Investing in an HR team versus partnering with a PEO, which path is best for your small business?
As your business grows, managing HR gets complicated fast. Should you build your own HR team or explore the benefits of partnering with a Professional Employer Organization (PEO)? Here’s how to decide which choice best fits your business.
Then, as your business expands, there are growing pains, and one thing becomes clear: you can’t do it all, especially when it comes to HR, and you need help.
Should you build an in-house HR team, or should you partner with a PEO?
With an in-house HR team, you hire and manage your own staff, people who work exclusively for your business. They handle recruiting, onboarding, payroll, benefits, and compliance, and they understand your goals and your culture.
🎯More than 230,000 small- and mid-sized companies across the U.S. already partner with a PEO.
According to new data from NAPEO, half of those businesses have between 10 and 49 employees, and another 35% have fewer than 10. In other words, most companies that use PEOs are true small businesses that simply need help managing the growing demands of HR.
In short:
🔸In-house HR = Personal, hands-on, fully customized
🔸PEO partnership: Team of experts, cost-efficient, lower overhead, access to better benefits
One of the biggest pros of having an in-house HR team is control. Your HR staff works directly for you, in your space (or virtual space), immersed in your company’s culture, goals, and involved in day-to-day decisions. They know your employees by name, understand your workplace dynamics, and can sense when morale dips or when it’s time to celebrate a big win.
And because they’re right there with you, they can respond quickly to changes as they happen. Whether you need to implement a new benefit or adjust your hiring processes, your HR staff can typically act right away, ensuring your business remains agile and proactive.
👉 But here’s the trade-off: Adding experienced HR professionals is expensive.
Hiring a qualified HR manager or team members means paying salaries, benefits, and ongoing training costs. You’ll also need systems — HR software, payroll tools, compliance tracking, and possibly legal support. For a small business, that can eat up a big chunk of the budget.
There’s also the question of bandwidth. One or two HR managers can handle a lot, but as you grow, the complexities multiply, such as multi-state compliance and benefits administration. Without adding specialized expertise, it’s easy to fall behind or make costly mistakes.
Now, let’s take a look at the advantages of partnering with a PEO.
🎯 A PEO can feel like gaining the expertise and resources of an established HR team overnight.
Think of it as hiring an entire department of HR experts on a subscription. You get expertise, state-of-the-art technology, and the benefits-buying power - think Fortune 500-style health plans and retirement options that small businesses couldn’t access alone.
🎯 NAPEO’s latest research highlights a “sweet spot” for businesses that work with PEOs: employers with 20 to 499 employees. Within this range, the average PEO adoption rate—the percentage of companies using a PEO — is 14%, and slightly higher (15%) for companies with 50–99 employees.
Why is this important? Once a business surpasses 20 employees, HR demands go off the charts with more benefits enrollment, payroll taxes, compliance, and keeping up with ever-changing labor laws — all while trying to focus on customers and sales. PEOs manage all of that.
Partnering with a PEO means:
🔸Better Benefits for your employees (top-rated health insurance, 401(k), perks, and more)
🔸Peace of Mind with compliance support across federal, state, and local laws
🔸Less Admin and More Time back to focus on your people and your bottom line
🔸Accurate Payroll that’s error-free and on time
🎯Some business owners worry about losing control when working with a PEO, but that’s largely a myth. You still manage your people and make all the decisions. You don’t lose control; you just lose a mountain of paperwork.
So, how do you decide? Start with a few honest questions.
➡️ How big is your business, and how fast are you growing?
A PEO can handle HR complexity while you scale.
➡️ How much control do you want? Want to offload the admin tasks, save money and time, and focus on growth? Choose a PEO. Want HR integrated into your daily decisions? Go in-house.
➡️ What’s your budget? PEOs can save on investing in HR salaries, system costs, and more. In-house HR requires a higher upfront investment.
➡️ What's your risk tolerance? An internal HR staff member may not be equipped to handle compliance responsibilities. An IRS-certified PEO's team of experts keeps up with all of the latest regulations (federal, state, and local), reducing the risk of errors, penalties, and legal complications.
➡️➡️READ MORE: Why More Businesses are Turning to PEOs
Getting HR right is smart business. Some businesses start with a PEO, love the efficiency (and saving money), and never look back. Others outgrow their in-house team and need a partner to take them to the next level. Here are a few helpful signs a PEO may be a smarter move:
✅ You have between 10 and 400 employees and no budget for a full-time HR team.🎯What matters most is finding the right setup that supports your people and frees you to focus on what you do best.
There’s no one-size-fits-all answer here.
If you're ready to find out what a PEO can do for your business, just give us a call. We're here to help you lighten your workload and strengthen your operations. So you can get back to growing your business.
Learn more about the PEO difference. Thousands of successful businesses are already doing it — and the data proves it works.
📥 Download the complete 2025 NAPEO white paper: PEO Clients: Who They Are, Where They Are, and What They Do, by Laurie Bassi and Dan McMurrer, McBassi & Company (October 2025) 📥HERE
About Propel HR. Propel HR is an IRS-certified PEO that has been a leading provider of human resources and payroll solutions for more than 25 years. Propel partners with small to mid-sized businesses to manage payroll, employee benefits, compliance and risks, and other HR functions in a way that maximizes efficiency and reduces costs. For more information, visit www.propelhr.com