Losing employees because of limited benefit offerings can deal a significant blow to any organization. For a small to mid-sized business like yours, the administrative burden and costs of providing robust HR services and benefits can seem prohibitive. Partnering with a Professional Employer Organization (PEO) can provide a strategic solution to help you retain talent by expanding your HR capabilities and benefits in a cost-effective manner.
Consider the potential value that partnering with a PEO can provide. This article outlines key procedures and considerations to evaluate if a PEO options is the right fit.
Why Partner with a PEO
PEOs allow small and mid-sized businesses to outsource HR functions traditionally managed in-house. This lets you focus on your core business goals, while leveraging the expertise and economies of scale of the PEO. Reasons companies partner with a PEO include:
Access to Fortune 500-level benefits. PEOs can provide access to comprehensive major medical plans, dental, vision, life, and disability insurance typically only available at large corporations. This expanded benefit offering helps attract and retain talent.
Payroll and compliance. PEOs manage payroll, tax filings, and compliance with labor and employment laws, ensuring you avoid costly penalties and lawsuits.
HR administration. The PEO handles HR functions like onboarding, training, performance management, workers’ compensation claims, HR recordkeeping, and more.
Cost savings. PEOs use their bulk buying power to secure discounted rates on HR services and benefits. This economy of scale can amount to significant savings for your organization and for your employees when they purchase family health coverage.
Key Factors to Consider When Evaluating a PEO
Choosing the right PEO partner is critical, so be thorough when evaluating options:
Services Offered
- What specific HR and benefit services does the PEO provide? Do they fully lift the administrative burden in these areas off your plate?
- How does the PEO handle payroll processing? Is it done in-house or through an outside vendor?
- Does the PEO have HR experts on staff to provide guidance on labor laws, compliance, hiring best practices, and more?
Benefits Packages
- What health insurance plans are available? Are there multiple plan options at different price points?
- What other benefits are offered: dental, vision, life insurance, 401k, etc.?
- Will employees have access to an online benefits enrollment platform?
- How are open enrollment and benefits communication managed?
Cost Savings
- Are cost savings projections provided based on your current overhead? How are fees structured?
- Does the PEO use its size to negotiate discounts that are passed on to your organization?
- Are there any hidden fees or lengthy contractual commitments?
Customization
- Can the PEO integrate its systems/services with your current HR and payroll programs if needed?
- Is there flexibility to customize the benefits offered based on your budget and priorities?
- Can employees still be structured under your company’s brand, or does the PEO require its name on communications/materials?
Compliance Expertise
- What support is provided related to labor law, health care reform, ERISA compliance, and more?
- Will the PEO assume liability for compliance failures like missed tax filings?
- How does the PEO ensure payroll accuracy and tax filing compliance?
Safety and Risk Management
- Does the PEO provide training related to workplace safety, discrimination, harassment, etc.?
- What support is provided related to claims management and mitigating risks and liabilities?
- Does the PEO maintain workers’ compensation policies on your behalf?
Customer Service
- What channels are available for your management team and employees to get HR/benefits help (phone, email, online)?
- How responsive is the PEO’s customer service?
- Are dedicated account managers assigned to your business?
Implementation Process
- How long does implementation take? How disruptive is the transition process?
- How are employees onboarded/trained on new systems and benefits offerings?
- What support does the PEO provide to ensure a smooth transition of HR functions to their systems?
Reputation and Stability
- How long has the PEO been in business? What is their financial stability?
- Can the PEO provide positive references from current clients in your industry?
- Is the PEO accredited by the IRS and Employment Services Assurance Corporation?
Carefully examining these factors will help you identify the right PEO to meet your specific needs and priorities in a strategic, cost-effective manner.
The PEO Evaluation and Selection Process
Once you have identified prospective PEO partners, follow this step-by-step process to vet your options and make a selection:
1. Request PEO Proposals
- Develop a request for proposal (RFP) outlining your requirements, priorities, and the evaluation criteria above.
- Send RFPs to 3-5 recommended PEOs to submit custom proposals.
2. Compare Service and Benefit Offerings
- Review proposals side by side and compare services, benefits packages, fees, contracts, implementation plans, state tax withholding procedures, worker’s compensation insurance costs, etc.
- Develop a shortlist of 2-3 PEOs that best fit your needs.
3. Interview Finalists
- Arrange video calls with leadership from remaining PEOs to align philosophies and discuss capabilities, experience, and references.
- Ask for client references to interview about their experience partnering with the PEO.
4. Review Proposals with Ownership and Management
- Present proposals and feedback from PEO interviews to ownership and management.
- Discuss which option best balances services, benefits, and costs.
5. Select the PEO
- Make a final selection on the best PEO fit for your organization.
- Work with the PEO on the next steps for contractual paperwork, implementation planning, announcements to staff, etc.
6. Oversee Implementation
- Proactively manage the implementation process, providing employee data/records.
- Have regular check-ins with the PEO account manager.
- Help employees understand changes to HR services, payroll, and benefits.
7. Evaluate Ongoing Value
- After 6-12 months, evaluate your PEO relationship.
- Review whether services and benefits have improved as projected.
- Confirm the PEO delivers ongoing value and partnership to help your business thrive.
A diligent evaluation and selection process will help you land on the best PEO for you. Partnering with a PEO can allow you to offer Fortune 500-level benefits and services without the overhead. This can all work to boost retention and let you focus on your core business.
Key Takeaways
As you consider a PEO to help provide more competitive employee benefits while reducing HR administration burdens, keep the following takeaways in mind:
- Research PEOs that specialize in businesses of your size and industry. Look for outstanding customer service and expertise.
- Avoid surprises by asking potential PEOs detailed questions up front about all service offerings, benefits, fees, and contracts.
- Look for a PEO that provides strong compliance management for payroll, taxes, labor laws, and workplace safety.
- Prioritize benefits that will make your offerings more competitive with larger companies.
- The right PEO allows you to focus energy on core operations vs. HR administration.
- Approach the transition carefully — communicate changes clearly and partner closely with the PEO on implementation.
- Monitor the value delivered by the PEO. Ensure they continue to provide strategic value after the initial transition.
Partnering with the right PEO provides a scalable solution to HR and benefits challenges as your dental lab continues growing. Taking the time to thoroughly evaluate options will help identify the ideal fit and ensure your employees are taken care of.
