Buyers Guide for PEO - Professional Employer Organization Services
Things to consider when selecting a PEO:
- Are you spending too much for workers’ compensation insurance?
- Are your employees asking for benefits you can’t offer?
- Are you paying too much for health insurance?
- Is your company compliant with state and federal regulations?
- Is your turnover rate adversely affecting your company’s performance?
- Is your HR department as effective or as efficient as you believe it could be?
Selecting a PEO vendor
With hundreds of PEOs operating in the United States, the process of selecting a PEO can be time consuming and frustrating. A Google search may turn up hundreds of PEO names yet it provides no insight into the viability of any PEO for your company. Many states require a PEO to be licensed in order to do business with you. In addition, each PEO has different risk tolerance (for workers’ compensation insurance), health insurance offerings and general HR service capabilities. At StaffMarket we advise clients to run a StaffMarket RFP. The RFP process matches your company profile and service requirements against our extensive database of PEO profiles (nearly all of the PEOs in the nation!) We profile each PEO on over 150 delivery points to ensure that you quickly target the most appropriate providers. The StaffMarket RFP process will identify three to five companies that will provide a quote for your business. Of course selecting a PEO is about more than just the PEO price. You will need to feel comfortable with the entire PEO offering, their financial stability and insurance coverage they are offering. In addition, reviewing the way a PEO responds to your StaffMarket RFP and follows up with you about questions you have is a good indicator of how attentive they will be if you become their client. A careful courtship makes a happy marriage!
In addition, it makes sense to ask for proof of insurance coverage. All StaffMarket PEO members can provide a copy of their master policies for your review. Finally it is a good idea to ask for client references. StaffMarket can assist with arranging a reference call for any PEO, at your request.
Professional employee organization pricing
StaffMarket has prepared an entire section on our web site to help explain PEO pricing. While at first it may seem arcane, with some study it makes good sense. In general if your company has relatively low wage employees like food service, a PEO will provide you a “bundled” quote that charges an administrative fee based on the total wages each pay period. Rates vary from 3-5%. If you company has relatively high wages and low workers’ compensation risk, most PEOs have moved to a fee passed on a flat dollar charge each month. These amounts vary from $500 to $900 per employee per year.
PEO Client Service Agreements
Since co-employment is a contractual assignment of employment related responsibilities between your company and a PEO, you need to understand the agreement. This document defines what you and the PEO are responsible for in the ongoing relationship. Click here for an example of a PEO Client service agreement (CSA) . Most PEOs want a 12 month agreement with a 30 day termination provision.
Evaluating PEO proposals
When you are ready to evaluate PEO quotes, StaffMarket has prepared some Excel based tools that enable easy understanding of the value offered in each PEO proposal. Our dedicated staff of PEO experts can prepare a custom analysis for you upon request.
