10 Tough Questions to Ask Your Future PEO

Questions for your PEOOn the surface, it can seem difficult to differentiate one Professional Employer Organization from another. When you are looking at several different providers who offer more or less the same services, how can you dig deeper to find out the details that will make or break your relationship with the PEO you choose? A comparison tool is a great place to start, but you’ll also want to interview your short list of providers to find out how they run their business, what you should expect from the client/provider relationship, and what their track record is. We’ve put together ten tough questions that will delve into the nitty gritty details of the PEO’s business operation, so you can make a well-informed decision before handing over the reins:

1. Can I see an unbundled fee schedule?

Ask for an itemized list of service fees so that you can see exactly how much you will pay for each service. The PEO should provide you with actual numbers and rates so you can determine what your annual cost will be.

2. Do you charge extra fees for certain services?

Some PEOs charge additional fees to handle issues such as workplace disputes, legal support, compliance support, handbook development, training, or processing a terminated employee. These fees can add up quickly, making an initially low quote much higher than expected. Look for a provider that includes these services in the regular rate rather than charging extra for them.

3. What is the average tenure of your clients?

Happy clients will stick around. If the average tenure is at least five years, then you know the majority of the provider’s clients have been satisfied with their services and business relationship.

4. Who will handle my needs and questions?

Dealing with a team specifically dedicated to your business takes much of the frustration out of working with a PEO. Dedicated service teams allow you to build relationships with the individuals who handle your account and to access those people directly with questions rather than being funneled through a call center.

5. What will you do to protect my business from going to trial in a legal dispute?

Most PEOs offer Employment Practices Liability Insurance (EPLI) to protect you from lawsuits dealing with discrimination, wrongful termination, harassment, breach of contract, or other legal discrepancies. In addition to this insurance, however, the PEO should implement an alternative dispute resolution procedure that utilizes the National Arbitration Forum with the goal of bringing disputes to resolution outside the courtroom.

6. Can my employees choose to participate in a FSA or HRA?

Employees should have flexible health care options including flexible spending accounts and health reimbursement accounts. In addition, you should be able to choose the health care package that benefits your business the most, whether that’s an individual plan or group plan.

7. What happens to the FICA savings when employees take advantage of pre-tax deductions?

You should be able to choose whether or not to assume the risk of receiving the FICA credit. If the PEO receives the credit, they should also assume the risk of loss if an employee’s utilization exceeds their contribution at the time they leave your organization.

8. Tell me about your 401k fees and options.

Ask for a detailed schedule of fees, including any exit fees that will be charged to run the 401k program. In addition, your employees should be able to choose managed portfolios and you should have the option of continuing to participate in the 401k even if you are no longer partnered with the PEO.

9. If I partner with you, will I be locked into a contract?

A reputable PEO will give you the option of terminating the contract at any time without a penalty.

10. How many years have you been in business under your current name?

Credibility is important in any business, and with so many newcomers to the PEO industry, it helps to know how much experience the provider has. Since some businesses list years of experience based on the experience accumulated through acquisitions, find out how long the company has been in operation under its current name.

Choosing a PEO can be a wonderful choice for your business, giving you the freedom you need to focus on growth and core competencies. In order to ensure a positive and beneficial business relationship that will move your business forward, take the time to research each potential provider so that you can make an informed choice about which one will best help you achieve your goals.


Thank you to Ben Hipps, at Employers Resource for contributing information.