PEO in Illinois [2024]

Small business owners have a lot of responsibilities. Trying to handle them all alone can hurt your business growth, but luckily, there’s another solution: a professional employer organization (PEO). A PEO can help small to mid-sized businesses save time and money by streamlining and automating manual HR tasks like payroll, benefits administration, compliance, and workers’ comp. Plus, PEOs can help businesses give their employees access to better, more affordable benefits.

There are many reasons why an Illinois-based business could benefit from using a PEO service. Labor laws are constantly changing, including the minimum wage, which can vary depending on where you're hiring. You also need to ensure you stay compliant with employment laws—like Illinois’s new pay transparency law that goes into effect in 2025. It can be tricky to balance staying on top of your business needs while avoiding penalties for non-compliance. A PEO can help.

Making an informed decision when choosing a PEO is crucial. With Rippling PEO, you can experience seamless hiring and onboarding in Illinois and across the US. Rippling saves you time and effort, from its automatic state tax registration to remote laptop management. So, what should you keep in mind for Illinois PEO services? 

Benefits of using a PEO in Illinois

Partnering with an Illinois PEO company can mean more time and money to expand your business—and redirecting your human resources team’s talent to other priorities. With a PEO’s support, you can reduce administrative work, access better rates for employee benefits, and stay compliant locally and federally. 

Offload administrative HR work

When you partner with a PEO, you share employment responsibilities with them—they take on your company's administrative HR tasks. They also co-employ your workforce, which allows them to handle those tasks more efficiently. 

Under a co-employment agreement, your company controls hiring, firing, and employee pay. You also control business operations like research and development, marketing, sales, and customer support. 

Meanwhile, your employees are hired under the PEO's federal tax identification number (EIN). This arrangement allows the PEO to manage all employment-related HR work, such as payroll, benefits administration, HR compliance, etc. PEOs use technology, expertise, and best practices to streamline HR management and reduce costs—freeing up your team's time and resources to focus on business-critical goals.

Better employee benefits, at a lower price

The Affordable Care Act (ACA) requires businesses with 50 or more full-time employees to provide health insurance benefits. And while offering other benefits in Illinois is usually optional, it can be challenging to attract talented employees without them. Fortunately, partnering with a PEO can help. According to the National Association of Professional Employer Organizations (NAPEO), more than 500 PEOs across the US co-employ 4.5 million workers at 200,000 businesses. 

Using these economies of scale, PEOs are able to negotiate with insurance providers for better prices on high-quality benefits. That means they can offer their client companies access to comprehensive benefits plans at better rates, often including health insurance, life and disability insurance, worksite benefits, mental health support, retirement plans, commuter benefits, dependent care, and more—helping employers stay competitive in the job market. Keep in mind: PEOs provide access to benefits through third-party providers—they don’t sell the benefits themselves. 

Worry-free compliance with Illinois laws

Illinois labor and employment laws, both at the federal and state levels, are intricate and ever-evolving. Complying with these laws can be challenging for businesses.

However, a PEO can help you navigate these complexities and stay compliant. For instance, Illinois has a minimum wage law that guarantees a minimum of $13.00 per hour for all non-tipped workers ages 18 or above, effective in 2023. There are higher minimum wage requirements in Cook County and the city of Chicago.

Keeping up with minimum wage requirements can be overwhelming, especially if you have remote employees across different states. However, a PEO like Rippling helps you avoid minimum wage violations by flagging them based on employees’ locations.

The IRS estimates that 40% of small businesses annually incur payroll penalties. Therefore, using a PEO service could be beneficial as it provides legal and compliance support for more than just minimum wage regulations. A PEO can help you maintain compliance with the following:

• Payroll regulations, including proper classification of employees and contractors; issuing and filing tax forms; reporting, collecting, and depositing payroll taxes; and complying with wage laws such as overtime requirements
• Benefits laws, including the ACA, COBRA, FSA, HSA, and other related regulations
• Labor laws, including workers' compensation insurance, Equal Employment Opportunity (EEO) laws, and laws that require businesses to display labor posters 

Following these laws is essential to avoid incurring expensive fines and penalties. 

Dedicated support team

Managing HR operations is no walk in the park if you're running a small business or startup with limited resources. However, partnering with a PEO can be incredibly helpful. PEOs are experts in HR and can provide valuable guidance to help you reduce costs, manage compliance risks, and avoid payroll penalties. They can also assist you in reducing administrative burden, complying with local labor laws, and providing training for your employees and managers. By partnering with a PEO, you can focus on growing your business while ensuring your HR operations are handled efficiently and effectively.

What to consider when evaluating a PEO service in Illinois

If you're a small to medium-sized business in Illinois, you may be ready to evaluate some of the Prairie State’s PEOs—and there are many options available. To choose the best PEO service for your business, consider the following criteria:

• Your business needs. Based on your business, what do you need from your PEO? Not all offerings may apply to your needs. Some standard PEO offerings include:
• Payroll processing
• Benefits administration
• Tax filing and compliance
• Labor law compliance
• Risk management
• Employee training and development
• Time and attendance tracking
• Regulatory compliance
• HR outsourcing

• Your budget. Different PEOs use different pricing structures—they may charge a flat fee per employee or a percentage of each payroll run. Look out for flat fees that come with hidden costs. Think about the future when assessing PEO costs: Ask what the pricing could look like as you scale.
• Experience and reputation. When picking a PEO service, ask colleagues in your industry for referrals. You'll want to make sure that they're familiar with local laws. Check G2, Capterra, and Software Advice for past and current customer reviews. Once you're in conversation with them, ask for case studies or customer testimonials to understand their value.
• Benefits. Take a look at a PEO’s benefit plans to evaluate how they handle group health insurance, retirement plans, life insurance, and other employee benefits—and whether they align with your company's budget and needs.
• Benefits renewal rates. When choosing a PEO, it’s essential to know how the cost of its benefits plans could change after the first year. A transparent PEO should publicize how its renewal rates fluctuate annually to help you avoid unexpected business costs. 

• Integrations. Most PEO services use outdated technology. Confirm that the PEO will seamlessly integrate with your existing systems, processes, and software tools to avoid extra administrative work. 
• Does the PEO specialize in specific industries? If your business operates in a specialized industry, partnering with a PEO service with experience in your field can be beneficial.
• Does the PEO specialize in specific legal or compliance issues? If your business needs to comply with federal or Illinois state regulations or address legal concerns, seeking out a PEO with specialized experience can be worthwhile.
• Your exit strategy. At some point, you may end your partnership with a PEO for various reasons, such as wanting to bring your HR processes in-house. However, some PEOs make it challenging to leave as you would need to remove all their systems and start from scratch. Consider asking what the process would look like if you ever need to terminate their service.

Why Rippling PEO is the right choice for your Illinois business

Rippling PEO is the first platform that syncs HR, IT, and Finance, simplifying your business operations and payroll services. 

We manage your critical compliance tasks, such as setting up state and local tax accounts and automatically detecting minimum wage and overtime violations. Plus, we offer your team access to high-quality, Fortune 500-level benefits at an affordable price.

Rippling runs on fast and easy-to-use modern software, unlike other PEO providers that use software built in the 1980s.

With Rippling, you get:

• All-in-one HR, IT, and Finance platform
• Essential tools to help manage remote teams: state and local tax registration, paperless onboarding, and app and device management
• Access to superior benefits plans, plus transparent renewal rates
• Automatic flagging for federal, state, and local compliance violations and options to resolve each one
• Automated risk management processes, including ACA and COBRA administration, digital labor law poster distribution, and employee anti-harassment training
• Comprehensive reporting on any employee data you need, customized to your preferences
• Access to hundreds of HR resources, guides, and templates

If you ever decide to bring your HR operations in-house, you can rely on Rippling to make the transition a breeze. Unlike other PEOs that make the switching process a painful experience, we make it easy and seamless for you to move to our all-in-one workforce management platform. Your HR, payroll, and employee data remain safe and secure in your account, and your integrations with other systems remain fully operational. Your employees can continue using Rippling without interruptions, thanks to the familiar interface and logins.

FAQs about PEOs in Illinois

What is a PEO, and how does it work?

A PEO, or professional employer organization, is an organization that works together with your company to provide a range of comprehensive HR solutions. One of the main advantages of partnering with a PEO is that it enables small to mid-sized businesses to offer their employees access to affordable, high-quality benefits, like health insurance and workers’ compensation insurance. PEOs can help save time and money with HR outsourcing and automating administrative HR functions such as payroll and compliance. PEOs typically adopt a co-employment model, which means that for tax purposes, the PEO becomes the legal employer of the company's workforce.

How does a PEO arrangement affect control over my employees?

Business owners retain control over day-to-day operations, direct supervision, hiring, and employee management, while the PEO handles HR needs: compliance management, payroll services, providing access to benefits like healthcare, and other employment-related HR work. 

What is a Certified PEO?

A Certified PEO (CPEO) is a type of PEO that fulfills certain IRS requirements regarding its qualifications, financial stability, reporting, and background. The certification program for PEOs was initiated in 2014 via the Tax Increase Prevention Act. It’s important to note that certification is voluntary and doesn’t indicate an endorsement by the IRS. The CPEO status previously provided tax benefits, but they are now mostly obsolete.

What size company can benefit from a PEO?

PEOs are useful for businesses of any size, but small to medium-sized businesses can benefit the most. By outsourcing manual HR tasks, PEOs can help businesses save money on administrative costs while freeing up their HR teams to focus on more important work. PEOs can also provide access to high-quality benefits plans that these businesses may not have been able to provide on their own.

How does a PEO charge for its services?

PEOs typically use one of two pricing structures:

• Fixed monthly fee per employee
• Percentage of payroll

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

The PEO will gather all the necessary information about your employees, establish their systems, and integrate their technology with yours, if needed. They can also provide training to onboard your employees, explain new processes and benefits, and offer ongoing support.

Some PEOs customize their services based on company size, industry, or location.

The duration of the process varies from a few weeks to a couple of months, depending on the size and complexity of the business's requirements.

Are PEOs regulated?

Yes, PEOs are subject to federal and state regulations. Many choose to be accredited by industry organizations for credibility.

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

PEOs in Illinois must register for an employee leasing company license. As per 215 Ill. Comp. Stat. 113/20(a), an employee leasing company must register with the Department of Insurance before acquiring workers' compensation insurance or self-insurance in the state.

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

Ending a relationship with a PEO can be a daunting task. For most PEOs, removing their systems from your business is painful and disruptive, and then you have to find new systems for payroll processing, benefits administration, and any other processes the PEO handled.

With Rippling PEO, you can simply switch to our all-in-one workforce management platform while keeping your existing data, systems, and integrations intact.

In what states is Rippling PEO available?

Rippling PEO is available in all US states.

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.