TriNet is a PEO, professional employer organization, that can help startups with payroll, state personnel tax compliance and benefits like 401(k)s and health plans. When you’re reviewing payroll providers, PEOs like TriNet occupy a slightly different role in the market than Gusto, Rippling and the other, popular payroll systems.
We’ve helped hundreds of high-growth, VC-backed startups put together their payroll systems, and are in a perfect position to review Trinet and compare it to competitive solutions.
As a PEO, TriNet has a different type of status than other payroll companies. Because it is a PEO, TriNet can take on a lot of the liability that employers typically take. And TriNet basically works as your payroll, your HR solution, and they do some tax compliance and they also handle all your benefits and they also handle R&D tax credits for you. They are not just a simple payroll company.
So TriNet is a pretty effective, all in one solution that can help startup founders - especially founders who expect to hire a ton (and in many different states, which we’ll address in a bit).
How PEOs work from a legal point of view is that the startup’s employees actually have a direct employment relationship with TriNet, and kind of like a secondary employment relationship with the startup. This special employment relationship lets TriNet pool all of its different clients’ employees into larger benefit plans. Because they can do that, they can actually negotiate better terms with all the medical insurance companies. And so you can imagine, a small startup with 20 employees is not going to get the same type of rates as someone like TriNet who has hundreds of thousands of employees under their umbrella. So it’s really attractive in that aspect.
The other attractive aspect is that TriNet will do all your payroll and they’re also going to handle your HR. And so when you have an issue, TriNet is very, very responsive on the HR front because guess what? They’re sharing some of the liability with you since they are the official employer of that employee. So they want to make sure that things get done correctly, they get done quickly and both the employee and the employer are protected. So that’s a really nice feature.
Now, one of the other things that TriNet will handle for you is your state tax compliance. And as a CPA with a big tax team, this is something Kruze takes very seriously! TriNet doesn’t handle every state, they don’t handle everything, but in a lot of states, they will help register you in that state and help register you for payroll taxes. Now, this is really nice, especially in the COVID era that we’re in right now because we’re seeing a lot of employees moving throughout the country and it’s happening at Kruze, it’s happening at our clients and so having a PEO solution who will actually handle that for you and again, share some of the liabilities so they’re motivated to do it correctly is actually really nice. It’s a nice value-add, simplifies the founder’s life.
Now, the alternative is our clients usually just have us do it and we’re happy to do it. It’s very inexpensive but hey, that’s not our favorite thing to do either. So if TriNet’s going to do it, that’s great.
So all this tax compliance is really helpful if your startup is going to be hiring in many different states. That’s a big reason why we’ve seen PEOs take off in the past few years.
Now, there is one little negative with TriNet in that they do charge a pretty healthy subscription fee. So when you compare them against other payroll and benefits providers, those other providers typically are not as full service as TriNet. So they’re significantly cheaper.
TriNet is a premium provider. Founders who work with them are paying for the premium bundle. It saves founders time and can help your employees have access to some solid health plans, but they’re going to charge for that. So just know that TriNet’s going to be a little bit more expensive than a traditional payroll and HR firm. There’s one other small downside and it’s pretty much been handled now but TriNet, because they pool all of their clients, they have some pretty complicated IRS tax forms they have to file with the government and in terms of R&D tax credits, the R&D tax credits kind of get pooled as well.
Yes - companies using Trinet as their payroll provider can get Research and Development Tax Credits - credits that can reduce an unprofitable company’s burn rate by up to $250,000 a year (visit our R&D tax credit calculator to estimate how much your company can save in payroll taxes)!! And the maximum amount that a Trinet customer - or any startup for that matter - will double thanks to the Inflation Reduction Act of 2022.
So in the early days, three years ago, when R&D tax credits were first emerging, this was a little bit of an issue but TriNet did get certified by the IRS and they are good to go now. Kruze is not having any issues with them on our new tax credits. In fact, they’ve very responsive and easy to work with for companies who are claiming the tax credits. So that’s something that they’ve actually improved over the last few years, which is really, really nice.
There are a lot of positives with TriNet, again, they’re going to handle all your payroll, they’re going to handle your benefits, they’re going to handle those hot HR issues that no one really wants to deal with. They’re going to handle your state tax compliance, which is really nice. Again, they’re not going to do it all but they’re going to do a lot of it so it’s going to save you time.
And you just have to realize you’re going to pay a little bit more than what a traditional payroll and benefits provider asks for because they are giving you a really premium service. So check out TriNet. We really recommend it. We like working with them a lot. Super nice people. And they’ve invested a lot in their customer support in the last couple of years.
Important Tax Dates for Startups