Many businesses, especially small ones that don’t necessarily have the man power for all of their human resources, needs use services provided by professional employer organizations (PEO). If you think you might be in need of payroll and various other services, there are some things you’ll need to think about first.

When You Need a PEO
• If you need to provide competitive benefits, such as health insurance, in order to recruit and keep employees. PEOs negotiate rates with insurance carriers for their entire clientele as a whole, which usually gets a better rate for everyone.
• When your business has strict regulation and compliance requirements on the state and federal level that would be difficult and time consuming to keep up with, such as businesses dealing with hazardous chemicals or explosives.

PEO Requirements
• PEOs charge anywhere from 1-4% of payroll, as well as a set up fee, typically around $1,500.
• You have to be willing to relinquish some control of your business over to them, as they will be dealing with payroll, taxes, and other important aspects.

Choosing the Right PEO
• Check the National Association of Professional Employer Organizations, whose members consist of over half the 700 PEOs in the country.
• Make sure the PEO has met state requirements for licensing and registration.
• As for the PEO’s financial records to make sure they are paying the taxes and insurance premiums of their current clients.
• Check on the certification of the PEO’s staff members.
• Check references (call the PEO’s current clients).

In addition to the requirements that the PEO you choose should meet, they should also be checking out your company. If a PEO you’re interested in is not asking for your insurance and financial records and well, chances are they are not checking on any of their other clients. This could mean financial trouble for the PEO and your business if they are taking on clients with high workers’ compensation records and other insurance and financial problems.

PEOs aren’t for every business, but if you’re thinking of using one, be sure and do your homework first.

Source:
• BusinessWeek.com: Hands-Free HR

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