What To Look For In A PEO

What To Look For In A PEO

Questions And Answers 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, making it easy for you to be sure you’re not overpaying. In addition, this approach allows you to ensure that the limits for employer taxes (FUTA, SUTA, FICA – Social Security) are being observed. Finally, be sure that you are receiving the employer 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 PEO’s?

A: Large group health plans may be better or worse for your group, depending on a number of factors. Some of these factors include the age of your employees, 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, we’ll even cover the deductible when you follow our guidance in these types of situations. 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 be able to identify what team members in their organization will assist you and your employees before you begin working with them. Be sure to confirm that you’ll have direct contact information for these team members and not 800 numbers or group email addresses. Just as importantly, be sure each of your PEO team members have 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 I choose doesn’t live up to their 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. We believe if we can not hold you with quality you should not be stuck in a relationship that is not working for you. 

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 to 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 work with you to help explain to your employees how this relationship will work and to help avoid 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, CPEO’s 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. In other words, a CPEO is unable to commit any type of financial fraud that can impact you or your employees. Likewise, a CPEO designation allows new customers (like you) 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 lots of turnover in their staff?

A.  Turnover should concern you as the client. It is disruptive to your business and it means that you constantly have to retrain the PEO’s staff while they learn you, your employees and your business.