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- PEOs (Professional Employer Organizations) outsource HR administration and many work-related liabilities for client businesses. Some PEOs focus on a particular state or area, and are known as Regional PEOs. Other PEOs cover the entire country and are called National PEOs.
- Regional PEOs can bring in-depth knowledge of local regulations, the labor market, and regional industries.
- National PEOs use economies of scale to provide efficient administration and low insurance premiums.
- Every PEO, whether Regional or National, needs to provide workers’ compensation insurance coverage, state tax reporting, training, and regulatory compliance that is in line with the state laws at the job site.
- A Regional PEO may be a better fit for some industries where extensive local regulatory knowledge is required. Companies operating within simple regulatory and insurance environments may prefer a National PEO for its ability to provide lower insurance and benefits premiums.
PEOs (Professional Employer Organizations) provide HR capabilities such as payroll processing and benefits administration for businesses. They are also able to hire and onboard new employees, shoulder liability for regulatory compliance, and report and process employee taxes. PEOs can do this because they act as “co-employers”; the client business handles all staff on the job site as the “worksite employer” while the PEO is responsible for payroll, employee taxes, insurance, benefits, and regulatory compliance as the “employer of record”.
As the employer of record, PEOs are liable for worker safety and labor regulations. Because these can vary from state to state, many PEOs choose to focus on only one state or several adjacent states. These are known as Regional PEOs.
There are also National PEOs, however, that are able to cover the entire country. National PEOs focus on the benefits of economies of scale in order to gain efficiency in administration and offer lower premiums on insurance and benefits. National PEOs will often open local or regional representative offices and ensure that state and local regulations are met.
There can be benefits to both National and Regional PEOs. Which choice is right for a particular business may depend on the nature of their work, their particular needs, and the qualifications of the PEO itself.
To find out more about the coverage of a particular PEO, check out the National Association of Professional Employer Organizations (NAPEO) ‘find a PEO‘ tool.
What are the benefits of a Regional PEO?
Typically a regional PEO will be closer at hand for in-person training, customer service, and any job site issues that may come up.
Being based in the same state or region as the client business, a regional PEO will have more knowledge of the local rules and regulations that affect the business. This may be a distinct advantage for industries that are large employers for many different companies within a specific geographic area, such as commercial fishing, logging, oil drilling, or mining. In such cases, a Regional PEO will most likely have well-developed training and hiring resources for the local industry, insurance packages that cater specifically to the needs of that industry, and a thorough knowledge of local regulations.
What are the benefits of a National PEO?
National PEOs will almost always be larger companies than Regional PEOs. The large number of co-employees working under National PEOs gives them unique advantages.
A large National PEO will likely have larger HR staff resources and more efficient information management systems than a smaller PEO can afford to invest in. This could mean faster customer service response times, less human error, faster claims processing, access to larger labor pools for hiring new staff, and higher quality onboarding and training programs.
The large amounts of co-employees under a national PEO may also give them an advantage in negotiating lower insurance premiums for their clients (find out more in our Employer’s Guide to PEO Insurance). A National PEO with ten times more co-employees than a Regional PEO will have an insurance risk pool that is also ten times larger than that of the regional PEO; since a larger risk pool means that there will be a higher percentage of healthy employees making no insurance claims, insurance companies will offer lower premiums to these large PEOs in order to keep their business.
Video: Regional PEO vs National PEO
Regional PEO vs National PEO: Which is right for you?
If your business is heavily affected by state regulations, such as oil drilling in Texas or logging in the Pacific Northwest, a Regional PEO will likely be better equipped to onboard your employees and navigate your compliance issues.
If your business is less affected by regional regulations, such as commercial cleaning, and you do not see a benefit to having local experts and customer service offices in your area, you may benefit more from a National PEO. A larger size of a National PEO may be able to provide better benefits packages and lower premiums than a smaller Regional PEO.
If you choose a National PEO, however, be sure to check that the workers’ compensation insurance offered is accepted by your state board. Regulations on workers’ compensation differ from state to state and not all providers will be recognized by all states.
A PEO-client relationship is a partnership, and what matters most at the end of the day is picking a partnership that is right for you. A large Regional PEO in your state may offer competitive benefits and insurance packages, with an efficient administration that can rival a National PEO. Conversely, a national PEO may have a strong, experienced office in your state, giving them expertise with local regulations and helpful staff nearby.
FAQ
A Regional PEO is a Professional Employer Organization that operates in one specific territory i.e., the Pacific Northwest, East Texas, or Ohio and Indiana. Regional PEOs only serve clients based in and with staff working within their focus area.
A national PEO serves clients located anywhere within the United States. National PEOs must be able to meet local tax reporting requirements, insurance qualifications, and labor regulations in whatever state or jurisdiction the client is based in. National PEOs may have regional or state offices in order to better serve clients in those areas.
