How to Choose a PEO for Your Small Business

What is the value of a PEO?

To understand the value of a PEO, you need to first understand, “What is a PEO?” A PEO (professional employer organization) is an HR outsourcing option that allows small and mid-sized businesses to outsource many of the administrative functions associated with human resources. When your business partners with a PEO, you gain access to HR administration, payroll processing, comprehensive benefits, compliance support, and more.

The benefits of using a PEO for your employees include, but are not limited to, affordable benefits packages with top-tier health insurance, retirement savings plans, corporate wellness programs, and life and disability insurance.

When should a company use a PEO?

The day-to-day of running a business can be exciting, but also challenging. As your company grows, HR responsibilities grow right along with it – and they can quickly take over. If you’re considering a PEO, you and your team are probably buried under necessary but time-consuming HR tasks. And there’s a good chance these tasks are taking time away from revenue-generating efforts. If you’re in this situation (or nearing it) it’s a good time to start looking into the best PEO for your business.

The advantages of a PEO for small and mid-sized businesses include:

• More time to grow. By offloading tasks such as HR management, payroll and employee benefits administration, workers’ compensation, recruiting efforts, and more – you free up time to focus on growing your organization.
• Attracting and retaining employees. With access to comprehensive HR expertise, affordable, Fortune 500-level benefits, and performance management and training tools, you have what you need to compete with larger companies for top talent.
• Guidance on complex HR issues. By tapping into the comprehensive HR expertise of a full-service PEO, like G&A, you have the support you need to navigate workplace laws and regulations, workers’ compensation, workplace safety, unemployment insurance claims, and more.

What to consider when choosing a PEO?

Once you’ve decided a PEO is the right choice for your company, you’ll want to do some research. When considering how to choose a PEO, or rather, how to choose the PEO that best matches your needs, it’s a good idea to find out the following:

• PEO payment structure
• Complete list of offered services (and flexibility to customize services)
• Years of experience and level of HR expertise
• Who will service your account
• Accessibility of customer service for you and your employees
• HR technology capabilities

The best PEO for your business is the one that meets your unique needs, has a solid reputation and years of experience, and has trusted experts who will take good care of you and your employees.

Questions to ask a PEO

To ensure you have what you need to make an informed decision, consider these questions to ask a potential PEO:

Can you explain what a PEO arrangement looks like with your organization?

When you work with a PEO, your business enters into a co-employment relationship, giving the PEO the authority to act as the “employer of record” for your employees. This allows the PEO to perform employment-related tasks on your behalf, assume much of the administrative responsibilities, and share liabilities associated with carrying employees.

What exactly will I be paying for with your PEO services?

Most PEOs charge for their services in one of two ways:

• As a percentage of total payroll (typically between 3% and 8%)
• As a flat per-employee-per-year (PEPY) fee

In both cases, the exact price or rate will often depend on which preset bundle of services you select. Therefore, ask to see the package broken down into line items before choosing a PEO, so you can clearly understand the services you will be receiving and what’s not included.

How are your PEO services structured?

Consider if you need a PEO that offers a software solution with back-end support or a full-service partner. The PEO is the employer of record for your employees and should be available to answer your questions, as well as your employees’ questions, about employment-related matters.

What kind of PEO technology or software does your company provide?

When you partner with a PEO, you should expect to gain access to new and upgraded human capital management (HCM) technology. Ask what technology the PEO offers, especially if you plan to continue using programs that you’ve already purchased or if you have specific technology needs in mind.

Do you provide training or professional development for my employees?

Some PEOs offer HR services beyond payroll and benefits administration. Professional development and employee training opportunities are attractive to potential candidates and allow you to maximize the potential of your current workforce.

What kind of employee benefits plans are available with your PEO?

Today’s top talent is looking for more than just a paycheck. They also want high-quality, affordable employee benefits, including top-tier health insurance, retirement savings plans, corporate wellness programs, life insurance, and more. Prior to choosing a PEO, ask which carriers they partner with and what kinds of plans they can offer.

What is my role when it comes to taxes and regulatory compliance?

As the co-employer for your employees, the PEO will assume both the liability and responsibility for managing and reporting your employees’ payroll and unemployment taxes. They should also assume much of the responsibility for ensuring that your employees are covered and protected under all applicable state and federal labor laws.

What’s your reputation?

This is perhaps the most important question you should ask before you hire a PEO. Find out how long they’ve been in business and what their clients say about them. If you plan to expand into other areas, ask what kind of geographic presence they have. Ask to see audited financial statements, federal, state, and local licenses, industry awards and/or accolades, certifications, and any accreditations they’ve received.