PEO Buying Guide
What to know and questions to ask when comparing Professional Employer Organizations (PEOs)
If you’re reading this, you’re considering partnering with a PEO.
Businesses that partner with a PEO see greater growth, retain their employees at higher rates, and are less likely to go out of business. A PEO allows you to focus on what’s most important – growing your revenue and investing in your team.
A PEO’s industry focus, services offered, and cost are the three most important factors to finding the right match for your company.
FullStack’s goal with this guide is to give you insights into how to ask the right questions when comparing PEOs and understanding the potential all-in-costs of partnering with one. We understand the challenge of taking on any new partnership, but considering one that has nuances – like a PEO – may come with additional questions. We want to ensure you know exactly what you’re paying for, what services are included in the cost, and avoid any surprises by an unexpected fee. This guide will equip you with everything needed to help you make your PEO partnership decision easier.
Be sure to download our free PEO Buying Guide Checklist for a full list of questions to ask throughout your PEO buying journey!
Let’s get started.
Be sure to download our free PEO Buying Guide Checklist for a full list of questions to ask throughout your PEO buying journey!
Let’s get started.
Identify Your Company’s Needs
Although most PEOs will manage your company’s payroll, administrative HR, compliance, and benefits, each has additional services that could make that PEO the best first for your company. Consider these questions:
What core PEO services does our company need?
What additional services would be beneficial for our organization?
What do I need for my company at its current size and stage versus what will be needed when we reach our next growth goals?
Do Your Research
The PEO industry is expansive – there are a lot of options and PEOs are very diverse in scope and focus. Some are industry-based while others focus on serving companies of a certain size. There are national, publicly-traded companies you’ve heard of before – others are local or regional. Dig deeper into the PEOs you’re considering by doing the research and asking these questions.
Payroll
Payroll can be difficult to navigate depending on your team’s structure. Here are some important questions to ask to learn more about how a PEO handles payroll.
Does your PEO outsource payroll to an outside firm, or is it done in house?
What is required of my team during payroll week?
Can I or my accountant access and customize payroll reports for our accounting needs?
Where do my employees go with payroll questions?
Benefits
Benefits can often make or break your team. Small companies that utilize PEOs can offer benefits comparable to larger organizations, which can help attract top talent. Consider asking these questions about benefits when chatting with a PEO representative:
Who are your current insurance carriers?
Have your benefits plans changed in the last 3 years? Why or why not?
What’s the employee experience going to be like during onboarding and open enrollment?
HR Compliance
Compliance is where a PEO partnership can alleviate the time you spend on complex paperwork and the money you spend on paying billable hour professionals to complete for you. Ask these questions when discussing compliance with a PEO representative
How do you handle employee handbook reviews and updates?
What does the compliance process look like when our company hires employees in states where we don’t currently employ anyone?
Do you take care of compliance with all of the relevant employment laws for my size company?
Onboarding + Employee Relations
Onboarding and employee relations from a PEO can make a world of difference for a company. From helping update handbook policies to difficult HR conversations, there are a wide variety of ways a PEO can help with HR. Here are some questions to ask
What’s the process for onboarding new employees?
What is our’s versus the PEO’s responsibility for onboarding?
How do we engage your team during disciplinary or termination conversations?
Specialized Services
Most PEOs will offer specialized services, such as consulting or educational opportunities. To learn more about a PEO’s additional services, ask these questions:
Outside of the basic HR services, what strategic services do you offer?
Do you offer training and development opportunities for managers and employees? What’s the format?
Do you offer HR consulting for strategic HR/talent decisions? Is the cost included in the quoted price or are these additional cost add-ons?
Software + Partners
Most PEOs leverage software and partners to help create the best outcome for their clients. Here are some questions to help you learn more about software and partners.
What softwares are utilized by the PEO and what is our interaction with it?
Will my team have interactions with any partners of the PEO - i.e. 401K Financial advisor, benefits broker, or software provider?
What ancillary services or software products are available through partners and how are these priced?
Pricing + Fees
Next, let’s take a look at some of the different ways a PEO can make money. This can range from a simple administrative fee, to hidden markups, to brokerage fees on health insurance. Some PEOs complicate this information, making it difficult to know exactly what you’re paying for. Here are some questions to help you learn more about a PEO’s payment structure.
Admin or Management Fee
SUTA/FUTA
Startup costs
Workers’ Compensation
401K
Admin or Management Fee
- Will you pay per employee or a percentage of payroll?
- How is this calculated?
- When and how does it change over time?
SUTA/FUTA
- What are the rates you will pay for SUTA/FUTA with the PEO, and how does this compare to your current rates?
- Does the PEO mark up these amounts for revenue, or is it passed through at cost?
Startup costs
- What are the startup fees to set up your account?
- Are there employee onboarding or offboarding fees?
- Does the PEO charge an extra fee when you have employees in more than one state?
Workers’ Compensation
Does PEO markup Workers’ Compensation premiums from the carrier? If so, by how much?
401K
Are the fees for 401K administration built into the administrative fee, or charged separately?
Other Questions You Should Be Asking About a PEO
Are there markups or additional fees for transactional services like background checks, I-9 verifications, etc?
Do you charge hourly rates for coaching, consulting, or advice?
Are there markups on health insurance costs?
Ask for
References
Now that you’ve done your research, spoken with representatives, and have narrowed down your list of potential PEOs, an important next step is to ask for references in order to get an honest understanding of how a company like yours benefits from utilizing their PEO. Here are some questions to ask during those conversations: