The professional employer organization (PEO) can be a new or small business’s most valuable partner. By taking care of important processes including payroll, taxes, benefits administration, and workers’ compensation, a PEO allows businesses to focus on their core business.
By working with a PEO, small businesses can alleviate worry about incidents like a small tax miscalculation turning into a major headache. Small businesses that work with PEO partners can also often make benefits available to employees that they wouldn’t be able to afford to otherwise. Because PEOs work with multiple companies, they can often get preferred rates on benefits like health insurance and 401(K) plans, and pass these great rates along to employer partners.
Reviewing Your PEO Contract: When and Why
Before signing on with a new PEO, or renewing a contract with the PEO you currently use, it is important that you review the contract thoroughly, make sure you understand it, and explore your options for getting better rates for PEO services. Many businesses have PEO contracts with terms that coincide with the company’s fiscal year, or the calendar year. The last quarter of the fiscal or calendar year in which your PEO contract is in effect is a good time to review your PEO contract. By reviewing before you renew, you can ensure that you’re getting the most from your PEO partnership.
Checklist of Considerations When Reviewing Your PEO Contract
First, read through your PEO contract thoroughly, and make sure you understand it. If you don’t, call your PEO and get clarification of issues about which you are unsure. Additionally, you should review the following when determining whether to renew your PEO contract or go with a new provider:
- The PEO’s Benefit Plan Options – such as health insurance plans tied to state-specific carriers. If your company plans to expand into another state, you need a PEO that has access to multiple insurance carriers and networks that can accommodate your expansion into other states.
- Your Options for Tailoring Employee Benefits – What benefits do your employees want, and what benefits does your PEO offer? Is your PEO willing to help you tailor a benefits package to the needs and wants of your employees?
- Specific Terms and Conditions – Your PEO contract should spell out responsibilities and liabilities for all concerned. Under what conditions could you or the PEO cancel the terms of the contract? Does the PEO have sufficient employment practices liability insurance, and do you gain coverage through your relationship with them?
- How Employee Benefits Are Funded – If your PEO offers a group health plan, is it fully insured, or self-funded? What insurance carrier or third-party administrator do they use, and are they authorized to do business in the states where your employees are located? Know the benefits and risksof a PEO’s use of an insurance carrier versus a third-party administrator.
- Provision of Data to Insurers and Regulatory Agencies – including the responsibility for providing the following: name, address, and tax ID numbers of clients, payroll data by client and workers’ compensation classification code, and workers’ compensation certificates of insurance.
- Liability Coverage – including adequate errors and omissions coverage, fidelity coverage, and umbrella liability coverage. The PEO should assume responsibility and liability for services such as human resources management, payroll and employee tax compliance.
- Availability of Audited Financial Statements – as required by many state PEO licensing and registration laws. Additionally, PEO industry best practices recommend audited financial statements for accuracy of financial information.
SourceOne Partners Can Help Review Your PEO or Payroll Contract
SourceOne Partners helps small and medium-sized businesses maximize efficiency and benefit offerings and minimize the risks that come with human resources and payroll responsibilities. Employment laws, insurance regulations, and workers’ compensation laws change frequently, and an outstanding PEO makes sure your business is always in compliance.
SourceOne Partners has over 50 years combined experience in the PEO and payroll industries, and can provide business solutions for any needs. SourceOne Partners reviews PEO and payroll needs of companies every day, helping businesses understand billing reports and PEO contracts. Working with carefully vetted PEOs licensed in all 50 states, SourceOne Partners is ready to help you find the PEO that is the best fit for your business. Call us today at 561-674-0748 or contact us online.