What to Expect: 10 Things to Look For in a PEO

As a business leader, you don’t need to be told the importance of putting every minute of your time to the best possible use. And yet, you’re not alone if you sometimes become frustrated as you try and juggle your seemingly endless to-do list. As reported in First Round Review, 70 percent of the time CEOs spend on work is sub-optimized.

Are you thinking of partnering with a professional employer organization (PEO) as a time-saving, business-enhancing solution? Before you make a decision, be sure you understand the inner workings of a PEO and know what to look for among the hundreds of options available.

Feeling Out a PEO: A Checklist

Here are 10 considerations as you explore the idea of partnering with a PEO:

Check out a PEO’s blanket insurance coverage.

Look closely at these policies, including deductibles, exclusions, and other information included in the “fine print.”

Review a PEO’s EPLI policy.

PEOS typically offer Employment Practices Liability Insurance (EPLI) to cover claims like wrongful termination, sexual harassment, and discrimination. Review the details of these coverage limits or ask about them during your initial discussions with a PEO.

Consider a PEO’s worker’s comp policy.

Make sure your employees are classified correctly. Also, review when you will have to pay premiums: either upfront or as you go. If the former is the case, you’ll need to undergo a workers’ comp audit at year’s end.

Try to negotiate fixed health insurance rates.

Try asking for multi-year rate guarantees whenever possible. Or, inquire about “honeymoon rates” and what typical renewal rates look like.

Review fees, markups, upcharges and splits.

PEOs typically charge a base fee for their services, plus a fee per employee per month (PEPM). The PEPM fee can be a flat amount per person or a percentage of wages paid.

Consider a PEO’s resources.

Determine exactly which resources you need from a PEO. Check whether or not specific offerings are effective and/or applicable to your company, industry, location, and line of business.

Understand co-employment – and make sure your employees do, too.

Remember, this means a worker is employed by both your company and your PEO. Be sure you’re able to explain this clearly to both current and prospective employees.

Review which services you would actually use.

A good rule of thumb is that you should only consider using a PEO if you plan to use 80 percent of the services offered.

Screen a PEO’s vendor partners.

Different PEOs use different vendors for their services. Understand who your PEO’s partners are and what type of value they can provide.

Review any limitations for yourself.

Ask what sort of limitations a PEO may have has as far as its service and systems are concerned. Don’t stop digging until you’re satisfied with every answer.

Considering a PEO Partnership? Key HR Can Help!

Opting to outsource HR functions through a PEO relationship is a big decision –not one you want to take lightly. For answers to any additional questions you have on PEOs and other partnership and outsourcing options, contact Key HR today. We are aligned with leading preferred provider companies to offer the best, most innovative solutions to all your talent management needs.