February 25, 2022 | By Derek Carlstrom
A Professional Employer Organization (PEO) is a partner that can handle all facets of your company’s HR needs. There are hundreds of PEOs across the country, but not all are capable of providing you the highest level of service you deserve.
As you begin finding the right PEO for your organization, you may face an overwhelming feeling as you try to sort through the hundreds of options available. By asking the following five essential questions, you can narrow down your choices and ultimately find the best PEO for your business.
The Internal Revenue Service (IRS) provides for certification of a PEO, called a Certified PEO (CPEO). This process does not infer any endorsement of a PEO by the IRS, but instead shows the CPEO has undergone specific measures to assure its trustworthiness.
To gain CPEO status, a PEO needs to undergo the following steps:
When a business is successful, it usually makes that success public. A PEO is no different, and their success stories should be on their website. Many PEOs even provide in-depth case studies, showing how they helped other businesses achieve their goals while saving costs.
A case study is a great way to see the long-term benefits of working with a PEO. However, if a PEO doesn’t have any case studies, that should be a red flag. They either haven’t had much success or haven’t been around a long time. Either situation should give you pause.
Just like hiring a new employee, you should speak with references for any PEO you’re considering partnering with to help your business grow. It’s important that a PEO gives you several options for calling references. This way, you’re certain to speak with at least two who can give you honest information about what it’s like to be a partner of that particular PEO.
If a PEO refuses to give you references, that should be a big red flag. Either they are too new or they don’t think any of their clients would speak highly of them. When a PEO doesn’t have references to give you, you may want to reconsider partnering with them.
The National Association of Professional Employer Organizations (NAPEO) is a paid membership organization. They provide tools and information for PEOs to help them stay up to date on compliance and regulations.
When a PEO is a member of the NAPEO, it shows they are engaged in the industry and take their role as a PEO seriously. They’re investing in their business to help keep businesses like yours at the top of their game.
Price transparency is one of the keys to finding a PEO you trust. PEOs use different pricing models. Some charge a percentage of payroll, which can serve as a deterrent to hiring new employees and giving raises because the more your payroll rises, the more you pay. Other PEOs charge flat rates but be careful because many PEOs will add on administrative charges.
Pay attention to the type of pricing model a PEO uses, as some may even try to bait and switch. Others may have such a confusing pricing model, you’re just not sure what you’re paying for and what you get in return.
Also, keep an eye on exit protocols. While you may hope a PEO takes care of your needs for a long time, your business needs may change, and you may need to rethink your partnership. How easy is it for you to leave a PEO? Some may try to keep you locked in for a long time. But a good and trustworthy PEO won’t try to lock you in but should be able to rely on their strength of services to keep you as a customer.
A trustworthy PEO will answer all five questions above in a satisfactory manner. They’ll be able to provide you with good references, show you quality case studies, give you a pricing model you understand and works with your budget, all while saving you money.
When choosing between PEOs that correctly answer all five questions, look at how flexible the PEO offerings are and whether they provide the services you need within your budget.
Do they give you a one-size-fits-all solution or one specifically designed to fit the unique needs of your company? Are they willing to work with you and give you flexible service offerings?
Don’t check your common sense at the door. Trust your gut. If something feels off, it probably is, and you should look elsewhere. Ultimately, the most critical trait for a PEO is trust. Everything else is secondary.
Derek is the Vice President of Sales Growth. He is a proactive leader with refined business acumen and exemplary people skills. He has progressive experience in sales leadership with the skills to drive business growth, capitalize on new revenue potential, and execute proper territory maximization