How to Utilize a PEO

A PEO, or professional employer organization, is a company that can help handle the human resources side of your business. Tasks like managing payroll, recruiting and training employees and compliance can all be handled by a PEO.

Many businesses can benefit from hiring a PEO, but some would be better off handling these tasks on their own. Any business with 5 or fewer employees would not benefit much from a PEO unless in high growth mode, while a company with 6+ employees could definitely save time and money by hiring the services of a PEO. The pros and cons of professional employer organizations have been explained in detail in other articles. Now, it is time to learn how to utilize a PEO to your advantage, and how to get the most out of your new business relationship.

Determine the Services you Need

The first thing you should do is make a list of all the services that are offered to you by the PEO(s) you are considering. Then, identify the services that are absolutely essential, and the ones you think you might need. Cross out any superfluous services that either don’t apply to your business, and/or that you would prefer be handled on your own. Often times, PEO’s will try to push extra services on you that are not really necessary. Know what you need, and eliminate what you don’t.

Research

The first thing you should do before hiring a PEO is research your options. Plenty of these types of companies exist, and they all offer a slightly different package of services. Also, the advertised rates can vary widely. If you do some research, and identify a company that has shockingly low rates, it is probably too good to be true. Do your own research, and read reviews of any company you are thinking about working with before you decide to partner.

Negotiate

Especially if you own a larger business with lots of employees, you have some leverage as far as negotiating the rate. PEO’s need to make money, but oftentimes charge a premium to new clients, simply because they know they can. Explain your current position, and negotiate the price. If they refuse to negotiate on their administrative service fee, try a different company.

Consult with Legal Council

Usually, hiring a PEO will involve a lot of paperwork and contracts. These documents are usually filled with all sorts of legal terms that can be hard to understand. It would be wise to consult with a legal professional, such as a lawyer, before finalizing any contracts. A lawyer can read the documents, and summarize or explain them to you in layman’s terms.

Research More

Once you engage with a PEO you want to work with, ask them for a proposal that includes a full financial analysis. The financial analysis should be reviewed carefully to ensure that all costs were accounted for and calculated and presented accurately. Once comfortable with the service offering and fee structure, ask to speak with references. A solid reference list will include a mix of clients that have both short and long tenure with the PEO. In addition, you should request they have a similar number of employees and conduct business in the same or a related industry.

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