PEO vs. Broker: Which One Makes Sense for Your Business?

So, you’re growing your business, hiring people, and now facing the health insurance puzzle. You’ve probably come across terms like PEO, co-employment, and ACA compliance, and you’re wondering.. How did this get so complicated?

Trust me, I get it. So let’s break down the difference between PEOs and brokers, what they cost, and how to avoid locking yourself into something that ends up costing way more than it should.

First, do You Have to Offer Health Insurance?

Here’s the deal:

If you have 50+ full-time employees (or equivalent if you count part-timers), you legally have to offer health insurance under the Affordable Care Act (ACA).

If you’re under 50? It’s optional. But if you want to keep good people, you’ll probably offer something.

Okay, now onto your options.

Option 1: Broker

Think of a broker like a personal shopper for health insurance. They help you pick a plan from the open market that fits your business.

Pros:

You own the policy—full control, easy to switch plans

Good brokers handle the legwork (shopping plans, enrollment)

Scales better if you grow significantly

Cons:

Typically higher rates upfront

You’ll manage HR, payroll, and compliance separately

Not all brokers are great

If you want control and lower long-term costs, this is usually the way to go.

Option 2: PEO

A PEO (Professional Employer Organization) bundles HR, payroll, benefits, and compliance. But here’s what makes them different: co-employment.

Your employees are technically under the PEO’s tax ID, not yours.

Why that matters:

They take on some liability, like payroll tax issues.

They handle compliance. Multi-state headaches, solved.

You get access to big-company insurance plans. Usually at cheaper rates.

But…

Fees can add up quickly.

Some providers count on you missing the hidden costs, or not switching when rates spike at renewal.

Getting out is complicated. You can’t just leave overnight.

Pro tip: Some PEOs now let you use your own broker.

Final Thought: Don’t Lock Yourself Into the Wrong Thing

At The Shiftly, I help businesses navigate this every day. Some save hundreds of thousands by switching from a PEO to a broker. Others save just as much by moving to a PEO, and gain peace of mind if they don’t have HR in place and are one misstep away from a compliance nightmare.

If you’re stuck deciding, let’s chat. Shoot us an email or book that 15 minute consultation. Better to make the right call now than regret it next year.