Guide
PEO vs In-House HR: How to Choose the Right Model
PEO
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The right HR structure can accelerate your company's growth in the United States.
But how do you structure your HR operations? Should you build a traditional, in-house HR team, or bring in a professional employer organization (PEO) to share the workload?
While a PEO doesn’t have to completely replace your HR team, it can supplement it with expert compliance guidance, access to competitive benefits, and alleviated HR and payroll tasks.
This guide helps you compare both approaches so you can make the best choice for your business.
What you’ll learn in this guide
This guide walks you through a head-to-head comparison of in-house HR vs. PEO outsourcing, including:
- How PEOs reduce costs through pooled benefits and insurance
- Which HR tasks stay in-house vs. what gets offloaded to a PEO
- Compliance risks of managing everything internally
- Real-world examples of companies scaling faster with a PEO
- A practical decision framework to evaluate your options
Who it’s for
- HR and payroll leaders managing a growing US workforce
- Global companies building a US team
- Finance leaders evaluating cost, risk, and employee experience
FAQs
What is the difference between a PEO and in-house HR?
Managing HR in-house means hiring and paying for HR staff, payroll systems, compliance experts, and legal support to cover payroll, benefits, and multi-state compliance. It offers direct control but comes with high overhead.
A Professional Employer Organization (PEO), by contrast, introduces a co-employment model. The PEO runs payroll, benefits, workers’ compensation, and compliance under its EIN while your company maintains day-to-day management of employees.
A PEO doesn’t have to completely replace your HR team, though. It takes on some administrative and compliance burdens so your internal team can focus on strategy, culture, and growth.
What are the cost savings of using a PEO vs managing HR internally?
A PEO leverages economies of scale to reduce costs across health insurance, workers’ comp, and HR operations. For example, PEO clients access group health and retirement plans typically reserved for larger employers, lowering premiums while expanding benefit options.
Deel PEO, specifically, provides access to Fortune 500-level plans like Aetna International and 60+ domestic options.
What HR tasks can a PEO offload, and which ones should remain in-house?
A PEO typically takes on:
- Payroll processing and multi-state tax filings
- Benefits administration and enrollment
- Workers’ compensation coverage and EPLI
- Compliance monitoring and reporting (W-2s, unemployment insurance, labor law changes)
Your in-house HR team retains:
- Day-to-day employee management
- Culture building and engagement strategies
- Talent acquisition and workforce planning
With Deel PEO, you also get support from HR business partners, payroll specialists, and compliance advisors who act as extensions of the internal team.
Does using a PEO mean giving up control of my HR processes or culture?
No. With a PEO, you maintain full operational control over your employees, and the PEO simply manages administrative and compliance functions under a co-employment model.
This ensures accurate, compliant processes without disrupting how you manage culture or make hiring decisions. Deel PEO, for example, provides support through dedicated HRBPs and built-in HR workflows, but your team still leads on people decisions.
At what company size or growth stage does a PEO become more advantageous than in-house HR?
PEOs are especially valuable for small to mid-sized businesses or international companies entering the US. These organizations often lack the bargaining power to secure competitive health insurance rates or the resources to staff full HR, payroll, and compliance teams.
A PEO provides enterprise-level benefits, compliance expertise, and HR tools at a predictable per-employee fee, making it financially sustainable compared to building HR capabilities internally.
What are the risks or downsides of using a PEO?
Some businesses may feel they lose a degree of control when partnering with a PEO. However, the main considerations are:
- Choosing the right PEO partner (service quality and transparency vary)
- Understanding that you may still need some HR presence internally for culture and employee relations
That said, the risks of compliance mistakes, high insurance premiums, and HR overhead are generally far higher when managing everything in-house, especially across multiple states.