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A Professional Employer Organization (PEO) is a co-employer and functions as an off-site human resources (HR) department to provide cost-effective outsourcing of HR services.
PEOs are able to provide small and mid-size companies access to a fully scalable and robust HR department that provides a variety of HR-related services and benefits while reducing employer-related liabilities.
It’s important to note that not all PEOs operate in the same way or offer the same services. Before you choose a PEO, you should have an idea of the services you want to use to benefit your business and your employees.
Continue reading to explore some of the questions you should ask a prospective PEO.
PEOs economy of scale enables each client to lower employment costs and increase the business’s bottom line.
The client can maintain a simple HR infrastructure or none at all by relying on their PEO. PEOs can also provide assistance with employer compliance which helps protect the client against liability. Additionally, a PEO provides time savings by handling routine and redundant tasks for its clients.
It’s important to note that while PEOs do provide a variety of HR-related services, they are not designed to entirely replace or take over all of the functions of an HR manager or HR department.
Your business’s responsibilities may vary depending on what the contract with your PEO states. Always discuss these details with your prospective PEO before deciding to partner with them.
The services that a PEO offers can vary spending on the individual organization, however there are some standard services that many PEOs offer:
Many PEOs require their client companies to use one or more services. It is important that your business has a clear idea of what services you will and will not require from a PEO so that your team can make the most effective decision when choosing a PEO partner.
Choosing a PEO that has successfully supported businesses in your field in the past can greatly benefit you and your team.
Different industries may have different regulations and compliance needs, and it’s important that your PEO has a general idea about the requirements of your business’s field.
Learn more:
What businesses can benefit from using a PEO?
Some PEOs will provide training and other professional development resources for their clients’ employees. This is an important question to ask a potential PEO because training and professional development opportunities will appeal to potential employees as well as bring value to current employees.
Many PEOs provide your business with flexible 401(k) retirement plan options that allow you to decide employer contributions, vesting schedules, and more.
It’s important to look for a PEO that offers a 401(k) program that will bring the most value to you and your employees. Additionally, you should ask your potential PEO if you have the option of continuing to participate in the 401k even if you are no longer partnered with the PEO.
Depending on the PEO, your business may only receive online services and support through web-based platforms. Other PEOs may offer in-person services and support, such as training and meetings.
Ensure that you ask your PEO for clarification regarding the communication process so that you can fully understand how your account will be managed. It’s also important to know how long you can expect a reply from your PEO when you contact them.
PEOs typically charge for their services using either a flat rate per employee or based on a percentage of total payroll. In both of these pricing models, the exact rate will depend on the bundle of services you choose for your business. It’s a good idea to ask for an itemized list of service fees before signing.
It’s important that your business chooses a trustworthy PEO with the proper accreditations. A CPEO (certified professional employer organization) is certified by the IRS. This allows the CPEO to provide benefits and handle HR functions such as payroll, tax remittance and employment tax filings.
Co-employment is a contractual arrangement where a business and a PEO share distinct employment obligations. Within the co-employment relationship, PEOs typically assume responsibility for all payroll obligations and employment tax filings.
Co-employment allows PEOs to have combined bargaining and buying power of all of their client businesses. This means that many PEOs can provide your business’s employees with access to high-quality insurance for themselves and their families.
Most PEOs will provide your business’s employees with access to benefits plans, however the benefit offerings can vary depending on the PEO.
When talking to a prospective PEO, be sure to ask about health care coverage, savings plans, corporate wellness programs, and life insurance.
At PER, we have over 25 years of experience in the PEO industry and over 100 years of combined experience from our team members delivering outsourced HR services to small and medium-sized businesses across Central Florida and beyond.
With the extensive capabilities of a full-service PEO and the personal touch of a small business, we are your integrated, off-site HR department that fully supports you with a vast array of quality services that mitigate your employer-related liabilities.
We strive to build trusted relationships with our clients and provide value in our compliance and advising services that go far beyond simply running payroll. As part of our comprehensive services, we offer payroll management, workers’ compensation, benefits administration, and more.
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