materially impact financial information (SOC 1), and can mitigate the likelihood of data breaches, unauthorized access, and other security incidents (SOC 2).

Compliance Assurance:
A PEO may have attractive prospects in regulated industries that may require assurance that their service providers are in compliance with industry standards. A SOC 1 report provides documented evidence of the PEO’s commitment to and compliance with established controls, and opens doors to opportunities closed to other PEOs without SOC 1 reports.

Compliance Adherence:
For certain industries, SOC 2 compliance aligns with industry best practices and regulatory requirements related to data protection. Meeting these standards can help the PEO avoid legal complications and demonstrate compliance with applicable industry regulations.

Operational Efficiency:
SOC 1 and SOC 2 examinations can reveal opportunities to enhance and optimize its internal controls and processes. This can lead to improved operational efficiency, reduction of soft costs associated with inefficiency, and a reduction the risk of errors.

Client Attraction:
SOC 1 and SOC 2 reports can be a persuasive factor for attracting new clients who prioritize security and reliability in their HR and financial processes.

Enhanced Internal Controls:
The SOC 1 examination serves as a mechanism for the PEO to proactively assess and enhance its internal controls, leading to a more secure and resilient operational environment.

Enhanced Data Security:
SOC 2 examination focuses on information security controls, helping the PEO strengthen its safeguards for sensitive data such as employee information, payroll data, and benefits details.

Enhanced Reputation:
SOC 2 certifications can enhance the reputation of a PEO within the industry. It signals to clients, partners, and stakeholders that the organization places a high priority on maintaining the confidentiality and integrity of sensitive data.

Global Market Access:
SOC 2 certification is globally recognized and can facilitate market access on an international scale. Many clients and partners, especially those in regulated industries, value the assurance provided by SOC 2 examinations.

See below to outline distinctions between SOC 1 and SOC 2 Examinations.

Criteria, SOC 1 Examination 

  • Purpose: Financial reporting controls.
  • Focus: Internal controls over financial reporting.
  • Report Types: Type I (suitability of design) and Type II (operational effectiveness).
  • Trust Service Criteria: No, focuses on financial reporting controls.
  • Audience Accessibility: Typically restricted, shared with specific stakeholders.
  • Level of Detail: Detailed report on controls.
  • Regulatory Compliance: Addresses financial reporting controls.
  • Common Users: Clients, management, external auditors.
  • Global Recognition: Recognized but may be industry-specific.

Criteria, SOC 2 Examination

  • Purpose:  Information security controls.
  • Focus:  Information security controls and practices.
  • Report Types:  Type I (suitability of design) and Type II (operational effectiveness).
  • Trust Service Criteria:  Yes, includes security, availability, processing integrity, confidentiality, and privacy.
  • Audience Accessibility: Typically restricted, shared with clients and partners.
  • Level of Detail:  Detailed report on controls.
  • Regulatory Compliance: Primarily addresses information security controls.
  • Common Users: Clients, business partners, stakeholders.
  • Global Recognition: Globally recognized for information security.

Currently there are no regulatory requirements for a PEO to have a SOC Examination. Obtaining a SOC certification is optional. While this is an optional certification, individual PEOs could experience significant benefits as previously described. The PEO industry, as a whole, would benefit by the quality, credibility, and further legitimization.


From my vantage point, the infusion of AI into the unemployment sector holds the key to unlocking a multitude of advantages that could revolutionize the efficiency, accuracy, and cost-effectiveness of unemployment insurance operations.


The evolving landscape of business operations and management signals a significant shift in workplace priorities. PEOs can refine their service offerings to cater to emerging demands.


As a PEO operator, you will be a trusted advisor to small and mid-size businesses in areas such as payroll, HR, benefits, workers’ compensation, unemployment, technology, and many other areas. As you grow and win more customers, they will quickly become dependent on your processes. Implementing solid processes will aid you in staying efficient and compliant. Here are some critical steps you should consider as you move forward establishing your operations. Relying on and utilizing industry experts will help you succeed.  


Value proposition and service offering. This is an important part of establishing your operations. It will be the initial step in determining your staffing needs and what will differentiate you from competitors. Some items you will need to consider are your benefits offering, master health, or individual plans. Do you require clients to enter their own time or use a time and attendance system? Do you require direct deposit/pay cards and charge if live checks are requested? What will be your administrative fee? In the areas you will be competing, can you charge a percentage of gross or per employee fee? These are just a few of the many items you will need to consider. 

Timeline. It is important to highlight start and end dates for items such as creating business processes, choosing HRIS and service vendors, purchasing insurance policies, staffing needs, and anything else critical to your success. Be sure to review this on a regular basis for visibility and to maintain accountability within your organization.  

Budget preparation. Create a detailed business plan outlining your projected growth, expenses, and revenue streams. It is particularly important to be aware of your projected costs for the first three to five years. This will provide you with an idea of the capital needed to secure adequate funding for staff and to operate properly. Too many start up PEOs think short-term and find themselves lacking the necessary capital after the first year or two. 

References. A good consultant has connections in the industry and can refer you to additional resources such as recruiters, attorneys, HRIS systems, etc. In addition to asking for referrals, it is wise to compare multiple options to ensure their product or service fits your specific organization’s needs. 

SOPs. Talk with your consultant about developing standard operating procedures. They are a critical piece of an efficient operation.  

FROS Survey. A great resource is NAPEO’s Financial Ratio & Operating Statistics survey. Each year, the survey collects a wealth of information from revenue earned, average number of WSEs, years in operations, average number of clients, internal staff sizes, and average pay of worksite employees. The FROS Survey is a great tool to familiarize yourself with and use as a guide as you make operational decisions. 


Licensing requirements. Depending on the state(s) where you will initially conduct business, it will be especially important to complete the registration and licensing requirements. A law firm knowledgeable in the PEO industry can assist you with the necessary steps. There are states that require licensing before you start conducting business and will impose fines if you start operating before becoming officially licensed. Some states may require the PEO to post a bond. 

Regulatory Database. NAPEO’s regulatory database contains a wealth of information on the federal, state, and local levels. A good suggestion is to provide all members of your organization with access to this database and incorporate it into your decision-making process. 

Customer Service Agreement (CSA). Your attorney will review the states you are going to be operating in and if their statutes are based on the NAPEO Model Act or not.  Some states have PEO statutes that can predate the NAPEO Model Act, which will then require specific issues to be included in your CSA. Work with your attorney to ensure you have the necessary safeguards in place. As your PEO grows and enters additional states, it will be necessary to regularly revisit your CSA to remain compliant.


It is necessary to obtain insurance coverage such as workers’ compensation, general Liability, directors and officers (D&O), errors and omissions (E&O), and employment practices liability insurance (EPLI). Workers’ compensation policies can be challenging for new PEOs and may require additional capital until you establish a good history with the carrier. As mentioned earlier, depending on the states you are or will be operating in, a bond may be required. Choose a broker who will take the time to understand your business and explain all your options for your organization. 


Seek out one who is active in the industry. PEO knowledgeable recruiters have a good understanding of their candidates’ skillsets/work history. This will aid you in your search for qualified candidates. Poor hiring choices cost businesses critical time and money which can cause you to miss important deadlines. In most cases, a start-up’s first hire will be an experienced operations leader, familiar with the PEO industry, and can take the lead in establishing the groundwork for your operations. 

Let’s face it, it will take time and money until you have a full staff for each department. What areas of the operations can you outsource in the initial stages? Take the time to review industry vendors and inquire if their services can augment your operations. Can your benefits third party administrator (TPA) offer additional services until you have a full benefits department? Would it be cost effective to outsource the handling of your unemployment administration? 

Refer to your timeline and budget to determine when you need to hire additional staff. In some scenarios, a startup will hire PEO professionals who have experience in more than area of the business. For example, they may bring on a tax specialist who can also process initial payrolls, giving you breathing room to onboard your first couple clients. It is not a recommended long-term solution, so you will want to monitor your timelines and hire additional staff as soon as possible. This will allow you to build your foundation and develop the necessary processes.


Establishing proper cybersecurity protocols is critical as threats are even more prominent than ever. You need an IT vendor who can maintain your IT infrastructure and be responsive to your needs. Here are a few suggestions to implement to protect your data: Phishing simulations and security monitoring; Email Encryption and SharePoint/File DLP Policies; Cloud Check Printing; and, HIPPA and SOC2 Compliance Assistance. Regular meetings with your IT firm will help to ensure you are protecting your data from current threats. A suggestion is to include your IT vendor in your security discussions with your HRIS vendor.


Your HRIS software will be the core of your operations, and it is important to carefully vet your choices. Prepare a checklist with questions and have the software vendor respond in writing to your questions. 

Schedule multiple demonstrations in each area to get a complete understanding of the software’s capabilities and processes. Some capabilities you should review are: New Client Implementation; Employee Portal/Mobile App; Employee Onboarding; Electronic Benefits Enrollment; Benefits Administration and Reconciliation; Payroll Processing and Multi-state Tax Handling; Reporting and Data Export; and Importing Capabilities.  

Also, be sure to ask for references for current and past customers. Other points about an HRIS to consider are:  

Pricing/Modules: How does the pricing scale as you grow? Are there modules not included in the base pricing and if so, what are they? Negotiate a cap on price increases if possible. 

Service Agreements: Be sure you fully understand the terms of the contract. Ask legal to review and outline any concerns. 

Third Party Vendors and APIs: How easy it is to integrate with other vendors and what are the costs? 

Implementation Process: Ask for an implementation timeline and be sure to establish a realistic date you will be “live” on the system. How many hours are included and what are all the costs, what options do you offer around training new employees as your organization grows? 

Support: How do you contact their support – via email, chat, phone, and/or support cases?  What is their Service-Level Agreement (SLAs)? Can your business operate efficiently with the proposed SLAs? What is their process for high priority cases? 

Data: In the event of a termination of service, will you receive your data in a readable format, and will there be a fee? 

Customer Service: Who will be available for questions outside of regular support? Will you have a CSM assigned to your account? 

Take the information you receive from each software vendor and consolidate it into one document. Hold internal meetings to review the information collected. Software implementations are a large undertaking for a PEO and it is best to choose a system that best suits your specific business model and service offerings. 

Once you are up and running, remember that setting up a PEO is extraordinarily complex, and growth brings additional complexities. Continuing to stay up to date with changes in laws, regulations, and compliance will be particularly important, as well as continuously improving your services. Choosing partners who best suit your business, providing top-notch customer service, and developing strong processes will be critical to your overall success.  

Lastly, the PEO industry is like one big family so ask for help if you have questions. If you are not sure who to contact, reach out to NAPEO and they will gladly connect you with the best resource.   


This article is designed to give general and timely information about the subjects covered. It is not intended as legal advice or assistance with individual problems. Readers should consult competent counsel of their own choosing about how the matters relate to their own affairs. 


As the economy and our industry continue to shift, PEOs are becoming even more attractive and important for many organizations. Through our leadership in the PEO space, we know our model enables companies to focus on the critical aspects of their business, while Human Capital Management (HCM) experts provide employee-centric services, including payroll and benefits, all while ensuring compliance requirements are met.  

An additional part of our responsibility is to deliver timely and accurate services. This is one of the reasons why running an efficient operation is important. While there are many ways this can be achieved, there is a methodology called “Lean” that has been used in manufacturing for over 50 years and can be adapted to accelerate your PEOs operational success.  

Lean is a framework that consists of five key principles, focusing on delivering higher quality products and services, while maintaining the right levels of operational efficiencies. Thanks to Toyota Lean was known in the industry. I’ve had the opportunity to leverage it in different spaces and businesses, and experienced transformational change. Let’s dive in.  


Lean’s five principles are known as: 

  1. Defining Value 
  2. Mapping the Value Stream 
  3. Creating Flow 
  4. Establishing Pull 
  5. Pursuing Perfection  

Let’s start with the first principle, defining value. PEOs must clearly understand what our clients need from the services we provide and which of those offerings bring the most value. To do this, it’s vital you define value through the eyes of the customer, because at the end of the day, that is what they are willing to invest in. This is an exercise I recommend completing quarterly to quickly re-prioritize what our clients need and deserve. For maximum effectiveness, be sure to define value with your full leadership team and cascade the outcomes across all associates to build transparency and shared common goals.  

The second principle, mapping the value stream, brings to life the tactical activities that support the value that you defined in your first principle. Mapping a process from this perspective helps you identify ways to streamline. This is where the fun begins! Based on your shared definition of value, and laying out your tactics, you can now clearly pinpoint and articulate which activities to eliminate or reduce from your process – generating efficiency and focus on delivering value through the eyes of your clients. There are many templates available that can be used to complete this step in its preferred method – with service associates.  

The third principle, creating flow, is where true transformation can take place. Once you understand your opportunities to streamline, you can begin looking at ways to re-organize your activities and leverage technology to create an optimized process that runs without delays and delivers faster services.  

Lean’s fourth principle, establishing pull, is the one that as I think can be a bit more challenging to apply to PEOs. Still, there are opportunities to leverage it. When you review your service operations with a “pull” mentality, you can adapt it by creating a “first in / first out” approach when assigning and managing the work to your team. By quickly addressing case management and client escalations, you will increase productivity and satisfaction amongst your associates and clients. Once you have established these four principles, it’s time to wrap up your Lean journey with the last principle, pursuing perfection. 

Pursuing perfection, is the most critical principle and the one that should become a part of your organization’s DNA. The mindset around this principle is that good is never enough, and there are always ways to improve and become better. While there are many tools available that can help your organization create a “continuous improvement” mentality, one of the most used (and one that I highly recommend) are “Kaizen events.” In a Kaizen event you link together with key subject matter experts and leaders to map your processes and identify opportunities to address in both short- and long-term timeframes. What really makes the difference with this tool compared to other activities and working sessions, is that you end with each action item having assigned owners and timelines, helping the team maintain focus and commitment. 

You may be asking, “Who has time to apply and follow Lean?” I’d challenge you to say, “Who doesn’t?” Once you and your leadership team agree Lean is right for your PEO operations, it naturally saves you time and becomes a part of your daily business culture. It can be applied throughout all operational processes, starting with implementing clients, transitioning them to service, and within the different teams that support payroll, benefits, talent, and other HCM services. 

Ultimately, it is up to each PEO business leader to determine the best approach to deliver their services. Lean is a framework to increase quality and efficiencies in your operation while concentrating on the services that your clients need. It is not only a simple approach, it is also process and industry agnostic, and will help reduce your operating expenses, giving you the chance to re-invest in new technologies that can enable you to be more proactive, and stay ahead and relevant in the marketplace.  

As you begin your Lean journey, remember good is never enough and you should always want to deliver an epic experience, while running an efficient PEO operation. Because, at the end of the day, you are taking care of your clients most important asset, their people. 


When entering the intricate PEO landscape, understanding the multifaceted operational tasks required to ensure compliance, efficiency, and effective management of human resources and payroll functions for client companies is paramount. The cornerstone of prosperity lies in crafting a well-structured operations plan. Below is a checklist to help guide you through this complicated process. 


A fundamental pillar of PEO operations is mastering regulatory compliance across federal, state, and local levels. The intricacies of employment and labor laws, especially when operating in multiple states, demand meticulous attention. Obtaining licenses or registrations in each state of operation is crucial. Your NAPEO membership can serve as an invaluable resource in untangling this web of regulations.  

Given the rise of remote workforces, extended geographical reach requires adherence to specific PEO licensing and registration requirements in various states. Even if your PEO doesn’t actively market in a particular state, clients with employees working there might necessitate compliance which can be burdensome and costly. State-specific unemployment regulations further accentuate the complexity, with reporting norms varying significantly. For instance, while Florida permits PEOs to elect how to report, other states prescribe either client or PEO reporting. 


Appropriate insurance coverage forms the backbone of safeguarding your PEO venture. Beyond standard general liability and workers’ compensation insurance, the growing prominence of cybersecurity threats calls for dedicated cybersecurity insurance. Cyber attacks can assail businesses of any size, and fortifying your defenses is imperative. 

Employment practices liability insurance (EPLI) warrants careful consideration. This coverage extends not only to your internal employees, but you may also extend coverage to your clients. EPLI offers protection against claims related to employment practices, encompassing discrimination, wrongful termination, and harassment. 

Navigating the complexities of workers’ compensation insurance, mandated by each state, necessitates an insurance broker well-versed in the PEO industry. Given the intricate nature of PEO operations and the myriad workers’ comp codes they manage, a broker experienced in this sector is invaluable. 


Client Contracts: Solidifying Agreements 

Crafting a robust client service agreement is a pivotal component of your PEO’s offerings. This document delineates service scope and responsibilities while establishing a legally binding co-employment relationship between your PEO and your clients. Legal counsel, well-versed in the nuances of the PEO industry, is indispensable for drafting comprehensive contracts that incorporate specific state PEO provisions. 

Human Resource Information System (HRIS): Powering Your Processes 

Selecting a suitable HRIS is a decisive step in streamlining payroll and HR functions. This choice should reflect long-term viability rather than short-term convenience, as system transitions can be arduous. Formulate a comprehensive list of business requirements, to aid in system comparisons that align with your goals. 

An optimal HRIS should: 

  • Maintain accurate records of employee data, payroll details, and compliance documentation. 
  • Facilitate client level payroll processing, tax withholding, and reporting in adherence to legal requirements. 
  • Remain scalable to accommodate exponential growth. 
  • Contain streamlined, user-friendly workflows to increase efficiency.  
  • Offer a seamless onboarding platform for worksite employees, encompassing forms, benefits enrollment, and compliance training. 
  • Include a robust billing system that accommodates multiple billing scenarios. 

Payroll & Tax Administration: Ensuring Accuracy and Compliance 

Staying abreast of payroll tax regulations is imperative to guarantee accurate and timely tax filings. Core to the co-employment relationship is your PEO’s responsibility for federal, state, and local tax withholding, remittance, and reporting under your PEO’s tax identification numbers. 

PEOs oversee a wide array of payroll cycles and varieties, necessitating a system capable of accommodating numerous data elements tailored to diverse industries. These encompass pay codes, deduction categories, PTO policies, and a multitude of state and local wage and taxation regulations. 

Employee Benefits: Nurturing Competitive Advantage 

Remaining competitive in the PEO domain mandates offering comprehensive employee health and supplemental benefits to clients and their workforce. This array spans health, dental, vision, life insurance, disability insurance, and supplementary options. Benefits can be structured as PEO master plans or client-sponsored plans, requiring collaboration with an insurance broker well-acquainted with PEO nuances. 

As you embark on your journey, it’s wise to consider whether offering a future master health plan aligns with your goals. It’s worth noting that most health insurance providers stipulate a minimum enrollment threshold for considering a group as eligible for a master plan. Hence, for startups, it might be prudent to initiate client-sponsored health plans to gradually build up enrollment numbers. While these client-sponsored plans typically involve more administrative efforts compared to master plans, they can also prove advantageous as part of your marketing strategies. 

Supplemental plans, on the other hand, are typically structured as PEO master plans. This arrangement allows these plans to be extended to all qualifying worksite employees and, depending on plan specifics, might not necessitate an employer contribution. 

Your PEO’s approach to administering client-sponsored plans will determine the course of benefit management. Some opt to fully handle the administration for their clients, while others might credit employee deductions back to the client, who then undertakes administration responsibilities. Conversely, master plans are administered by the PEO. 

Another avenue to attract and retain employees is through retirement plans. A common choice for many PEOs is sponsoring a multiple-employer 401(k) plan. This type of retirement plan empowers clients to adopt the plan and offer it to their worksite employees. Notably, the multiple-employer plan streamlines administrative processes for the PEO, simplifying overall management. 

HR Support & Compliance: Guiding Clients Through Complexity 

Your PEO’s role extends to providing HR support and ensuring client compliance with employment laws. Navigating both federal and state regulations is essential and requires frequent client communication. Subscribing to a service that maintains federal and state regulatory data can be immensely beneficial in staying informed. 

Incorporating these components into your operational blueprint sets a strong foundation for a successful start-up PEO journey. Educating yourself about regulatory nuances, fortifying your insurance coverage, optimizing your operations, and providing robust client support will guide you toward becoming a trusted partner in the PEO landscape. 


Two different sales approaches follow. One leads to fast growth and chaos while the other leads to slow growth and stability. One is probably too hot, the other perhaps too cold. May you find what is “just right” for your company.  

I have been fortunate to be involved in two successful PEOs with dramatically different sales approaches. In the mid-1990s when I joined the industry, our start-up PEO’s mission was to quickly amass a large village of worksite employees (WSE), and then to jettison them to another PEO that could service them. All energies went into building a successful sales machine. From a start-up with no clients and no industry knowledge, we grew to 12,500 worksite employees and number one in our market in two and a half years. Seven years later, we had 45,000 WSE with offices throughout the west. Our close ratio was above 50%, the median time from first meeting to closed contract was seven days, 25% signed within 24 hours of the first meeting, and 75% closed within 30 days. The internal salesforce ranged from 3 to 6 reps, with two selling vice presidents. Constant, fear driven, heavy pressure, permeated the sales team. So did heavy incentives. A deal a week was expected. Many achieved that and even the average performers were doing over 30 a year. The result was rapid growth and constant internal stress. 

Most sales reps in our industry talk about how wonderful the industry is and quite frankly the prospective client does not care. We never mentioned the PEO industry. We simply asked open-ended questions to find one area of pain. When asked, what do you hate about your business? The answer is almost always something we provide. If we could solve that pain point, would they be willing to look at numbers? Research on the company was done before the meeting, not after. If the owner agreed to look, we had a prepared contract with us. There may only be one meeting and one chance with an owner. Get them to commit and delegate. Then get the owner and the sales rep out of the way and get the right people on both sides involved as soon as possible. It was astounding to us that PEOs would let operations people push hard on sales to “do more.”  The skill set of finding clients and getting them to commit is markedly different than the skill set of gathering quality information to run a PEO client. The salesperson closed the deal and then got out of the way. Three benefits resulted. First it allowed the salesperson to be more productive in their job. They could hunt and close which was in their wheelhouse. Second, it allowed the operations people for both the client and the PEO to gather the right information. Big incentives for the operations staff to get a client running quickly helps too. The faster they run and the less problems that occur, the bigger the bonus for operations. Third, it established the relationship between client and operations, not the sales rep. If the rep decided to leave after amassing a large book of business, the clients stayed, because they were loyal to operations.


A snowball running downhill is the revenue model of a PEO. It grows as it goes. So do your own math and financial modeling. How much more revenue can you generate by getting that first payroll to run one or two cycles earlier? Decrease the time in this metric and it impacts revenue significantly over time given the high retention rate of a PEO. The numbers may surprise you. After a few payrolls, we would circle back with the client once we knew things were running smoothly. Then we would show them all the other benefits and services that they did not know about when they signed. It worked.  

Sounds great, right? But there is a downside. The selling culture works best if established early on. It is difficult to change the operations culture found in most PEOs to a sales culture. It can be done, but heartache and likely turnover will occur. Second, the operations team will almost always be under extreme stress. Clients being engaged without having a full understanding of what they are getting into can be tiresome. It also may be difficult getting information from subordinates in the client company who do not understand what is happening. Internal operations staff may find themselves “reselling” the deal which is not their strength. Combine that with the pressure of getting that first run done quickly and a high-tension atmosphere may result. More mistakes are likely. That first payroll typically results in a phone call with issues and that detracts from the fundamentals of the day-to-day work. This wears down operations people over time. Also, the run rate percentage of new clients will be less than industry norms, but the raw number of clients that run will also likely be higher. Pick your medicine. Goldilocks would likely taste this porridge and think it is too hot. 

Another approach is more thorough with front-end discussions and uncovering of needs. Beware that thorough (to some) can also sound like “slow.” This approach includes a discovery call followed by a series of next steps. Step one is software demonstration. This demo may expand into demos of multiple channel partners offered by the PEOs software provider, like time clock or benefit offerings. Then onboarding, orientation, and all that goes with it. Multiple stakeholders in the client company and the PEO become involved. By the time implementation is complete, the client has bought in to the PEO program to a high degree. That first payroll run is smooth, the client is happy, and the PEO operations staff is happy. Healthy growth generally follows. Sounds great. Until you do the math. It is simple…how much money over a few years is left on the table due to the speed of getting that first run? Goldilocks might find this approach too cold.  

To find what is “just right” likely combines aspects of each approach. The key? Find what works for your company. Culture is key. If the culture is too slow for your liking, be willing to turn up the heat a little. If you are moving too fast and causing unwanted stress, consider turning the heat down a bit. There exists a sweet spot for every company. May you find what Goldilocks would call “just right.”    


When I was young, I watched movies with robots and drones; we called this science fiction because such things would, of course, never come true. This was only imagined to be future scientific or technology advances as is artificial intelligence or AI. So here we are – and yes, robots and drones have come to offer technological advances that can enhance the way we interact with each other and with the world. And they are here to stay!   

So how can AI impact mergers and acquisitions (M&A)? What M&A tasks can a robot control or computer complete in the M&A world that are usually done by humans? Let’s look at just a few examples. 



Target Screening.To determine the best ROI, shareholders of the buying company must identify acquisition targets and understand how the deal will impact their strategy and financial performance. By harnessing the power of AI, buyers may be able to more efficiently and accurately identify potential targets, thereby increasing the likelihood of successful acquisitions. 

Due Diligence. AI can streamline the due diligence process by document review and analysis. Cloud based data rooms have already revolutionized M&A due diligence by replacing physical data rooms and I think AI will enhance the process even more. And to think that back in the day we had real paper deal books that we mailed! 


Analysis of Information. AI may be able to analyze information such as a company’s brand, management, trajectory, resources, productivity, and financial information to determine the profitability of the combined entities. 

Reduction of Risk. AI may be able to reduce risk in due diligence by analysis of huge volumes of data, therefore forecasting trends. This could help decision making for more successful MA strategies. Companies can leverage AI as algorithms accurately aid better predictions which makes a shift in how deals are originated and evaluated. 

Valuation. Determining the value of a PEO is made of many distinct pieces of the valuation puzzle. I just do not see a tremendous impact on the human ability to understand valuations across the PEO industry unless they have done multiple deals and understand the comparisons in detail. 

Post-acquisition. AI can follow an acquisition, facilitating the integration by automating various tasks including data migration, employee onboarding, and process standardization. 

In summary, AI is reshaping the way buyers undertake due diligence, make decisions, and integrate post-merger. Organizations can obtain profound understandings of target companies, minimize the duration and expense of M&A and make better informed decisions driven by data. 

But at the end of the day there is one thing you cannot take out of successful M&A transactions and that is the people. It takes a combination of business and emotional intelligence to be a great M&A advisor, and it takes an incredible “read” on the people involved on both the buy and sell side to know if a deal will ultimately be successful. It is kindness, integrity and respect that truly guide the M&A process and those for me are simply real-time and human.  So for now, while some of the deal tasks can be completed by AI, great deal making is about the ability to understand, guide and value the people and will not gain immediately from AI in my opinion.  But then again, I was not a believer in science fiction! 


A company’s story is often written succinctly on its website, with details of the company’s history, its values, and its aspirations for the future. Internally, however, company leaders can capture a more telling story. Operational metrics, while often unique to each company, depict a different story.


Employee turnover poses significant challenges to PEOs, affecting their productivity, financial stability, and overall success. In this article, we will delve into the various costs associated with employee turnover, providing a detailed analysis of the expenses involved and the detrimental effects on organizational performance.