What’s a PEO, and Why California Small Businesses Need One
Quick look: The road to success for California small businesses is paved with unique HR needs and strict state regulations. With a PEO partnership, you don’t have to tackle it all on your own. In this blog, learn what a PEO is and how its HR services and expertise help small businesses simplify human resources, strengthen their workforce, and maximize growth and profitability.
With the 4th largest economy in the world, California is full of opportunity. Yet, employers here face specific challenges including high-living costs, complex and ever-changing labor laws, and a highly competitive job market that makes attracting and retaining talent more difficult.
Partnering with a professional employer organization (PEO) helps California small and mid-sized businesses (SMBs) navigate this landscape. Never heard of a PEO before? Don’t worry; you’re not alone. Keep reading to learn what a PEO is and how its human resource expertise and services can simplify HR, reduce compliance risk, and create more business wins in the Golden State.
So, what is a PEO?
HR management is no small task. Between endless paperwork, constant regulatory changes, and the demands of people operations, completing these to-dos can be challenging without a dedicated professional or department.
A PEO fills this gap for small businesses, offering comprehensive HR services for payroll, employee benefits, risk management, compliance, and recruiting, through a co-employment model. This means the PEO takes on key administrative and legal responsibilities, while you, the business owner, retain full control over your company’s vision, strategy, and hiring decisions. For example, a PEO might handle the posting and compliance aspects of a job opening, while you decide the role’s salary and which candidate to hire.
Beyond compliance and administration, PEOs connect small businesses to Fortune 500-level employee benefits. From health insurance and 401(k) plans to supplemental perks like pet insurance and financial wellness resources, a PEO makes it possible to offer the kinds of benefits that help you stand out and keep your team engaged.
How a PEO helps California small businesses
Succeeding in California’s small business landscape is easier with a PEO partnership. Here’s how:
Improved compliance: California is the most regulated state in the U.S., with requirements that go beyond federal standards. From Cal/OSHA standards like Injury and Illness Protection Programs (IIPP) and Heat and Illness Prevention guidelines, to city-specific ordinances like Los Angeles’ Fair Work Week law, small businesses must stay on top of and comply with the multiple policies. Add in statewide rules around pay transparency, wage-and-hour compliance, family leave, and meal and rest breaks, it’s easy to see how compliance becomes overwhelming.
A PEO’s compliance experts help companies track, interpret, and implement these laws, keeping HR policies and practices always up to date and aligned with California’s strict expectations.
Streamlined recruitment and retention: Attracting and retaining top talent is essential for business growth, especially in high-demand hubs like San Francisco, Los Angeles, and San Diego. Offering premium employee benefits is a proven way to stand out, and with a PEO, SMBs can provide Fortune 500-level benefits that boost profitability and reduce turnover. For California employers, this is especially valuable as some PEOs like ExtensisHR offer access to Kaiser Permanente, the state’s largest healthcare system. Combined with complimentary recruiting services, these resources make it easier to attract qualified candidates, refine interview processes, and onboard new hires: all critical advantages in a market where talent is scarce.
Time savings: Managing HR in California requires constant attention, from navigating wage ordinances to filing compliance reports. For small business owners wearing multiple hats, these tasks can take up valuable time and energy. A PEO partner relieves this burden by handling payroll, benefits administration, compliance and more, freeing leaders to focus on revenue growth, customer satisfaction, and scaling their business.
Cost savings: Operating in California already comes with high expenses like rent and employee salaries. A PEO partnership helps SMBs stretch their budgets further by leveraging large group purchasing power for benefits and workers’ comp, allowing SMBs to access better plans at lower costs while reducing HR overhead, which enables companies to reinvest what they save back into their workforce.
Why ExtensisHR differs from big-box PEOs
Not all PEOs serving California are built the same. While many big-box PEOs rely on one-size-fits-all models, we deliver tailored solutions designed for the realities of doing business in California. Here’s what makes our PEO the partner of choice for SMBs across the state.
A boutique service model: We believe the best customer service runs on real-human assistance, not traditional ticketing queues and endless phone trees. With ExtensisHR, each customer is paired with a dedicated Account Manager, HR Business Partner, Payroll Specialist, and support from our risk, compliance, and other experienced specialists. Our Employee Solution Center (ESC) adds another layer of guidance, providing your team with direct, reliable support to get HR questions answered quickly.
California-driven solutions: Larger PEOs often focus on scale over quality, causing them to create one-size-fits-all services. We take a different approach, customizing solutions that reflect California’s business environment, while tailoring strategies to the state’s top industries like professional services, technology, education, entertainment, and wholesale.
National reach, California expertise: With roots across the U.S., we understand the complexities of federal law, state mandates, and city-specific ordinances (like San Francisco’s Paid Parental Leave and Los Angeles’ Fair Work Week rules). Our specialists ensure your HR practices stay complaint no matter where your employees are located.
Flexible solutions and top credentials: Every business is different, which is why ExtensisHR offers multiple service models to meet California employers where they are:
- Full-cycle recruiting at no extra cost to strengthen your talent pool
- Enterprise-level employee benefits, including Kaiser Permanente health plans
- SchoolCloud® for charter, private, parochial, and independent schools, combining HR expertise with education-focused technology
- PEO Premier®, a fully outsourced HR solution with a Premier Account Manager, exclusive employee support line, and executive-level employee benefits like health advocacy and wellness programs
- HRO for businesses that want to outsource specific HR functions rather than their entire operation
All solutions are backed by gold-standard accreditations, including certified professional employer organization (CPEO) status from the IRS, Employer Services Assurance Corporation (ESAC) approval, SOC 1 Type II certification, and Certification Institute approval.
The ROI of partnering with a PEO
The right PEO does more than take on your HR responsibilities; it strengthens your operational procedures and drives workforce efficiency. According to the National Association of Professional Employer Organizations (NAPEO), businesses partnered with a PEO are 50% less likely to go out of business than those without one, experience 2x faster business growth, a 27% ROI in cost savings, and 12% lower employee turnover.
Other benefits include:
- The confidence of having a business compliant with federal, state, and industry standards
- A stronger competitive edge with talent acquisition due to better employee benefits, recruitment strategies, and performance management support
- More bandwidth to focus on other business strategies and workforce growth
- Greater cost efficiency from leveraging bundled HR services instead of outsourcing tasks across various companies
You don’t need to be an HR expert; that’s what ExtensisHR is for
Understanding what a PEO does is a normal learning curve for many small business owners. With over 25 years of experience, we leverage our customizable solutions and white-glove service model to make your HR operations simple and strategic. This approach helps your team offload time-consuming admin tasks, streamline internal workflows, and maintain a compliant and efficient workplace.
Talk to our team today to see how we can simplify HR for your California small business.
