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When You Want to Choose a Professional Employer Organization...
The employee leasing business got a black eye for good reason. Some firms collapsed, leaving business owners with huge liabilities; a few took the money and ran. Before signing up, consider the following:
EXPERIENCE
What involvement has the PEO had in your industry or with companies of similar size and employee composition? Get client references.
FINANCIAL SECURITY
Ask for banking and credit references, proof
that payroll taxes and insurance premiums have been paid, and audited financial statements.
CREDIBILITY
Check membership in the National Association of Professional Employer Organizations (www.napeo.org/peo) and approval by the Institute for the Accreditation of Professional Employer Organizations (www.podi.com/iapeo). Verify compliance with state licensing or registration.
BENEFITS
Some PEOs just buy insurance, while some partially self-fund coverage. Check the rating and reputation of the insurance carrier. If a third party administers claims, verify that it meets state licensing requirements, and is reputable. Make sure all employees are automatically covered. Ask what optional benefits (for example, access to a credit union) are offered.
FEES
Is the charge based on wages; wages plus taxes; or wages, taxes, and benefits? To judge whether a PEO may save you money, assess your full employment costs. For help see the Bureau of National Affairs data in its Bulletin to Management (800 372-1033, www.bna.com).
SAND TRAPS
How does the PEO handle intellectual-property ownership issues, stock option plans, and other management practices common in your industry, or peculiar to your company?
CONTRACT
Try to get a provision that permits you to cancel at short notice--say, 30 days.
SWEET DEAL
By putting workers from many companies on one payroll, PEOs let
even the smallest company offer competitive benefits
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