7 Questions to Ask When Picking the Right PEO

Running a business is not only expensive but too often it also entails spending too much time on burdensome tasks. That’s why more and more businesses are hiring a PEO (Professional Employer Organization) for outsourcing jobs, such as HR (human resources), risk management, payroll, and other services. But finding the right PEO can be challenging if you don’t ask the right questions. Here are seven questions to ask when choosing the right PEO, along with some considerations and warnings.

1. The Needs of Your Company

What are the primary needs of your business? Before wading through applications, list the specific problems your company is dealing with and how a good PEO can fix these challenges. Determine your needs, including payroll, and if you need full or part-time payroll assistance. What about risk management needs? A PEO needs to be able to streamline processes so that your business can save time and money on administrative tasks. They should also be current on the any local tax laws and requirements.

2. Compliance Knowledge and Proficiency

Compliance knowledge and expertise should be at the top of your list when checking the credentials of a PEO. Consider how compliance regulations  tend to change quickly as new mandates continue to be issued from local, state and federal authorities. If a PEO doesn’t stay updated on compliance changes, your business can suffer financially and waste time.

3. Technological Skills of a Candidate

In today’s high-tech business world, it’s imperative that a PEO is proficient in using web-based payroll portals for managing payroll as well as for tracking employee time, accessing payroll data and other administrative tasks. Therefore, you need to ask potential PEOs about the tools and technology they’ve used.

4. Flexibility of a PEO

One of the main traits a PEO needs is flexibility. This means a PEO should be able to adapt to your business’s needs as it grows. Your PEO needs to do more than just provide services. Whomever you choose should also be considered a business partner who shares your goals and is able to adjust as your business expands.

5. Health Insurance

Be sure you find out about a PEO’s medical carrier and the coverage for your area as well as for your employees. Ask the PEO if their health insurance company is a regional or national carrier. If there isn’t any medical coverage, your employees probably won’t stay but will leave and go to work for your competitors. Besides inquiring about health benefits and their health plans, ask if they frequently change health carriers.

6. Qualifications and Work Background

It’s critical that you do a comprehensive background check in which you evaluate a PEO’s qualifications and work history. Be sure the PEO has the right certifications and is compliant with every governmental entity. Is the PEO a member of the NAPEO (National Association of Professional Employer Organization)? What’s more, a PEO must be in good standing with their industry’s professional work practices. Ensure that the PEO has enough experience in your particular industry. Also, check their rate of client retention.

7. Geographic Location

Check the geographic area of a PEO, regarding license requirements. Consider that  different PEOs have different legal permits for accepting clients, besides doing business in various areas of the country. While some states don’t require PEOs to have a license, the majority of states do.

Other Considerations and Warnings

  • Besides asking for references, if possible, ask for a list of the PEO’s current or former clients.
  • Consider the way a PEO tailors the benefits of workers and if this strategy is a good fit for your workforce.
  • Ask a PEO if their fees are transparent, besides what they are. It’s important that you know what the fee is and if it’s a POP (percentage of payroll) or a fixed PEPM (per employee per month) fee.
  • Ask the name of the PEO’s Worker’s Comp carrier and if the carrier has an A rating.

Questions? For more information on hiring the right people, contact us.

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