Is a PEO Right for You? Why Fractional HR Support Might Be a Better Fit
As a fractional HR leader, I partner with companies at critical stages of growth. Often, when a startup begins hiring employees and feeling the pressures of HR compliance, payroll, and benefits management, the first thought is: "We should get a PEO."
It seems like the logical next step — but is it always the best one? Not necessarily. In fact, depending on your goals and growth plans, locking into a PEO too early can actually slow you down. Let’s break it down.
What Does a PEO Actually Do?
A Professional Employer Organization (PEO) offers a bundle of HR services — payroll, benefits administration, compliance support, and workers’ compensation insurance — all under a co-employment model.
Co-employment means:
You still manage the day-to-day work of your employees.
The PEO becomes the “employer of record” for tax purposes and benefits.
Startups often choose PEOs because they offer:
Access to affordable group health insurance
Reduced HR compliance risk
Payroll and tax administration
Ready-to-go HR policies and employee handbooks
How a PEO Differs from Fractional HR Support
Unlike a PEO, fractional HR leadership doesn't require you to hand over legal control of your employees. Instead, you get customized HR support that flexes with your needs — without the rigidity or hidden costs that often come with PEO contracts.
When you work with a fractional HR partner like me, you get:
Strategic guidance to build an HR function aligned with your culture and business goals
Flexible support tiers that can evolve as your company scales
Freedom to customize benefits, policies, and processes — not just fit into a one-size-fits-all system
My model offers three tiers of service each one building on the last, so you get everything from the previous tier as you grow:
Take Action - Get compliant, stay protected. This tier sets up your core HR foundation: compliant policies, essential documentation, and clear, legally sound processes. It’s practical, no-fluff support to ensure you’re aligned and ready for growth. Includes on-demand HR support for employee relations issues.
Take Shape - Build a people-first foundation. Move beyond the basics to shape a high-functioning, human-centered organization. We help you design performance systems, strengthen leadership, and align culture to strategy — so HR starts driving business results.
Take Off - Get executive-level HR without the full-time overhead. Your dedicated fractional HR partner becomes part of your leadership team — running day-to-day operations, leading strategic initiatives, and helping you scale with confidence.
You get the flexibility to start where you are — and grow your HR function intentionally, without disruption.
Why Startups Often Choose a PEO (and Why They Regret It Later)
The appeal of a PEO is understandable: quick setup, bundled benefits, less to worry about. But there are tradeoffs that often don't become clear until later:
Lack of flexibility: You’re locked into the PEO’s health plans, policies, and vendors.
Cost over time: PEO fees, often a percentage of payroll, can balloon as your team grows.
Hard exits: Transitioning out of a PEO is complex — you’ll need to set up your own payroll, benefits, and compliance systems all at once, which can be disruptive during key growth periods.
Loss of culture control: When your policies, onboarding materials, and benefits aren’t truly "yours," it can be harder to build a strong, authentic company culture.
In contrast, fractional HR support scales with you — no messy exits, no rigid systems, just tailored support as you grow.
And as you grow, we grow with you: Whether it’s supporting your search for an in-house HR hire or, down the line, expanding our role through a dedicated consultant, our goal is always the same: to help you build toward an HR model that fits your future — not just your right-now.
When a PEO Might Still Be the Right Move
To be fair, PEOs are valuable for certain situations, like:
Companies with complex, multi-state employment needs and no internal HR.
Very early-stage companies that need temporary relief while planning a longer-term HR strategy.
But even then, it's important to think about exit plans and how you will transition as you scale.
Final Thought
Choosing the right HR solution early can mean the difference between scalable growth and future bottlenecks.
Instead of defaulting to a PEO, consider whether fractional HR leadership could give you:
The expertise you need,
The flexibility you want,
And the control you deserve over your culture and future.
Startups and scaling companies deserve HR support that's strategic, customized, and built to grow with them — not a cookie-cutter solution that might outgrow them.
If you're ready to build a strong HR foundation without locking yourself into the wrong model, let's talk. My three tiers of fractional HR support are designed to meet your company exactly where you are — and help you get where you're going.
Learn More
Grab a 15-minute, no-pressue time slot on my calendar to learn more about our services and how we can help you achieve your business goals.
