Myth 1: Business Owners Lose Control of their Business

Perhaps the number one concern that business owners have about working with a PEO is the fear of losing control of their business, so it’s no surprise that this is one of the most common PEO myths, too.

However, this myth isn’t true. In fact, owners don’t lose any control when they partner with a professional employer organization.

Instead, businesses gain a strategic partner who shares various HR responsibilities to ensure improved practices, strategies, and efficiency.

But this isn’t the only myth that exists about responsibilities and business control...


Myth 2: A PEO can Hire and Fire a Client’s Employees

Along with losing control of the day-to-day aspects of their company, some business owners assume that a PEO takes over hiring, promoting, and firing employees.

But this myth has also been busted.

In a PEO partnership, all talent management responsibilities stay with the owner. This means they get to make all hiring and firing decisions, along with any promotions or raises that are given to employees.

All a business owner would need to do is notify their PEO so that all HR and employment documentation is updated accordingly.

It should be noted that some PEOs do offer recruiting services to their clients and can help small business owners find potential new hires. However, the decision to interview or hire a candidate rests solely with the owner, and not the PEO.


Myth 3: Businesses Lose their Insurance or Benefits Broker

For many small and medium-sized business owners, their insurance or benefits broker is more than just a broker— they are a trusted advisor who has the best interest of their client in mind.

This myth is a bit different than the first two, because with some PEOs you might lose the broker relationship. So why is this a myth and not a fact?

It’s because Broker-Only PEOs exist today that differ from other PEOs on the market. A Broker-Only PEO partners with brokers to offer their services to small and medium- sized employers. The benefit to this type of PEO is that not only does a business owner gain an HR partner, but they also get to keep their broker.

This is ultimately a win-win for many employers.


Myth 4: My Business is Too Big or Too Small for a PEO

According to the National Association of Professional Employer Organizations (NAPEO), the average PEO client has around 22 employees. But another common misconception is that PEO is only an option for companies around this size—and more specifically, that much larger or much smaller employers can’t benefit from this HR solution.

Some professional employer organizations will even go beyond 1,000 employees!

Companies of just about any size stand to gain from a PEO partnership, debunking this popular myth.


Myth 5: A PEO Replaces HR Personnel

This myth applies mostly to medium-sized employers who work with PEOs, as many smaller employers don’t have a dedicated HR employee.

Mid-sized employers, though, might even have an HR team. So, if the business partners with a PEO, do these team members lose their jobs?

Not at all! Just because a business brings on a PEO to handle certain HR responsibilities doesn’t mean they have to replace current HR personnel.

As a matter of fact, a PEO can assist HR employees with numerous tasks, especially around compliance issues.

In many cases, HR personnel end up benefiting from a PEO partnership as they gain additional resources that can make their jobs easier!


Myth 6: PEO is the Same as Employee Leasing

Besides the idea of losing control, perhaps the next most popular misconception about PEOs involves the relationship between a client company’s employees and the PEO—called co-employment.

There are a few major differences between co-employment and employee leasing, but the biggest is that PEOs do
not lease out employees or provide staff to their clients. Instead, the client keeps control over all hiring and other employee-related decisions.

It’s also important to know that in a co-employment relationship, employees have 2 employers—the client company and the PEO (the employer of record).

Yet another PEO myth busted!


Myth 7: A PEO Won’t Save My Business Money

Another barrier for some business owners to explore PEOs is the thought that they are too expensive and won’t save a business money or reduce HR-related costs.

However, this is another myth about PEOs that isn’t true. For example, a report from NAPEO found that PEOs help their clients save up to 35% on HR administration costs.

Additionally, PEOs can help employers save considerable amounts on health insurance and other benefits, all while improving the quantity and quality current offerings.

Often, small and medium-sized employers stand to save money and become more efficient through a PEO partnership.


Myth 8: Co-Employment will Negatively Impact the Employee Experience

Along with being confused with employee leasing, another myth surrounding co-employment revolves around how
it would impact a client’s employees. And while the
myth says that co-employment would hurt the employee experience, the opposite is usually true.

By being co-employed by their company and a PEO, employees will be able to choose from enhanced employee benefits that include:

·       Tailored health insurance

·       Voluntary benefits (legal assistance programs, identity

theft protection, pet insurance, employee assistance

programs, etc.)

·       A wide-range of complimentary benefits

And since a PEO can help improve HR practices and strategies, employees stand to gain even further.

Not only is this myth debunked, but a PEO can actually help boost the employee experience for small and medium-sized employers!


Myth 9: PEOs Lack Transparency

A complaint that some business owners have is a lack of transparency that comes from working with a PEO. But is this myth fact or fiction?

The answer is that it depends on the PEO. Some may be less transparent whether it’s with their pricing, fees, or services, but others are the complete opposite with their prospects and clients.

This is why researching PEOs is important as it helps ensure that business owners find the perfect partner that is up-front with their solutions and fees. Working with your broker is also a great way to ensure you only work with a best-in-class PEO that can help your business and employees!


Cosmo Insurance Agency is an independent insurance agency serving surrounding communities in New Jersey. Cosmo keeps its promise to assure an efficient and creative approach to the services we offer. Each of our clients experience a personalized and long-term relationship with us. Our New Jersey based team of health brokers guides our clients in helping them choose the most cost-effective options. By incorporating the latest in technology-based tools and laws on healthcare, employee benefits, life insurance and finance, we keep our clients up-to-date with the plans that encompass all of their needs, whether it is individual or group insurance. 




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