Guide · for founders
Fractional HR vs HR consultant vs PEO
A PEO runs payroll and benefits. An HR consultant delivers a project. Fractional HR owns the people function part-time. Pick by the job, not the label.
Updated . Definitions and facts from our own listings only; no prices, no ranking.
Fractional HR, an HR consultant, and a PEO solve three different jobs. A PEO runs payroll, benefits, and HR paperwork as a service. An HR consultant delivers one project, such as a handbook or a pay study, then leaves. A fractional HR leader owns your people decisions part-time and stays. Name the job first, then pick the arrangement. Named leaders are in the fractional HR directory.
Three jobs that all get called “outsourced HR”
Outsourced HR is a catch-all label. It hides three separate jobs.
Administration. Pay people on time. Enroll them in benefits. Keep the forms filed. A PEO or a payroll and HR software tool does this work.
A defined project. Write the handbook. Build a pay band. Run an investigation. An HR consultant scopes it, delivers it, and hands it back.
Ongoing ownership. Decide how you hire, pay, manage, and part with people, week after week. That is a seat. A fractional HR leader holds it part-time. A full-time head of people holds it when the work fills a week.
Most growing companies need the first job early. They need the third job once managers start asking people questions faster than the founder can answer.
What a PEO does
A PEO, or professional employer organization, takes on payroll, benefits, and much of the HR paperwork.
Under a PEO, your employees are co-employed by the PEO for payroll and benefits. That lets a small company join a larger benefits pool. The PEO files the forms and runs the pay cycle. It does not coach your managers or design your org. Read the contract for what it covers, and ask the PEO directly about co-employment terms.
What an HR consultant does
An HR consultant delivers a defined project with a start and an end.
The scope is written down before the work starts. A handbook, a compensation review, a policy refresh, or a workplace investigation are common examples. When the project ships, the consultant leaves. That works well when you know the exact deliverable. It works poorly when the real problem is that no one owns people decisions.
What a fractional HR leader does
A fractional HR leader owns the people function part-time and stays on.
They set the hiring process, write and enforce policy, build the pay structure, coach managers, and handle employee issues. They work next to your PEO or payroll tool and tell it what to run. They call in a consultant or a lawyer for a narrow project. The What is fractional HR? guide covers the seat in full.
Pick by the job
| You need someone to | Talk to | Do not expect it from |
|---|---|---|
| Run payroll and benefits | A PEO or payroll tool | A fractional HR leader |
| Ship one defined HR project | An HR consultant | A PEO |
| Own people decisions every week | A fractional HR leader | A one-off consultant |
| Give legal advice | An employment lawyer | Any of the three above |
You can use two of these at once. A PEO runs the pay cycle while a fractional leader owns the decisions. The jobs do not overlap.
FAQ
What is the difference between fractional HR and consulting?
An HR consultant delivers one project and leaves. A fractional HR leader stays on part-time and owns the people function as an ongoing seat.
What is the difference between a PEO and fractional HR?
A PEO runs payroll, benefits, and HR paperwork as a service. A fractional HR leader owns people decisions such as hiring process, policy, pay structure, and manager coaching.
Can I use a PEO and fractional HR at the same time?
Yes. The PEO runs administration. The fractional HR leader decides how the company hires, pays, and manages people, and tells the PEO what to run.
What is outsourced HR called?
Outsourced HR covers several models: a PEO, HR outsourcing services, HR consultants, and fractional HR leaders. Each one owns a different job. Name the job before you pick the model.
Does Listed Fractional list PEOs or HR consultants?
No. The fractional HR directory lists named people who hold the HR seat part-time. Read who they serve, shortlist a few, and open their sites.
Name the job, then the model
Write down which of the three jobs is unowned today. If it is the weekly people decisions, open the fractional HR directory. Read who each leader serves, keep a few, and compare them on Your shortlist.