Three Things to Consider When Switching to a PEO

At times, the concept of offloading HR responsibilities or activities may seem attractive as employers look for new ways to address their human capital management needs. One of these possible solutions is to enter into a co-employment relationship with a Professional Employer Organization (PEO). However, these relationships can come with a variety of (not so fun) surprises, headaches, and operational challenges. These can be compounded for multi-state organizations. Here are three questions to ask potential vendors to help guide your decision making.

  1. Will I have a single point of contact in my time zone?

Many PEO’s have moved to a call-center style of customer support and assistance. Often, clients will not have a dedicated account representative, but will have to work with multiple contact to facilitate different activities. For example, you may have one point of contact for platform assistance, another for benefits questions, another for employee relations assistance, and yet another for payroll. Additionally, these support persons may be scattered across the country, making timely communication difficult.

  1. How is pricing structured?

Often, PEO pricing will be presented as a simple Per-Employee/Per-Month (PEPM) rate. However, it is usually more complicated than that and you may be surprised by additional costs. In reality, this pricing is Per-Employee/Per-Check and can, in some cases, dramatically increase the cost of doing business. Need to cut an off-cycle bonus check? Additional Fee. Need to pay final wages mid pay-period? Additional Fee. Forgot to include a reimbursement check on the normal payroll? Additional fee.

  1. Is the Tax Department client facing?

As mentioned, the PEO relationship is complicated. Part of the relationship includes the filing of certain taxes by the PEO, on behalf of their client.  It would be easy to assume then, that the clients of PEOs would be able to speak directly to representatives within the PEO’s Tax Department to ask questions and receive clarification. FALSE. The majority of PEO tax departments are not client facing in that, as a matter of operational policy, representatives do not communicate directly with clients. This can be especially maddening when your taxes were not paid or filed properly.

If you’re thinking of engaging with a PEO, there is much to consider. We can help you think through the advantages and unintended consequences.