Seven questions to ask when evaluating PEOs for your business
With more than 500 professional employer organizations (PEOs) across the country to choose from, finding the right co-employer might seem daunting. But due diligence doesn’t have to be a burden. After identifying your needs and the PEOs you want to evaluate, use the following questions to prepare for your discussions.
1. Is the PEO dependent on acquisitions and mergers, or has it grown organically through customer retention and long-term stability?
How a PEO grows is indicative of its risk management policies. PEOs can grow organically, attracting and retaining customers, or through acquisitions and mergers, combining customer bases.
2. How much does a PEO cost, and what is the pricing model?
Some PEOs allocate costs differently than others, but there are typically two price models – employee headcount as a percentage of payroll and a flat rate per employee per month (PEPM). It’s essential to obtain a sample invoice so you can better understand the PEO’s cost structure.
3. Does a PEO provide my company with dedicated team members to help with HR, payroll and benefits?
PEOs generally provide a service and support team to help clients with payroll and benefit administration, HR and compliance, workplace safety, and more. Due to rapid growth in the market, however, some co-employers may only offer virtual or call center support without dedicated resources assigned to your account.
4. How many benefits carriers do a PEO partner with to offer benefits plans to clients?
Benefits carrier support differs by each PEO. Some rely heavily on a single national benefits carrier or only offer benefits plans in a few states nationwide.
5. Are PEO health insurance and workers’ compensation insurance fully insured?
As a result of the competitive PEO market, some providers have shifted away from a fully insured workers’ compensation and health care model, increasing customer risk and cost instability.
6. How does a PEO protect my company from an employee lawsuit or claim? What is the deductible on the Employment Practices Liability Insurance (EPLI) policy?
By partnering with a PEO, you may be able to mitigate some of the liabilities associated with being an employer. Some PEOs provide an EPLI and a legal defense benefit, which can help reduce the financial consequences of employee lawsuits and claims.
7. Can a PEO integrate with other platforms or partners?
Some PEOs can integrate with business software applications and leading HR, payroll and financial systems. An online HR marketplace, where you can obtain applications for connecting and integrating data across HR systems, might even be available. Additionally, some PEOs can leverage custom integrations or application programming interfaces (APIs) if you need such services.
Download our guidebook to learn how ADP TotalSource®, the industry’s leading PEO, performs under the scrutiny of these seven questions.
