PEO in Texas [2024]

From the business hubs of Dallas and Houston to the startup scene in Austin, many Texas companies turn to professional employer organizations (PEO) for help streamlining and automating their manual human resources tasks. A PEO partners with businesses to offer HR services like employee benefits, payroll services, and compliance with labor laws. It also helps companies access better employee benefits at more affordable prices.

PEOs can help companies in Texas’s business-friendly environment save costs and reduce administrative burdens—especially small to mid-sized enterprises in growing cities like San Antonio and El Paso.

But before you settle on a PEO, you need to think about your business needs and weigh your options. For example, Rippling PEO can help with automatic state tax registration, remote laptop management, and more to simplify hiring and onboarding in Texas and across the US.

Benefits of using a PEO in Texas

Businesses across the Lone Star State can find value in partnering with a Texas PEO service. Let's delve into the ways PEOs are transforming how Texas businesses handle their HR responsibilities.

Offload administrative HR work

By partnering with a PEO, your business enters into a co-employment relationship. 

Under this arrangement, your company becomes the worksite (or primary) employer, responsible for day-to-day operations and workforce management. You’ll still decide who to hire and fire and how much to pay your workers. You’ll also make day-to-day decisions related to overall business strategy, like sales, marketing, and customer support.

The PEO assumes the role of the administrative employer and employs your workforce under its federal tax identification number (EIN). This allows the PEO to manage labor-intensive, employment-related HR tasks such as payroll services, benefits administration, and ensuring compliance with HR laws and regulations. 

This means the PEO handles a lot of manual work, freeing up more of your team’s time and resources to focus on strategy and growth.

Better employee benefits, at a lower price

Offering competitive employee benefits is key to attracting and retaining top talent, especially in competitive industries. This is another area where a PEO can help businesses stand out, as they provide access to better quality benefits plans at lower costs.

PEOs pool together people they co-employ across multiple businesses, state or nationwide. This gives them collective bargaining power to negotiate with insurance providers for high-quality benefits at lower costs. Through these economies of scale, PEOs can provide small to mid-sized businesses with access to not only affordable benefits, but comprehensive plans typically reserved for large corporations. This can include healthcare, life and disability insurance, mental health support, retirement plans, and even perks like commuter benefits and dependent care.

The federal Affordable Care Act (ACA) requires businesses with 50 or more full-time employees (including those in Texas) to provide their employees with health insurance coverage. While Texas doesn’t have any state-specific requirements beyond the federal mandate, a PEO can still help businesses comply with the ACA—or even elevate their benefits offerings to become more attractive to potential employees.

Worry-free compliance with Texas laws

Maintaining compliance with various employment laws can be challenging. PEOs help you adhere to federal mandates, like the ACA, along with state- and local-level Texas laws. 

While Texas follows the Fair Labor Standards Act when it comes to overtime rules, which requires employers to pay eligible employees at 1.5 times their regular pay rate when they work more than 40 hours in a workweek, overtime regulations vary from state to state. It’s a lot to keep track of if you employ remote workers in different locations. A PEO like Rippling tracks employees’ hours, applies the correct pay rate based on their time and location, and flags violations to make sure you always stay compliant with local laws.

PEOs can help Texas businesses manage compliance with:

• Payroll regulations, including accurate classification of employees and contractors, tax filings, and ensuring payroll taxes are correctly reported, collected, and deposited on time
• Benefits laws, including the ACA, Consolidated Omnibus Budget Reconciliation Act (COBRA), Flexible Spending Account (FSA), and Health Savings Account (HSA)
• Labor laws, including workers’ compensation insurance, Equal Employment Opportunity (EEO) laws, and displaying of state-required labor posters

Compliance violations can lead to hefty fines. According to the IRS, 40% of small businesses face payroll-related penalties annually. A PEO can help you avoid slip-ups and manage risk.

Dedicated support team

For small businesses and startups that may lack in-house HR resources, PEOs can provide invaluable support. Providers offer a team of seasoned HR professionals who can advise your business and help you through challenges related to local employment laws, workplace safety, industry-specific regulations, and more.

This level of expert support ensures small businesses can make more informed decisions and remain competitive. It also means companies can focus on core business activities.

What to consider when evaluating a PEO service in Texas

There are a lot of Texas PEO companies to choose from. Here are some key considerations when evaluating providers for the right fit:

• Your business needs: Assess the services offered by the PEO—typical offerings include payroll processing, benefits administration, HR outsourcing, and compliance with Texas-specific employment and labor laws
• Your budget: PEOs generally charge a per-employee fee or a percentage of payroll. Consider how these costs will align with your business’s future growth and whether you can still afford the PEO if your headcount increases.
• Experience and reputation: Investigate the PEO's track record in Texas. Online reviews and testimonials, especially from other Texas businesses, can offer valuable insights into their reliability and service quality.
• Benefits: Look into the quality, range, and affordability of the employee benefits plans you can access via the PEO.
• Benefits renewal rates: Consider how the cost of your employees’ benefits plans might evolve. Look for PEOs that are transparent about their annual renewal rates to avoid unexpected future expenses or the hassle of having to switch PEO providers unexpectedly.
• Integrations: Consider how the PEO will integrate with your existing systems and technology.
• Industry specialization: Does the PEO have expertise in your specific industry? If your business operates in a certain niche, a PEO with specialized expertise can be helpful.
• Legal and compliance expertise: Evaluate the PEO’s experience with Texas-specific legal and compliance issues or any specific legal needs your business might face.
• Exit strategy: Plan for the future. Understand the process and implications of transitioning away from the PEO should you choose to bring HR in-house or change providers.

Why Rippling PEO is the right choice for your Texas business

Rippling PEO leads the way as the first PEO to leverage modern software, simplifying all your busy work, from 90-second onboarding to comprehensive remote IT management. 

Rippling also takes charge of critical compliance tasks, like establishing state and local tax accounts on your behalf and managing your workers’ compensation insurance—all while helping you give your employees access to high-quality benefits at more affordable costs.

With Rippling, you get:

• HR, IT, and Finance in one platform
• Powerful and customizable reporting on any employee data and metrics
• Tools for managing remote teams, including state and local tax registration, paperless onboarding, and app and device management
• Access to superior benefits plans, plus below-average, predictable renewal rates
• Automatic flagging for federal, state, and local compliance infractions, along with recommended plans to fix each one
• Automated risk management processes, including ACA and COBRA administration, anti-harassment training, and sending digital labor law posters to your employees
• Access to hundreds of HR resources, guides, and templates

Plus, should your business’s needs change, transitioning on or off Rippling PEO is simple. Unlike other PEOs that can make the switch a painful process, with Rippling, you can easily switch to our all-in-one workforce management platform without disrupting your business operations, losing your data, or changing your systems and logins.

FAQs about PEOs in Texas

What is a PEO, and how does it work?

A professional employer organization (PEO) is a firm that partners with Texas businesses to manage manual HR functions such as payroll processing, employee benefits administration, and compliance with labor laws. PEOs typically use a co-employment arrangement to assume employment-related HR tasks on your business’s behalf.

How does a PEO arrangement affect control over my employees?

In a PEO relationship, business owners retain full managerial control over their employees. The PEO's role is to handle administrative HR tasks, allowing you to focus on your company’s core activities.

What is a Certified PEO?

A Certified PEO (CPEO) meets standards set by the IRS related to its background, expertise, finances, and reporting. Certification isn't mandatory and doesn't mean the IRS endorses the PEO—just that it passed a series of assessments. In the past, CPEO status could provide certain tax benefits to businesses, but today, the main advantages of PEO certification are largely obsolete.

What size company can benefit from a PEO?

Texas businesses of all sizes, from small startups in Austin to larger firms in Dallas, can benefit from PEO services. But PEOs are especially helpful for small to mid-sized businesses that might not have extensive in-house HR capabilities or resources.

How does a PEO charge for its services?

PEOs generally charge per employee or a percentage of payroll.

What is the implementation process, and how long does it take to go live?

Generally, the PEO will collect important information about your employees, like payroll data, employment records, and benefits information. They may also run onboarding sessions for your employees to familiarize them with the new processes, benefits, and how to use the platform. The timeline can vary, typically ranging from a few weeks to a few months, depending on the complexity and size of your business. 

Are PEOs regulated?

Yes, PEOs are regulated at both federal and state levels, ensuring compliance with various employment and labor laws.

Are PEOs in Texas required to have special certifications or licenses?

PEOs in Texas must apply for a license to operate in the state. A new licensing application can cost anywhere between $300 and $700. You can learn more on the Texas Department of Licensing and Regulation’s website. 

What happens if I want to terminate my relationship with a PEO?

Terminating a PEO partnership means transitioning HR processes back in-house or to another provider. The process can vary based on the depth of services provided and your contract terms. Many PEOs make this a painful and disruptive process. With Rippling PEO, moving off the PEO is as simple as switching it off and moving to our all-in-one workforce management platform, leaving all your systems, data, and integrations intact.

In what states is Rippling PEO available?

Rippling PEO is available in all US states, including Texas.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.