How to Choose the Right PEO for Your Business

A Professional Employer Organization (PEO) helps companies outsource the management of payroll, human resources, employee benefits, and workers’ compensation, so business owners can focus on the core aspects of their business.

Many businesses today need help managing their HR responsibilities and employer/administrative tasks. Luckily, a PEO is able to offer services to assist businesses with these responsibilities by establishing a co-employer relationship with them. With this relationship, business owners will be able to focus on the operational and profit-building side of their company, while the PEO manages their complex employee-related matters.

Now that you know what a PEO does, which one should you choose? There are a variety of PEOs in the market looking to help small to mid-sized businesses as much as possible. That being said, not all of them are the same, and some of them are able to provide higher quality services to your particular business better than others.

Therefore, here are 5 questions you need to ask each PEO before you decide to partner with it:


Does the PEO provide the service(s) that you are looking for?

Take an in-depth look into your company. Are there any key HR or risk management issues that need to be solved? Figure out the HR flaws within your business and see if the PEO is able to resolve those problems. If they don’t offer a service that will repair one of your issues within your business, then you may want to look for another one that will be better suited for your firm. You need to make sure that the PEO is willing to customize their plans to satisfy the needs of your business.

Is the PEO financially strong and secure?

Obtain the PEO’s financial history to ensure that they’re not going out of business anytime soon. Also, you should find out if the organization is able to properly manage their finances. Remember, regardless of the PEO, you are committing to a relationship, so you need to know if they are reliable or not. It’s important to note that the PEO has audited financial statements because it is considered an industry best practice, and it confirms their financial accuracy and fairness.

Does the PEO have positive referrals?

Referrals are crucial when determining your PEO. Talk to other clients who have partnered with that PEO and hear what they say have to say about their services. Ask for the PEO’s clients and partners, so you can contact them to hear their reviews. You can also search for businesses within the same industry as yours with the same amount of employees and HR needs to help you give a better overview of how the PEO will treat you. These referrals are game-changers, and they’ll help you look beyond just their sales pitches and marketing tactics.


How is the PEO’s customer service?

If you have any questions or issues that needs attending, how will you be able to contact a PEO representative? The level of support a PEO can offer is vital because it shows how much the company cares about your business. If you had an issue about an HR service, you don’t want to wait a week for the company to get back to you. You’d want to know what the solution to your issue is in a much more timely manner. The ability to be able to seek support from the people you partnered with can be invaluable.

How are their employee benefits funded and what are they?

Understanding the PEO’s group health plan is very important before you make your decision. You need to know if the plan is fully insured or self-insured, and if their third party administrator (TPA) or insurance carrier is authorized to do business in your state. Under a fully-insured plan, you pay a premium to the insurer and have no financial risk whatsoever. Meanwhile, a self-insured plan makes the employer responsible for making payments on their claims, while the PEO’s TPA manages the plan’s functions instead of the insurer. The difference between the two plans could make or break the decision to partner with a certain PEO.

Deciding on a PEO is not an easy decision for any business owner. It takes a lot of time and energy to figure out which one will satisfy the needs of your business. However, a proper PEO offers valuable tools and services that will greatly improve your business. These 5 questions will help you better understand the quality of each PEO and give you an overview of how the organization will match with your company. The services of a compatible PEO can be invaluable, so if you are able to find one that will serve the demands of your business, you should definitely decide to start a partnership.

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