What is a PEO in Arizona? [2025]
Running a business in Arizona can be challenging. Juggling teams, meeting deadlines, and keeping clients satisfied leaves little time for extra paperwork. That's where a Professional Employer Organization (PEO) steps in. A PEO collaborates with your business to take on tasks such as payroll, HR, benefits administration, workers' compensation, and ensuring compliance with relevant laws.
Author: FrankCrum | Last Updated: October 27, 2025
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Understanding PEO Services in Arizona
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Key Benefits of Partnering with a PEO for Arizona Employers
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What to Look for in an Arizona PEO
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How Can PEOs Help with Payroll & HR Services in Arizona?
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What Types of Benefits do PEOs Offer in Arizona?
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Workers' Compensation Solutions for Arizona Employers
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How Can PEOs Help Navigate Legal and Compliance Issues in Arizona
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Cost-Effectiveness of PEO Services
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Choosing the Right PEO for Your Business Size & Industry
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Manage Your California Business with FrankCrum
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Frequently Asked Questions
As of 2025, over 700,000 small businesses call Arizona home, making up 99.5% of all companies in the state. Most don't have dedicated HR teams to track every regulatory change coming out of Phoenix. Many are struggling to negotiate competitive health insurance rates on their own, only to find it impossible. A PEO changes that equation entirely.
Instead of building an entire HR department from the ground up, you partner with experts who already have the systems, knowledge, and purchasing power to manage everything — from payroll services to offering Fortune 500-level benefits packages.
This guide breaks down how Arizona businesses can use PEOs to cut costs, maintain compliance, and stay competitive for talent in one of the country's fastest-growing markets.
PEOs streamline HR and payroll operations for Arizona businesses, freeing leaders to focus on growth instead of administration.
Partnering with a PEO gives Arizona businesses access to stronger benefits packages that support hiring and retention.
Arizona PEOs, like FrankCrum, help manage workers' compensation, safety programs, & claims so businesses stay safe.
Understanding PEO Services in Arizona
When you partner with a PEO for your Arizona business, you're essentially dividing up the employer workload. You keep doing what you do best — running your company, making strategic decisions, and leading your team. The PEO takes on the behind-the-scenes work that keeps HR functioning — processing paychecks, managing employee benefits, handling workers' comp claims, and staying on top of state regulations.
Think of it this way: you're still the boss, but now you have a dedicated support system providing human resources expertise and help with administrative tasks, saving you time. The PEO becomes the official employer for tax filings and administers employee benefits, which means less red tape for you to deal with. Instead of drowning in compliance checklists and benefit enrollment forms, you can actually spend time growing revenue and taking care of customers.
Workers' compensation can also be a significant advantage of the PEO partnership, particularly for companies in the construction or trades industries. When you work with a PEO, your employees are covered under the PEO's workers' comp policy from day one. The PEO handles claims management, reporting, and coordination with carriers.
Arizona PEOs bring a full suite of services designed to keep your business running smoothly while you stay compliant with state requirements. These services take the complexity out of HR management so you can focus on what really moves the needle for your business.
Essential Services Provided by Arizona PEOs
- Human Resources Support: Getting new hires set up through onboarding systems, offering guidance on employee performance reviews, and keeping your employee handbook current with Arizona employment laws.
- Payroll Services: Running your entire payroll operation, from calculating wages and withholding taxes to managing timekeeping systems and processing wage garnishments, ensuring everyone gets paid accurately and on time.
- Benefits Management: Handling employee benefits like health insurance, dental and vision coverage, disability plans, retirement accounts, and employee assistance programs to make enrollment straightforward for your team.
- Regulatory Compliance: Keeping your business aligned with Arizona's wage laws, minimum wage updates, paid sick leave requirements, final paycheck timing rules, federal workplace safety standards, and unemployment tax obligations so you avoid penalties and legal headaches.
- Risk Mitigation: Providing employment practices liability insurance (EPLI) to shield your business from employment-related lawsuits and creating workplace safety programs tailored to your industry's specific risks.
- Workers' Compensation Coverage: PEOs often offer workers' comp insurance with flexible payment structures, like pay-as-you-go, to ease cash flow pressure. They also handle the entire claims process, from initial reporting through resolution, and coordinate with insurance carriers on your behalf.
When you tap into a PEO's expertise, you streamline everything from payroll and benefits to compliance and risk management. This frees you up to focus on what drives your business forward, keeps you legally protected, and doesn't break the bank.
Key Benefits of Partnering with a PEO for Arizona Employers
Running a successful Arizona business means juggling a lot of responsibilities. You're great at what you do, whether that's construction, professional services, or any other industry. But HR administration? That's a different skill set entirely, and it takes serious time away from your core business.
A PEO helps with that. Research from the National Association of Professional Employer Organizations (NAPEO) shows companies partnering with a PEO achieve a 27.2% return on investment. For every dollar you spend, you get back $1.27 in value. But the real benefit isn't just the money saved. It's getting your time back to focus on what you do best.
Advantages of Partnering with a PEO:
Save Money: The numbers are straightforward. Businesses using a PEO save approximately $1,775 per employee annually, according to NAPEO data. That's not accounting magic. It comes from better insurance rates, fewer compliance penalties, and reduced administrative overhead.
Access to Better Benefits: Your competitors with 500 employees can offer better health insurance than you can. That's just economics until you work with a PEO. Suddenly, you're negotiating with the same carriers and accessing the same plan options as the big players.
Keep Good Workers Longer: Training a new employee costs time and money. NAPEO research shows PEO clients experience 12% lower turnover. That means less time recruiting, less money on job postings, and your experienced team stays intact.
Know the Rules: Employment law isn't your specialty. It shouldn't have to be. PEOs track regulatory changes and update policies so you don't get blindsided by new requirements.
Manage Risk: When workplace injuries happen, you need proper coverage and efficient claims handling. PEOs provide quality workers' comp insurance with professional claims management.
Grow at Your Own Pace: Your business doesn't grow in a straight line. PEOs flex with you, scaling services up when you're expanding and adjusting when you need to be more conservative. You're not locked into fixed overhead that doesn't match your current reality.
Focus on Your Business: Every hour you spend on HR paperwork is an hour you're not spending on work that grows your company. PEOs handle the administrative burden so you can focus on what matters.
| Cost Category | Managing HR Independently | Partnering with a PEO (Industry Averages) | Potential Savings (%) |
|---|---|---|---|
| Payroll Processing | $1,200 per employee/year | $850 per employee/year | 29% |
| Employee Benefits | $5,000 per employee/year | $3,600 per employee/year | 28% |
| Workers’ Compensation | $1,500 per employee/year | $1,050 per employee/year | 30% |
| HR Compliance & Risk Mgmt |
$900 per employee/year | $520 per employee/year | 42% |
| Total Annual Cost | $8,600 per employee/year | $6,020 per employee/year | 30% |
Estimated cost savings based on industry averages reported by PEO providers and research
commissioned by the National Association of Professional Employer Organizations (NAPEO).
What to Look for in an Arizona PEO
Choosing a PEO for your Arizona business takes a bit of research. The goal is to find a partner that matches your company's needs while ensuring compliance with state rules.
Key Considerations:State Licensing and Coverage
Verify the PEO is registered with the Arizona Secretary of State. Since June 2023, Arizona has required PEOs to register with the state. The PEO should also demonstrate compliance with the Industrial Commission of Arizona (ICA) for workers' compensation and the Department of Economic Security for unemployment insurance.
Arizona Payroll Expertise
Arizona requires employers to pay workers at least twice monthly, with no more than 16 days between paychecks. The state also has a flat 2.5% income tax and unemployment insurance rates ranging from 0.05% to 14.03%. Choose a PEO that understands these requirements and handles tax filings accurately and on time.
Workers' Compensation Insurance
All Arizona employers must carry workers' comp insurance approved by the Industrial Commission of Arizona. Confirm your PEO provides valid coverage through licensed carriers and handles claims management efficiently.
Range of HR Services
Evaluate what HR services they provide. You are likely to need payroll processing, compliance support, risk management, benefits administration, and onboarding assistance. Make sure they cover everything your business needs to operate smoothly.
Competitive Employee Benefits
Don't focus solely on price. Find a PEO that offers enterprise-level benefits through top-rated carriers. Arizona's growing economy means that competition for talent is fierce, and offering strong benefits helps you attract and retain quality workers.
Compliance with Arizona and Federal Laws
A reliable Arizona PEO should stay current with state employment laws, including the Fair Wages and Healthy Families Act for paid sick leave, annual minimum wage adjustments announced each September, and right-to-work regulations. Ask how they monitor legal changes and keep your HR practices compliant.
User-Friendly Technology
Choose a PEO with a modern HR technology platform, offering online employee onboarding, direct deposit, benefits enrollment, and real-time reporting to simplify management for you and your employees.
By carefully evaluating these factors, Arizona businesses can partner with a PEO that delivers comprehensive, compliant, and cost-effective HR solutions tailored to their unique needs and growth goals.
FrankCrum stands out with white-glove service and a 91% customer retention rate, making us a trusted partner for businesses across Arizona. Nine out of ten customers are satisfied with our service and continue working with us year after year.
How Can PEOs Help with Payroll & HR Services in Arizona?
Partnering with a PEO in Arizona gives your business access to comprehensive payroll and HR services that take the administrative load off your plate. Here's how PEOs support your business across key areas:
- Comprehensive Payroll Processing: PEOs manage your entire payroll operation, from calculating employee wages to processing direct deposits. They ensure employees are paid accurately and on time, following Arizona’s requirement of at least two pay periods per month.
- Payroll Tax Compliance: Handling payroll taxes can be complex. PEOs take responsibility for filing and remitting all required federal and Arizona state payroll taxes, including unemployment insurance contributions, helping you avoid costly penalties.
- Time and Attendance Tracking: Many PEOs provide integrated technology platforms to track employee hours, manage overtime, and maintain accurate attendance records, simplifying payroll calculations and compliance with wage laws.
- Bringing on New Workers: PEOs streamline employee onboarding by handling new hire paperwork, E-Verify processing (mandatory for all Arizona employers), verifying eligibility, and updating employee records in compliance with Arizona employment regulations.
- Benefits Help: PEOs provide access to competitive health insurance, retirement plans, and supplemental benefits while assisting with enrollment and ongoing benefits administration to support employee satisfaction and retention.
- HR Administration and Support: From employee relations and performance management to policy development and handbook maintenance, PEOs offer expert HR guidance tailored to Arizona businesses, ensuring compliance with local employment laws.
- Handling Wage Garnishments and Deductions: PEOs manage wage garnishments, deductions, and other payroll-related withholdings accurately and promptly, relieving you of the administrative complexities involved.
By leveraging these payroll and HR services through a trusted Arizona PEO, your business gains local expertise, streamlined processes, and comprehensive support that frees you to focus on growing your company.
What Types of Benefits do PEOs Offer in Arizona?
Working with an Arizona PEO gives your business access to Fortune 500-level employee benefits without Fortune 500-level costs. PEOs leverage their collective buying power across hundreds of companies to negotiate better rates and more comprehensive coverage. According to NAPEO research, companies using PEOs see 12% lower employee turnover, which is significant in Arizona's competitive job market, where replacing workers costs time and money.
Common benefits offered by Arizona PEOs include:
Health Insurance
Group health plans that include medical, dental, and vision coverage. Small businesses gain access to the same quality plans larger companies offer, at prices that actually make sense.
Retirement Plans
401(k) options that let your team build wealth for the future. It's a benefit that tells employees you're thinking long-term with them.
Disability and Life Insurance
Coverage that protects your workers if they get sick or injured and can't work. Life insurance gives their families a financial safety net if something happens.
Employee Assistance Programs (EAPs)
Confidential counseling and mental health support when your workers need it. These services help them deal with stress, family issues, and personal challenges.
Paid Time Off (PTO) and Leave Management
Tools to track vacation days, sick leave (which Arizona law requires), family leave, and other time away from work without the administrative headache.
Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs)
Pre-tax accounts that reduce the sting of healthcare and childcare expenses throughout the year.
When you provide these benefits through a PEO, your Arizona business can offer competitive packages that attract quality employees, reduce HR administrative work, and improve retention. All while staying compliant with state requirements.
FrankCrum's benefits platform, bswift, includes AskEmma, an AI assistant that walks your employees through benefits enrollment step by step. The platform handles common benefits questions, breaks down plan details, and helps employees make informed decisions. This means less time answering benefits questions and more confident employees who understand their coverage.
Workers' Compensation Solutions for Arizona Employers
Arizona saw its 10th consecutive year of workers' comp rate decreases in 2024, with rates dropping 10.3% according to the National Council on Compensation Insurance (NCCI).
Despite these improvements, managing coverage and staying compliant with Industrial Commission of Arizona (ICA) requirements remains challenging for small businesses.
Additionally, in Arizona, injured workers generally have the right to choose their own treating physician after an initial employer-required visit, except when working for self-insured employers with contracted medical providers registered with the ICA. The employee's choice in medical care makes proper claims management even more critical for employers.
Key benefits of workers' compensation and risk management services through a PEO include:
- Valid Workers' Comp Insurance: Coverage through carriers that are licensed and approved by the Industrial Commission of Arizona. This keeps you compliant with state law and protects your business from penalties.
- Streamlined Claims Management: The PEO handles claims reporting, documentation, and carrier communications from start to finish. This simplifies the process and helps reduce claim costs.
- Pay-As-You-Go Premiums: Many PEOs offer pay-as-you-go workers' comp plans where you pay premiums based on actual payroll each pay period. This improves cash flow and eliminates large upfront deposits that can strain your budget.
- Workplace Safety Programs: Customized safety training, workplace assessments, and risk evaluations help prevent injuries before they happen. Fewer injuries mean lower insurance costs and a safer work environment for your team.
- Risk Reduction and Compliance: Regular safety audits, policy updates, and compliance checks help you meet federal OSHA standards and Arizona-specific requirements. This reduces your exposure to fines and legal issues.
- Expert Guidance on Arizona Regulations: The PEO's knowledge of Arizona workers' comp laws, ICA reporting requirements, and recent case law (including rulings on COVID-19 workplace transmission claims) helps you navigate complex regulations with confidence.
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When you partner with a PEO for workers' comp and risk management, you control costs more effectively, protect your employees, and maintain compliance with state requirements.
At FrankCrum, our affiliated carrier, Frank Winston Crum Insurance, provides competitive rates on workers' comp insurance for Arizona businesses of all sizes. We deliver reliable coverage and personalized support that fits your needs. With pay-as-you-go and no down payment required, FrankCrum makes workers' comp coverage accessible and affordable for Arizona employers.
How Can PEOs Help Navigate Legal and Compliance Issues in Arizona?
Arizona's employment laws present a unique set of challenges for businesses, covering wage and hour rules, anti-discrimination measures, family leave, and worker classification. Partnering with a PEO ensures you receive expert guidance to comply with both federal regulations and Arizona-specific labor laws.
For example, Arizona's Fair Wages and Healthy Families Act mandates paid sick leave accrual and sets a minimum wage that adjusts annually based on the consumer price index. As of 2025, the minimum wage is $14.70 per hour statewide, more than double the federal minimum wage of $7.25 per hour. Some localities have even higher rates, including Flagstaff at $17.85 per hour. PEOs help businesses stay current with these changes by updating policies and training managers to prevent violations.
By working together, Arizona employers reduce the risk of costly fines and legal issues related to HR compliance, allowing them to focus on growing their business with confidence and peace of mind.
Cost-Effectiveness of PEO Services
PEOs save you money by using their buying power to secure lower rates on health insurance, workers' compensation, and employee benefits — rates small businesses can't access alone. They also reduce your unemployment tax costs and help you avoid expensive compliance penalties that come from regulatory missteps.
Beyond insurance savings, PEOs make retirement plans more affordable. You gain access to professionally managed 401(k) plans, typically with lower fees than small business employer plans.
The real value shows up in how your business operates. When the PEO handles payroll, benefits, and compliance, you're not constantly pulled into HR issues. Your team stays focused on work that drives revenue. That efficiency boost improves your bottom line and sets you up for sustainable growth.
Choosing the Right PEO for Your Business Size & Industry
Picking the right PEO for your Arizona business requires a thoughtful
approach tailored to your unique needs and growth objectives.
Follow this step-by-step guide to make an informed decision:
Define Your Business Needs
Assess your current HR challenges, payroll requirements, compliance concerns, and benefits goals. Consider your company’s size, industry, and future growth plans to determine which services you’ll need from a PEO.
Research PEOs with Arizona Expertise
Seek out PEO providers with a proven track record in Arizona who understand the state's complex labor laws, workers' compensation requirements, and regulatory landscape.
Evaluate Service Offerings
Compare the range of services offered, such as payroll processing, benefits administration, risk management, and compliance support. Ensure the PEO can tailor solutions to fit your business’s specific needs.
Check Customer Service and Support Quality
Look into the responsiveness and availability of the PEO’s support team. Dedicated account managers and prompt assistance are crucial for a seamless partnership.
Review Technology and Reporting Tools
Consider the HR and payroll platforms provided. User-friendly technology with real-time data access can significantly reduce administrative workload.
Verify Licensing and Insurance Credentials
Confirm that the PEO is properly registered in Arizona and partners with valid workers' compensation carriers recognized by the state’s authorities.
Assess Compliance and Risk Management Capabilities
Ensure the PEO is knowledgeable about Arizona laws and has effective risk mitigation strategies and workplace safety programs to protect your business.
Request Case Studies and References
Ask for examples of how the PEO has helped similar businesses achieve cost savings, improve compliance, and enhance employee benefits.
Compare Pricing Structures and Contracts
Understand the PEO’s fee models and contract terms. Look for transparent pricing and flexibility that can accommodate your business’s growth.
Plan for a Smooth Transition
Discuss the onboarding process. A well-organized start minimizes disruption and maximizes benefits.
By carefully evaluating your options, you can select a PEO that effectively manages your HR and payroll needs, supports your growth, and ensures compliance with Arizona laws. The right partnership will streamline your operations, reduce administrative burdens, and position your business for long-term success.
Manage Your Arizona Business with FrankCrum
FrankCrum is a trusted Professional Employer Organization with 40+ years of experience, serving over 4,700 businesses nationwide.
FrankCrum Offers:
- Gold-Standard Customer Service: 9/10 customer satisfaction rating and a 91% retention rate.
- Personalized Support: We customize our solutions to fit your business, combining white-glove service with state-of-the-art technology.
- Real People: No phone queues, just real people ready to help.
- AM Best-rated Workers' Compensation Carrier: We own our own carrier, providing discounts to employers of all sizes.
In conclusion, partnering with a PEO like FrankCrum in Arizona offers a variety of benefits from enhanced HR functions and payroll management to comprehensive employee benefits and cost savings.
Why Choose FrankCrum for Texas HR Outsourcing?
FrankCrum offers a comprehensive PEO solution that includes payroll, HR, workers’ compensation, and employee benefits. But FrankCrum isn’t just any PEO—our commitment to service and expertise makes us a trusted choice among businesses searching for the best PEO providers. Here’s what sets us apart:
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Top-Tier Customer Service:
9/10 customer satisfaction rating and a 91% retention rate. -
Personalized Support:
We tailor our HR solutions to fit your business, combining white-glove service and innovative technology. -
AM Best-rated Workers’ Comp Carrier:
We own our own carrier, providing discounts to businesses of all sizes. -
Real People, Real Answers:
No frustrating phone queues—just real humans ready to help. -
40+ Years of Experience:
We’ve been helping businesses grow since 1981.
FrankCrum is dedicated to delivering the best PEO services by providing products and solutions that foster stability and security. With an operational philosophy of “do the right things for the right reasons” we are singularly focused on our customers’ success. That is the way we do business—one person at a time, one client at a time.
Frequently Asked Questions
Does Arizona require PEOs to have special licenses or registrations?
As of June 30, 2023, PEOs must register with the Arizona Secretary of State. They must also comply with the Industrial Commission of Arizona for workers' comp, the Department of Economic Security for unemployment insurance, and the Department of Revenue for taxes. Verify your PEO is properly registered before partnering.
What are Arizona's paid sick leave requirements, and how do PEOs help manage them?
Under the Fair Wages and Healthy Families Act, employees accrue one hour of paid sick leave for every 30 hours worked. Smaller employers with fewer than 15 employees are required to allow up to 24 hours of sick leave accrual annually, while larger employers must allow up to 40 hours. PEOs automatically track this accrual and maintain the required records for a period of four years to ensure compliance.
Will my employees know we're using a PEO?
Yes, your employees will be aware of the PEO relationship. The PEO's name will appear on their pay stubs and W-2 forms since the PEO serves as the employer of record for tax purposes. Most employees view this positively because it often means access to better benefits and more professional HR support than a small business could provide on its own.
How do PEOs handle Arizona's twice-monthly payroll requirement?
Arizona requires two fixed paydays per month with no more than 16 days between them. PEOs set up your payroll schedule to meet this requirement and process payments on time every period, protecting you from wage and hour violations.
What happens to my state unemployment tax rate when I join a PEO?
When you partner with a PEO, your employees are reported under the PEO's SUTA account instead of your own. The PEO handles all unemployment tax filings and claims on your behalf. While you won’t build your own rate history, many businesses find the administrative savings and simplified process to be well worth it.
How does workers' compensation work with a PEO in Arizona?
Your employees are covered under the PEO’s workers' compensation policy through ICA-approved carriers. The PEO manages all claims, reporting, and communication with insurance providers. Many PEOs offer pay-as-you-go options, allowing you to pay based on actual payroll without large upfront deposits.