According to the NAPEO, there are over 487 Professional Employer Organizations (PEOs) in the United States alone. This number will likely go up as more companies look for ideas on how to find a PEO they can trust.
When you consider both time and cost savings, outsourcing HR to a PEO is a no-brainer. However, figuring out which one will give you the best returns is much more of a challenge. Ultimately, you are placing a very high degree of trust in your PEO.
While the average ROI of partnering with a PEO is 27.2%, this number varies depending on several factors. Often, a quality, trustworthy PEO will give you a higher ROI, while a bad one will provide you with much less than your target. So how can you tell if a PEO can be trusted? Here are five things to consider.
If you've already determined that outsourcing HR is necessary for your business, you might be wondering how to find a PEO you can trust. Unfortunately, PEOs are uncharted territory for many companies. Most don't even know what to look for in a PEO that will assist with human resource and administrative tasks. To get value for money from your partnership with a PEO, have the following considerations in mind:
PEOs can be certified or non-certified. An IRS-certified PEO gives you several advantages.
While certification does not mean the IRS has endorsed the PEO, it does mean that the PEO maintains specific regulatory and legislative requirements, which include:
Certification is also a sign that the PEO takes its responsibilities seriously and is more likely to do its best for you and your employees.
Ask other business owners you know and trust what PEO they use and whether they would recommend them. Make sure you ask people you trust and watch for referral bonuses, which can incentivize people to recommend a lower-quality service. A good company does not need to offer large bonuses to get referrals because they will have satisfied customers willing to speak out.
Although case studies posted by the PEO are biased in their favor, case studies can help you understand that particular PEO's process. They can help you determine whether it is a good fit for you at the culture and values level.
You will also get an idea of what results they have achieved in the past and gather evidence of the PEO's experience in your industry. You might want to think twice before going with a PEO if you are their first client in a particular area.
Any decent PEO should be able to provide you with several references. Avoid PEOs that refuse to do so; they may be inexperienced or have issues.
While the PEO will choose satisfied customers as references, talking to them is still a good idea. They can give you an idea of how suited the PEO is to your needs. If possible, call references in your industry so that you can assess their experience with your specific needs.
Finally, please take a look at their pricing model. Ensure that the price tiers or system are crystal clear and that there are no hidden fees or "administrative charges."
Bad PEOs will try to bait and switch you either on the price or what you get for it, so make sure that none of it is confusing. A good PEO does not need to offer low starter rates and jump them up later, add on fees after you have signed, or nickel and dime you on administrative charges. Instead, they can stand by their prices because they are confident in their offer.
Another red flag is overly complicated exit protocols. A good PEO isn't worried about you leaving because they know they offer good services. Bad PEOs will try to keep you around by making it too painful to switch.
If you've been tasked with how to find a PEO for your organization, this checklist provides a great foundation to base your search. Ultimately, finding a PEO you can trust produces significantly higher ROI. When you depend on your PEO, you free up more time for your in-house HR team, increase your cost savings, and get more peace of mind. Also, choosing a good PEO in the first place helps you avoid the costly and tedious process of changing PEOs.
Ensure that the PEO you choose is certified by the IRS, has good referrals and references, provides quality case studies, and is transparent about their prices. Choose a PEO that meets all of your requirements, and you can build a long-term relationship. Partnering with a PEO is fantastic, but you need to make sure it is one you can trust.
Questco is a licensed professional employer organization that partners with businesses to provide proven HR solutions that help save time and money. Questco delivers the scale and skill to support any business goal. We partner with clients to provide guidance and leadership in crafting human resources strategies. To learn more about what we can do for your business, contact us today.