A PEO tends to fit Utah companies with 10 to 100+ employees and no HR team yet.1 It runs payroll, benefits and HR paperwork as your co-employer. At 50 full-time employees the ACA employer mandate applies to you either way, and near 100 your own group plan is worth pricing. We partner with PEOs instead of fighting them.

You’re hiring in Lehi or Salt Lake City, nobody owns HR, and the third person this month just asked about health insurance. A PEO looks like the shortcut. Often it’s the right one. This guide covers when a PEO in Utah fits, what shifts at 50 and 100 employees, and how to tell when you’ve outgrown it.

Co-employment for a Utah team, in brief

A PEO (professional employer organization) is a company that shares the employer role with you. That arrangement is called co-employment. You still hire, set pay and run the work. The PEO generally files payroll taxes under its own tax ID, enrolls your team in its health plans, and handles a lot of HR paperwork.2 We cover the full model in what a PEO is.

For a Utah company, the model works the same way it does elsewhere. A few things are worth checking on day one:

  • Where your people live. If half your team is on the Wasatch Front and the rest is remote in other states, ask how the PEO’s plans and networks cover each place. Multi-state payroll is one of the reasons founders pick a PEO in the first place.
  • Whose plan it is. In most PEOs your employees join the PEO’s plan, rather than a policy your company holds. That matters later, when you want to leave.
  • What it can’t change for you. Co-employment moves paperwork. Your company still counts as the employer for rules that depend on your headcount, such as the ACA mandate below.

A payroll platform is a different thing. Is Gusto a PEO? walks through that line, and Gusto vs Justworks puts a platform and a PEO side by side.

Does a PEO fit your stage?

Headcount is a starting point. Your HR capacity, where your team lives and how fast you’re hiring move the answer more.

Situation PEO fit Why
Under 10 employees, one state Possible A payroll tool plus a small group plan may cost less than the bundle.
10 to 49 employees, no HR person Strong Payroll, benefits and HR help come from one place while you hire.1
10 to 49 employees across several states Strong The PEO runs payroll and HR rules in each state for you.
50 to 99 employees Review every renewal The ACA mandate applies, and carriers will now quote your own group.3
You’ve hired a full-time HR lead Weaker You may be paying for HR services your own team now covers.
100 or more employees Price the alternatives Your own plan, your own claims data and level funding are all on the table.1

Some 120-person companies stay with a PEO on purpose, because the HR help is worth the cost to them. Some 15-person companies never need one. The table tells you when to look, and your numbers tell you what to do.

What changes at 50 employees

At 50 or more full-time employees, counting full-time equivalents (part-time hours added together), your company is an “applicable large employer” under the ACA. You then have to offer affordable, minimum value coverage to full-time employees, or you may owe a payment to the IRS.3 The count is your company’s, PEO or not.

A PEO can help with coverage offers and the year-end forms. Ask yours exactly what it files on your behalf and what stays with you. Our ACA compliance guide for small businesses covers the basics.

Fifty is also the point where your own group plan gets a real quote. You have enough people for carriers to price you as a group of your own, so a broker can put that quote next to the PEO renewal. If you’re at this stage, see choosing a benefits broker for a 50-employee company.

What changes at 100 employees

Near 100 employees, the bundled fee that felt fair at 20 people covers a lot more payroll, and you may want things a PEO plan rarely gives you:

  • Your own claims data. Inside a PEO, your claims usually sit in a shared pool. On your own plan, you can see what drives cost.
  • More ways to fund the plan. Level-funded plans, where you pay a fixed monthly amount and may get a portion of unused claims funds back depending on the carrier’s terms, fit larger groups better.4 Kingsfoil Health’s guidance puts the level-funded sweet spot at 25 to 500+ employees.1 See level-funded vs fully insured in Utah.
  • Your own plan design. You pick deductibles, networks and contribution levels for your team, rather than choosing from a menu.

When a PEO stops fitting

A PEO is a good tool for a stage of growth. Look at leaving when two or more of these are true:

  • You’re near 100 employees, or past it.
  • You’ve hired an HR lead or bought separate HR software.
  • Your renewal went up and the bundled invoice doesn’t show why.
  • You want a level-funded plan or an ICHRA, and the PEO’s menu doesn’t include one.
  • You pay for services in the bundle that nobody on your team uses.

The hidden costs of a PEO shows how to split the bundled price into parts you can compare. When you’re ready to move, our PEO exit checklist covers payroll, workers’ comp, records and the message to employees. Start at least 90 days before your effective date, and line everything up on one switch date.

A PEO also isn’t the right first step for every company. If you already run payroll on a platform, have someone handling HR, or have a young, healthy team that could do well on a level-funded plan, a broker-placed plan may fit better from the start. PEO vs independent broker lays out that choice.

The mistake is never checking. A PEO that fit at 15 people deserves a fresh look at 50 and again near 100.

How we help

We partner with PEOs instead of fighting them. If a PEO is best for you, we recommend it. When you’re weighing a change, we price your own group plan, level funding and the PEO renewal on the same census, the list of your employees with ages, ZIP codes and coverage choices. A PEO partnership is one of seven paths covered in Utah health insurance renewal options. For everything else on Utah benefits, start at the Utah small business health insurance hub.

Kingsfoil Health is licensed in 13 states, including Utah. If yours isn’t one of them, tell us.

Not sure your PEO still fits? We run this analysis for every client, free, no obligation. See your options.

Footnotes

  1. Kingsfoil Health, Rate Shock Survival Guide. States that the PEO sweet spot is 10 to 100+ employees and the level-funded sweet spot is 25 to 500+ employees. ↩ ↩2 ↩3 ↩4

  2. IRS, Certified Professional Employer Organizations final regulations (Federal Register, May 28, 2019). A certified PEO is treated as the employer for federal employment tax purposes on wages it pays to work site employees. ↩

  3. IRS, Employer Shared Responsibility Provisions. Employers with 50 or more full-time employees, including full-time equivalents, are applicable large employers. ↩ ↩2

  4. UnitedHealthcare, What is a level-funded health plan?. Describes a possible refund of unused claims funds, or a credit toward the next year, depending on the plan’s terms. ↩