Many variables exist when choosing a PEO. – The first step is deciding IF a PEO is the right decision. It’s never always yes or no. You may have the goal of being in a PEO for the short term or long term. If short term you may be trying to correct WC, health insurance or administrative problems. If long term, be sure to choose a strategic partner. Regardless, always consider the opt-out clause; i.e. lengthy contract obligation, one year, 30 day opt-out, terminate anytime or only at renewal…
Questions for a PEO and the right fit for each PEO will be different depending on the potential client. Is price the primary concern? What’s their culture? Do they value customer service? Do they provide training; HR, WC, etc…? Performance reviews? Are they strategic? Tactical?
Employee Benefit Advisors places transparency right at the top of the list. – Ask to see a sample bill and ask to see all rates you are being charged, not a bundled rate. What are they trying to hide that they cannot tell you? Many PEOs hide their cost within the margins of the billing points and charge an artificially low administration rate. What are the transparent points in evaluating a PEO?
- Payroll Tax; FICA, Medicare, FUTA, SUTA
- Tax cutoff points – Does PEO continue to charge?
- Does the PEO make the ER/EE whole if contracted mid-year?
- Is the PEO passing on Work Opportunity Tax Credits (WOTC) you may be eligible for?
- Is the PEO SSAE 16 Type 2 certified? (formerly known as SAS70. This is an independent audit vendors should obtain to verify their systems, processes and data security.)
- Restaurants: Is the PEO passing on FICA Tax Tip Credits you may be eligible for?
PEOs receiving federal and state tax credits should be offering this tax savings opportunity to their clients.
You want your PEO to be financially stable. The best PEOs are accredited by the Employer Services Assurance Corporation and have a current Statement on Standards for Attestation Engagements No. 16 audit (formerly known as SAS 70). Do your homework, make sure your PEO has a strong presence in your industry. Talk to references.