How to Choose the Right PEO

There are 487 professional employer organizations (PEOs) in the United States, providing services to hundreds of thousands of primarily small and mid-sized businesses employing 4 million people. If you’re considering joining the more than 15 percent of employers with 10 to 99 employees who partner with a PEO, which one of the 487 is right for you?

If you’ve gotten this far, you already know the benefits of a PEO partnership: As NAPEO explains, it enables you to focus your time and energy on the “business of your business” rather than the time-consuming yet essential “business of employment.” Your company may not have the bandwidth to thoroughly manage all the training, payroll and accounting, benefits, compliance, risk management, insurance and myriad other responsibilities that go hand-in-hand with effective talent management. If this rings true, then your decision to work with a PEO is the right one.

From the Experts: How to Make the Right Choice

Here’s a summary of selection criteria for a PEO as recommended by NAPEO:

Begin by assessing your company’s HR and risk management needs. Involve key leadership – and also staff-level employees, because their boots-on-the-ground perspective can be invaluable – in this process. You want to make sure the PEO you choose can meet all your needs and help you achieve the business goals behind them.
Ask for references from a PEO’s current clients, as well as members of your professional network.
Choose a NAPEO member PEO that is certified by the Internal Revenue Service (IRS). This certification confirms that the PEO can pay federal employment taxes under its Employer Identification Number (EIN). It also protects a PEO’s customers by requiring that the certified PEO assumes sole liability for employee wages.
Find out if a PEO’s financial statements are independently audited by a certified public accountant (CPA), whether its risk management practices have been independently certified by the Certification Institute, and if its operational, financial and ethical practices have been independently accredited by the Employer Services Assurance Corporation (ESAC).
Delve into the PEO’s administrative and management competence. What level and depth of experience does its internal staff offer? What about professional training and designations?
Understand how employee benefits are funded. Is a PEO fully insured or partially self-funded? Who is their third-party administration (TPA) or carrier – and are they authorized to do business in your state?
And, how are those benefits tailored? Will they fit the specific needs of your workforce?
Carefully review a PEO’s client service agreement (CSA). Are all responsibilities and liabilities clearly laid out? What guarantees are provided? What provisions permit does either party need to cancel contract terms?

Looking For Solutions? We Can Help!

Lyons HR can help you address all these concerns and more, as you grow your business and position it for whatever the future looks like. Functioning like an off-site HR department, we can manage any or all your talent management needs, from recruitment through retirement. At Lyons, We Are HR. Read our related posts or contact us today to learn more.