What to Ask Before Moving Forward with a PEO

A PEO contract is either one year or month to month yet the average company stays with a PEO for closer to three. Due to this mismatch, many businesses focus on upfront savings and underinvest in properly evaluating the contract.

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That’s why asking the right questions upfront can save time, money and headaches later.

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What Is the True Cost Per Employee?‍

The advertised rate doesn’t always reflect the full cost. It’s similar to receiving an interest rate that’s not reflective of the total cost of owning a home. Ask the PEO for an itemized breakdown that includes SUTA rates, workers comp and onboarding fees. It’s also worth walking through real world scenarios, like onboarding a new hire or running an off-cycle payroll to hiring an international contractor, to forecast what you’ll pay in the future.

Network Quality and Cobra‍

With a PEO, your employees are likely enrolled under their master health plan. If you have a distributed team, verify coverage is national (eg Aetna, UHC, BCBS) and is strong across all states. Make sure to also ask about Cobra enrollment and who's responsible for managing that for ex-employees.

Why You Need to Evaluate Before Your Renewal Notice‍

Many PEO contracts require at least 30 days notice to terminate. PEO’s will release their renewal rates 60-90 days out from renewal so make sure you’re evaluating alternative options ahead of time. The reason for that is competing PEO’s require you to furnish the renewal rate as part of their underwriting process. If it’s on the higher end then they may turn you away so it’s important to review PEO options before renewal rates are released.

How Is Workers Comp Priced?‍

Workers comp may be bundled into the PEO structure, but pricing isn’t always transparent. It’s based on a percentage of payroll for each employee based on the state, job function and salary. Ask for your rates by classification code and confirm they align with your risk profile and claims history. If your business hasn’t had any claims you can negotiate a lower rate which can save you potentially thousands each year in premiums.

What Level of HR Support Will You Actually Receive?‍

“Dedicated support” can mean very different things. Some PEOs assign a specific HR partner; others rely on a general support queue. Ask how support is structured and request to speak with the team you’d be working with before signing. Also if HR is an important piece make sure to ask if the rep is PHR and SHRM certified.