Do I need a PEO to handle multi-state payroll?
- Claire Baker
- Mar 7
- 2 min read
If you don’t work in HR, you might not know the lengths that people will go to avoid dealing with state taxes.
Many companies with fewer than 200 people will literally sign away legal control of their employees and pay multiple times more for payroll services.
Just so they don’t have to think about state tax settings.
We’re not talking about a small amount, either.
To pick on Justworks (because their pricing is public):
Payroll without PEO costs: 💲8️⃣ per employee per month (PEPM)
PEO costs: 💲7️⃣9️⃣ PEPM
That’s 10x more for every single employee,
every single month
just so you don’t have to register for state taxes
and look up overtime and PTO payouts and stuff.
Is it a good investment?
Maybe. If you have a lot of turnover and/or complex payroll.
But the situations where it’s relevant don’t come up very often.
And once you’ve “solved” a state wage & hour regulation, it tends to stay “solved” for every other employee in that state thereafter.
If you’ve got 100 employees, you’re paying an extra $85,200 per year just for someone to register you in a new state a few times and set up your sick time for you.
And be your HR nanny.
$85,200 can pay for a full time employee to handle the same thing. And they’ll probably have extra time to contribute in other ways.
So if you’d like to avoid a PEO and keep your payroll in-house, here are 3 tips to stay on top of it:
1️⃣ Report on it
If your payroll platform doesn’t flag updates to home addresses automatically, schedule a monthly report with 3 columns:
Name
Home address
Work address
Set a reminder to eyeball it every month. It takes like a minute.
2️⃣ Be a pill
Make a big deal in the handbook about how people have to notify HR when they move.
Threaten punishment.
When someone doesn’t tell you, nag them and their manager. Tell them it’s their fault. (Don’t actually punish them.)
Eventually it will enter company lore that HR hates it when you don’t let them know that you’ve moved.
Then you can start being nice again.
3️⃣ Actually read the letters
Yes, I know they’re boring. But try to understand what they say.
Ask ChatGPT to translate it.
I promise, they’re figure-outable. Many times, they require no action at all.
Every so often, you’ll need to take 5 minutes to update a payroll setting. Or just upload it to your payroll company and have them do it.
You might have to make a few phone calls 1-2 times per year.
4️⃣ Learn from your mistakes
If something does break down and you have to spend time fixing it, take a few extra minutes to figure out what happened.
Change your processes so it doesn’t happen again.
It’s still cheaper than a PEO.
👋 I’m Claire. I’ve done hundreds of state tax registrations. If you need help with that, I’d be happy to talk. I can also help with PEO migrations. And if you are a good candidate for a PEO, I'll tell you why I think so.
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