See if this scenario sounds familiar (anonymized, but you’ve met this company before):
A fully remote, 10-person U.S. team hit a messy personnel issue and asked, “Should we just hand this to a PEO?”
They were hoping for two things:
- Compliance confidence
- A way to “professionalize HR” without adding headcount
Our answer? They probably shouldn’t get a PEO.
Instead, we’d recommend they get their foundations in order, assign clear internal ownership (usually the COO/Operations), and bring in targeted outside help where the risk actually lives.
Why? Because PEOs aren’t what a lot of people have been sold.
The PEO Pitch vs. The Reality
| What You’re Sold | What Actually Happens |
| “Big-company benefits at small-company prices.” | Savings vary wildly…but most often not at all. Networks may not fit your employees. Many small teams find that shopped small-group plans or a strong broker do just as well. |
| “Outsource HR and stop worrying.” | Sure, except you still need someone internal to manage the PEO, answer questions, approve changes, and make judgment calls. Most small teams end up staffing an HR coordinator anyway. A significant population of our clients have to hire to manage the PEO when they could have just hired HR directly. |
| “We’ve got compliance covered.” | No. They don’t. Co-employment doesn’t shift your legal exposure. If classification or investigations go sideways, you wear it. Vendor processes may not meet legal best practices or your culture. As an example, convincing a PEO to terminate a bad employee is nearly impossible. |
| “One system to run it all.” | Yep, it’s one system… that you don’t control. You adopt their processes and timelines. If you have to unwind later, it’s expensive, time-consuming, and disruptive. |
Not that PEOs are always bad…
When a PEO Does Make Sense
There are situations where using a PEO is the right call, though it’s important to acknowledge that these are edge cases, not the norm. Still, they’re worth highlighting:
- You’re foreign-owned and need immediate U.S. payroll/benefits coverage.
- You need to stand up multi-state HR operations at speed.
- You’re in a niche with unusual workers’ comp or benefits needs.
- You go into a PEO with a predetermined timeline to get out of the PEO.
Outside of these, most small teams get better results by building lean internal HR.
How do you do that? What are our specific recommendations?
The Foundational Moves That Beat a PEO (And Cost Less)
Here’s what actually moves the needle:
- Name an HR Owner. Often this will be the COO or Operations Lead. Make it explicit.
- Start With the Handbook. It forces clarity on policies, expectations, culture, and operations. After you have one, everything else snaps into place faster.
- Run Two Quick Audits:
- I-9 self-audit – for every employee, including remote staff
- Contractor vs. employee classification – your #1 hidden risk
- Build a Real Hiring Operating Model. Use a simple, repeatable sequence:
- Role scorecard
- Structured interviews
- References
- Decision log
Add onboarding/offboarding checklists and manager tools, and you’ve eliminated most preventable people problems.
- Set a Monthly HR Cadence. A 60-minute check-in with your HR partner/counsel. If an issue is recurring, bring it up at the meeting. If not, cancel that month. Simple.
What’s Your Expected Budget Pattern?
- Short, heavier lift (2–4 months) to install foundations
- Light, predictable maintenance after that
This helps you avoid the ongoing spend of a PEO and you stay in control.
What Does It Really Look Like to Set Up Foundational Internal HR?
Generalities are nice, but you want specifics, right? Okay. Take a look at this 90-Day “Button-Up” Plan presented as a handy-dandy checklist. (incidentally, we can help with pretty much all of the below.)
Days 0–30: Stabilize
- Update/replace handbook (remote/hybrid realities, conduct, leave, discipline, investigations, data/security, expenses, device use).
- Full I-9 audit; fix remote-hire gaps.
- Review contractor relationships; convert where at risk.
- Confirm required workplace notices for remote/hybrid teams.
- Map current HR tech (payroll, PTO, benefits, docs) and keep what works.
Days 31–60: Systematize
- Role scorecards + job description templates.
- Structured interview kits and rubrics.
- Onboarding/offboarding checklists, plus manager one-pagers.
- Complaint + investigation protocol (intake → triage → documentation).
Days 61–90: Plan Ahead
- 12-month headcount plan with budget guardrails.
- Identify key regulatory thresholds for your size and states.
- Lock a monthly HR check-in with metrics and standard agenda.
The Six-Month Hiring Timeline
Month 0: Need recognized → write role scorecard
Month 1: Publish JD → sourcing → structured screens
Months 2-3: Panel interviews, work sample, references → decision
Month 4: Offer, notice period, background checks
Months 5-6: Start date, onboarding, 30/60/90 goals
Moving at this pace dramatically improves quality and culture fit (and prevents emergency hires!)
IMPORTANT: Global Teams? Don’t Copy-Paste U.S. HR
We’re sure you’re all already aware of this, but just a friendly little reminder that each country’s employment system stands alone. Translation: Practices that are normal abroad can be unlawful here (and vice versa).
So while you want to keep your global values aligned, HR policies and processes have to be local by necessity.
Still Feeling PEO-Curious? Do This Quick Self-Check
You can probably tell we’re not big PEO fans in general here, but it’s not an across-the-board no. If you say “yes” to most of these, it’s possible a PEO might fit your needs:
- “We expect dramatic benefits savings we can’t get elsewhere.”
- “We need a vendor to design HR, not just administer it.”
- “We have zero internal HR capacity – even part-time.”
- “We need instant multi-state setup and don’t mind using vendor processes.”
- “We understand compliance/investigations are still our responsibility.”
- “We understand each required step to get out of the PEO.”
Did you put a check in front of most of those? If not, you likely don’t want a PEO.
The Alternate Path Treaty Oak Can Help You With (AKA, The Path That Actually Works for Small Teams)
Here’s what we offer:
- Foundations package (time-boxed): handbook overhaul, I-9 & contractor audits, hiring system, onboarding/offboarding.
- Monthly HR check-in (1 hour): only when there’s a pattern or decision to make.
- Specialty support: investigations, separations, state-specific expansion.
You stay in control. You spend less. And you build HR that actually fits how you work. Interested in learning more? Get in touch.