What To Look For In A PEO

What To Look For In A PEO

What You Need To Know Before Partnering With A PEO 

Q: How do I know what I’m paying my PEO partner? I’ve heard about overbilling and don’t want to overpay.

A: Most importantly, look for transparency with PEO billing. For instance, avoid bundled billing where all taxes and fees are expressed as a single percentage of payroll. A good PEO partner will detail all these line items for every employee each pay period. This makes it easy for you to be sure you’re not overpaying. In addition, it ensures that the limits for employer taxes (FUTA, SUTA, FICA – Social Security) are being observed. Finally, be sure that you are receiving the employer’s share of tax savings for any benefit premiums paid. These items are easy to overlook but can amount to significant dollars if not handled properly by your PEO partner.  

Q: What are the pros and cons of large group health plans through PEOs?

A: Large group health plans may be better or worse for your group, depending on different factors. Some of these factors include the age of your employees, the overall health of your group, and how well the risk of the PEO large group plan has been managed. Ideally, look to partner with a PEO that has the flexibility to offer options that also include individual group plans for your organization. This helps you provide the best coverage for your employees at the right price.

Q: What is EPLI coverage and why should I care about it?

A: Employment Practices and Liability Insurance (EPLI) exists to mitigate financial exposure for employers. This exposure comes in the form of things such as employee lawsuits or EEOC complaints. Unfortunately, filing lawsuits or complaints against employers may be done by disgruntled employees at little to no cost to them. EPLI caps the exposure for employers by paying damages or judgments after a deductible is met. With HCC, not only are you protected by our EPLI coverage, but we’ll even cover the deductible when you follow our guidance. This saves you thousands of dollars when situations like this occur.

Q: How can I determine the effectiveness of the PEO’s service model? I want to make sure my employees and I can get answers to our questions when we need them.

A: The right PEO partner should identify the team members who will assist you and your employees before you begin working with them. Confirm that you’ll have direct contact information for these team members and not 800 numbers or group email addresses. And, be sure each of your PEO team members has expertise in their respective areas (payroll, benefits, HR, etc.). Employment is far too complex for a single person to have all the answers.  

Q: How can I avoid being stuck in a contract if the PEO doesn’t live up to its promises?  

A: First look for a PEO partner that is willing to financially back up their service claims. With HCC, we offer a guarantee for every new customer. In the first 3 months, if you determine we aren’t living up to your expectations, you’re able to exit our working agreement early. In addition, we’ll refund 50% of the fees paid up to that point in our working relationship.  

Second, after the first year, our contracts convert to month-to-month agreements. If we can’t keep you happy with our services, you shouldn’t be stuck in our PEO relationship. 

Q:  Do I lose control of my employees by working with a PEO? 

A: The good news is that you maintain full control of employee issues. This includes hiring, managing, motivating, and establishing culture. These are all things only you can control for your organization. Your PEO partner’s role is to help ensure compliance, provide guidance around changing employment rules and regulations, and assist your employees with questions related to their payroll, benefits, or retirement plans.

Q: Will this confuse my employees? Will they think they work for the PEO instead of me?

A: When the right PEO partner is engaged, there should be no confusion around this issue. The PEO simply becomes an extension of your organization to provide better support for HR-related matters. The right PEO partner should help explain to your employees how this relationship works, and clear up any possible confusion. When done correctly, your employees will appreciate what this type of relationship offers. 

Q: What is a CPEO and why should I care?

A: CPEO (Certified Professional Employer Organization) is a designation awarded by the IRS. To keep this designation, CPEOs are mandated to do quarterly and annual reporting, along with specified audits. This offers you significant assurance that all wages and taxes for your employees are solely the liability of the CPEO. A CPEO is unable to commit any type of financial fraud that can impact you or your employees. A CPEO allows new customers who onboard during the calendar year to avoid double taxation of FICA and FUTA taxes. This results in significant savings for you and your organization.   

Q. Does the PEO have a lot of turnover in their staff?

A.  Turnover should concern you as the client. It is disruptive to your business. You regularly have to retrain the PEO’s staff while they learn about you, your employees, and your business.