Payroll & HR Outsourcing for SMBs: Which Model Fits?

Jan de Vries · 2026-05-22

### Which Companies Offer Payroll and HR Outsourcing for SMBs? If you're running a U.S. company with 10 to 200 employees, choosing the right payroll and HR partner can feel overwhelming. You've got four main options, and each one works best for a different situation. Let's break them down so you can pick the one that fits your business today. ### The Four Outsourcing Models, Explained Simply First, you need to understand who's the legal employer, who files payroll taxes, and where your employees are located. Get these straight, and you won't waste time on the wrong solution. #  ### PEO (Professional Employer Organization) A PEO enters into a co-employment agreement with you. They file payroll taxes under their own employer identification number (EIN), pool benefits across many companies to lower costs, and often handle workers' comp and compliance. Over 230,000 U.S. businesses use a PEO, covering about 15% of employers with 10 to 499 employees. Look for IRS Certified PEO (CPEO) status and ESAC accreditation for peace of mind. #### Payroll/HR Software (HCM) Here, you stay the sole employer. The software files taxes under your EIN and offers modules for payroll, time tracking, benefits, and compliance. HCM stands for human capital management, and it's all about giving you control through software. #### ASO (Administrative Services Organization) An ASO provides advisory and admin support without co-employment. Services are a la carte, like payroll admin or handbook help, and you keep your own EIN. #### EOR (Employer of Record) An EOR becomes the legal employer in another country, so you can hire internationally without opening a local entity. Unlike a PEO, you don't need a domestic entity in that country. ### When to Use Each Model Your choice depends on where your team is and how much control you want. Here's a quick cheat sheet: - **PEO**: Best when all employees are in the U.S. and you want one bundled service for payroll, benefits, and compliance. - **Payroll/HR Suite**: Ideal if you have an HR team and want full control with software. - **ASO**: Great if you just need expert advice on your existing setup. - **EOR**: Perfect for hiring one person abroad without setting up a local company. ### What You'll Pay: Cost Models Explained Separate admin fees from pass-through costs. A low admin fee can still mean a high total bill if benefits and workers' comp are expensive. - **PEO pricing**: Flat per employee per month or a percentage of gross payroll. Justworks lists two tiers at $59 and $99 per employee per month for smaller teams. Oyster's U.S. PEO charges $89 per employee per month plus a $25 platform fee, with a one-time $500 setup fee. ADP TotalSource and Paychex PEO require a custom quote. - **Payroll/HR suites**: Gusto's Simple plan is $49 per month plus $6 per person. Higher tiers add more features. - **EOR pricing**: Expect higher costs since the provider becomes the employer. Deel starts at $599 per employee per month. ### A Simple Test to Decide Ask yourself these questions: - Is everyone in the U.S. and do you want one bundled admin layer? Compare PEOs. - Do you want software and full control? Compare payroll suites. - Do you only need occasional expert help? Ask ASO firms for a menu. - Is one hire abroad and you have no entity there? Start with an EOR. This framework will save you time and help you build a smart RFP.