PEO vs HRIS: which one makes sense at your size?
Cost, control, and benefits trade-offs explained with real examples.
The short answer
A PEO makes the most sense for small US companies without HR staff that need competitive benefits and compliance help. An HRIS makes the most sense when you have HR staff, want control over your benefits and vendors, and are large enough to get good group health rates on your own.
The core difference
With an HRIS, you are the sole employer. You choose the broker, the benefits plans, and the payroll setup. With a PEO, you enter a co-employment arrangement: the PEO handles payroll taxes, benefits, and workers' compensation under its own umbrella, while you direct the work.
How to compare cost
Compare the full PEO fee, including admin, benefits, and workers' compensation, against the cost of an HRIS plus payroll, a broker, your own benefits premiums, workers' compensation, and the HR time you would need. Model it for the next 24 months of hiring, since percentage-of-payroll PEO pricing grows with salaries.
Where ICHRA fits
An individual coverage HRA lets you reimburse employees for individual health insurance instead of offering a group plan. Some small companies use an HRIS plus an ICHRA as an alternative to a PEO. It works best when employees have good individual market options where they live.
When companies switch
Many companies leave a PEO somewhere between 100 and 250 employees, when they hire HR staff and their own health rates become competitive. Plan the switch at the start of a calendar year to keep tax reporting and benefits deductibles simple.
Want this applied to your company?
Our research team can send a short, specific recommendation.