The genuine appeal for a small business is benefits and risk. Joining a large pool can produce health insurance materially better or cheaper than a company with three employees could arrange alone, and the compliance burden of employment law moves substantially onto somebody who does it professionally. For a business hiring in several states, where the requirements multiply, that is a real saving in attention as well as money.
The costs are worth understanding clearly. Pricing is typically a percentage of payroll or a fee per employee, which grows as you do. You are giving up some control over benefits and process, since you operate inside their system rather than your own. And leaving is a project rather than a decision, because your employees are inside their arrangement and moving them means new registrations, new benefits, and new systems.
For most first year businesses this is premature. With one to three employees the numbers rarely justify the percentage, and a payroll platform with benefits available as an add on covers the requirement at a fraction of the cost. The threshold where it starts to make sense is usually somewhere around ten employees, or earlier if you have people in multiple states or an unusually high compliance burden.
If you do evaluate one, ask specifically what happens if you leave, how the fee scales, and whether their insurance rates are guaranteed or renegotiated annually. The last question is where the arithmetic changes after year one.
There is a lighter alternative worth knowing about. Some providers offer employer of record services, where they employ somebody on your behalf in a jurisdiction where you have no entity, which is narrower than co employment and useful for a single remote hire in another state. It is priced per person rather than as a share of payroll, and for one or two people in one additional state it is usually the cheaper answer to a problem that otherwise pushes businesses toward a full arrangement.
Ask specifically what happens to your employees if you leave the arrangement, since they are technically co employed and the exit is more involved than ending a software subscription. New registrations, new benefits enrolment, and a gap in coverage if it is handled badly. Understanding that process before joining is what makes the decision reversible in practice rather than only in principle.