How a PEO Differs From a Staffing Agency and the Benefits for Your Business

Did you know that about 80% of employee turnover results from bad hiring decisions? If there’s one thing you should never compromise, it’s getting the right staff for your company. Fortunately, you can use a Professional Employer Organization (PEO) or a staffing agency to get top talents.

As a business owner, understanding PEO and staffing agency will give you significant leverage when hiring. You’ll understand their benefits and downsides to guide your decision-making.

Keep reading our comprehensive guide to know more about the staffing agency and PEO benefits.


What Is a PEO?

A Professional Employer Organization (PEO) is an entity that provides a business with various employee management services such as recruitment, management, and payroll processing. Typically, these companies hire workers directly, through the process of joint employment or co-employment.

With a PEO, you don’t have to worry about payroll processing and other related services. PEO goes beyond payroll services to incorporate activities related to insurance and other services that improve employees’ welfare for better productivity. It also provides a range of other human resource activities such as Labor Law compliance.

You can check out this article to know more about what is a PEO. The information will help you understand the concept and how you can use it to improve your organization.

PEO is more recommendable for small and medium-sized businesses that have less than 25 employees. However, its robust technologies and HR expertise has made it to gain recognition even among large corporations. PEO is useful in a range of industries, from accounting to manufacturing.


What Is a Staffing Agency?

A staffing agency refers to a firm providing staffing services, including sourcing for suitable candidates and matching them with the right job positions. A staffing agency allows you to get a top professional. It carries out all the activities related to recruitment on behalf of the client company.

Staffing agencies further provide the need for resources for temporary job positions. If some of your workers are on leave or need a hand in a new project, a staffing agency can help. Some staffing agencies have a special category to provide candidates for any niche field that requires a rare skill set.

Many businesses utilize the services of a staffing agency to get top talents and save time. Whether you’re a small business or a large multinational, a staffing agency can come in handy. You will get the right temporary or full-time employees effortlessly.

Comparing PEO Vs. Staffing Agency

If you have been using the terms staffing agency and PEO interchangeably, you’re not alone! Many people don’t differentiate the two. While a staffing agency and PEO have several similarities, their stack differences are undeniable.

Both of these services deal with employment and recruitment services. They provide other benefits, such as employment insurance and payroll. PEO and staffing agencies further provide HR solutions to businesses.

On their differences, it’s clear that PEO offers more services than a staffing agency. One of the primary differences is the role of PEO as a co-employer. PEO shares all the liability and responsibility related to the workers.

Unlike a staffing agency that doesn’t get involved with most other operations in the organization, PEO is quite involved. It handles a range of administrative tasks relating to HR components and payroll management. For businesses that have been changing payroll services now and then, getting a PEO would ease their burden.

PEO further collaborates with existing workers. On the other hand, a staffing agency deals solely with the recruitment of new talent. You don’t have to hire a payroll processing company or a recruitment agency if you partner with the right PEO.


Benefits of Using PEO in Your Business

PEOs not only save time, but they also help you save some money as you won’t fall into costly pitfalls. Here are some of the areas where PEO can provide significant benefits.



About 33% of employers make costly payroll errors. The IRS penalizes such businesses leading to significant losses. If you’re part of this statistic, it would be best to consider PEO for increased payroll processing accuracy.

When looking for payroll leads, prioritize PEO that has a simple and straightforward fee structure than a provider charging separate fees for the payroll services.


HR Compliance

Employment law is ever-changing and quite complex. If you’re not sure how to go about all the HR laws, you might get your company in a big mess. The last thing you’d want is facing a suit for non-compliance.

PEOs know all about the employment laws a company ought to follow. Using the right PEO will save you from a range of compliance mishaps. The PEO will guide you on matters related to wage equity laws, hiring practices, and even sick leave policies.


Recruiting and Additional Employee-Related Roles

A staffing agency or a PEO is an ideal option if you want to have an easier recruitment time. If you don’t have the bandwidth and time to focus on solid recruiting and related services, PEO can help. You’ll save time and money spent on candidates’ interviews, place job ads, and offer additional services like recruitment assistance.


Access to Benefits

A PEO relationship aims at providing workers with access to comprehensive and cost-effective benefits. It also ensures that these benefits are not accompanied by costly or overwhelming regulatory and administrative benefits.

The PEO offers benefits to workers through PEO-sponsored benefit programs like vision coverage, dental, and medical. These benefits further cover disability and life covers. The PEO negotiate with carriers for reasonable premiums to protect employees.


Working With a PEO or Staffing Agency Has Significant Benefits for a Business

Your small business will benefit from a staffing agency or a PEO. Given their almost similar roles, people tend to confuse the two. However, a staffing agency and a PEO have stack differences that you need to know before choosing.

The benefits of a PEO makes it more outstanding than a staffing agency. The former executes several roles, which you won’t enjoy with a staffing agency. However, both have significant benefits that will have you saving time and money when running your business.

Are you looking for a PEO to help with your HR needs? Next Generation Payroll is your ideal PEO alternative for assisting your small business. Contact us today for a range of payroll, HR, insurance and digital marketing needs. We are located at 11816 Inwood Rd #3013 Dallas, TX 75244, however we offer virtual options for clients in other states.

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