Top Reasons SMBs Shouldn’t Miss National PEO Week: A PEO Checklist

16 May

National PEO Week is a great opportunity for small to medium-sized businesses (SMBs) to learn more about the benefits of professional employer organizations (PEOs). But with so many PEOs on the market, it can be difficult to know how to choose a PEO that fits your specific needs.

That’s why we’ve created this PEO checklist to help SMBs get the most out of National PEO Week.

What Is a PEO?

A PEO acts as a co-employer, assuming responsibility for managing a wide range of employee-related tasks, such as payroll processing, benefits administration, and compliance management. This can free up valuable time and resources for business owners to focus on other areas of their business.

How to Choose a PEO

Business owners are always looking for ways to cut costs and stay competitive. One way to do that is to outsource back-office administration to a PEO. Here are a few reasons why SMBs should consider partnering with a PEO and some factors that will help guide you on how to choose a PEO.

Size and Scalability

SMBs often struggle with scaling their organization as they grow. This often stems from an HR infrastructure that doesn’t support nor stimulate business growth. So when SMBs look to expand their business, they aren’t equipped with an experienced or growth-ready HR team.

That’s where PEOs thrive. Not only do SMBs receive the experienced HR professionals they need to grow, but they also have access to simplified, more efficient processes. From recruiting, hiring, and onboarding, to training and technology integration, PEOs are ready to scale up with the business.

Customization and Flexibility

While it may not be the case for all PEOs, many can offer mix-and-match solutions. Meaning, if you simply need HR help, PEOs can customize an HR outsourcing (HRO) solution that fits your business needs. Other solutions that might be available include administrative services only (ASO) or employer of record (EOR), both of which provide employers unique benefits in expanding and managing their operations.

Reputation and Reviews

How to choose a PEO is no straightforward path. There are many ways to determine a PEO’s stance in the industry through researching a PEO’s reputation. From industry-specific certifications and net promoter score (NPS) to employee and client review sites, there is a lot to consider. Here are some specifics to look for:

Certification Institute (CI) for Workers’ Compensation and Risk Management: Receiving a certification from CI for workers’ compensation and risk management provides both PEOs, PEO clients, and insurers invaluable advantages. For PEOs, it offers opportunities to improve risk management policies and practices to obtain the lowest possible workers’ compensation losses. As a result, PEO clients are provided with compliant work environments for worksite employees and reduced losses from workers’ compensation claims. Insurers also reap the benefits through efficient, verifiable underwriting consideration and risk management best practices.
IRS Certified PEO (CPEO): Though relatively new—established in 2014 when the Small Business Efficiency Act became law and federally recognized PEO services—a CPEO is awarded to PEOs who meet the strict U.S. government requirements, such as proper tax status, bonding, and financial reporting. If you’re looking for a baseline requirement on how to choose a PEO, this certification is an important one.
Service Organization Control (SOC) Type II Certification: Developed by the American Institute of Certified Public Accountants (AICPA), the SOC 2 certification evaluates an organization’s customer data management based on security, availability, processing integrity, confidentiality, and privacy. Though it is not required for SaaS and cloud-based vendors, organizations that hold the SOC 2 certification represent their commitment to securing customer data. Data is booming and becoming more prominently vulnerable, which is why a SOC 2 certification should be on your how to choose a PEO list under industry certifications.
Net promoter score (NPS): An NPS is an evaluation of how well HR experts serve their clients and embody highly valued qualities, such as being ethical, honest, and responsible. The average NPS for outsourced HR providers is 37%.
Employee Review Sites: While it may not be as much of a concern for you from a client perspective, employee review sites like Glassdoor and Indeed can provide you insights into the behind-the-scenes of a PEO. This can be useful for gauging how their employees might treat you. For example, if they have a great company culture, the employees are likely to be more engaged and fulfilled in their roles and thus provide a more positive customer experience.
Industry-Specific Review Sites: There are countless industry-specific review sites like G2 and Capterra that provide reviews from real businesses and other industry professionals on which service providers excel in certain areas. These sites offer high-level overviews of HR tech and organizations and client reviews for potential customers to explore.
Client Testimonials: Many organizations will gladly post client testimonials on their website, social media pages, and other public-facing forums. It’s a great way to showcase satisfied clients and build a strong reputation in their industry. However, there is no harm in requesting a more recent, relevant, or current client testimonial from a PEO.

Industry Experience

Because PEOs are experts in their fields, many of their industry professionals hold industry-specific certifications. While it is not a requirement for employees in these fields to obtain or to hold them for PEO employment, many PEO professionals are subject matter experts in their respective fields. Some examples of these certifications include Society for Human Resource Management (SHRM) and HR Certification Institute® (HRCI) certifications for HR professionals, Certified Public Accountant (CPA) for financial and tax professionals, and licensed health insurance brokers for benefits-related plans and questions. Though these certifications aren’t required, examining a PEO’s expertise should be at the top of your how to choose a PEO checklist—after all, the main advantage of a PEO is to provide you with specialized tools, resources, and support for your business needs.

Geographic Coverage

Business owners often select a provider in the same state as their business to ensure they are well-versed in local and state regulations. However, many PEOs are able to service multi-state businesses and are knowledgeable in various local and state regulations.

For example, VensureHR is headquartered in Chandler, Arizona, but because it has partnered with various PEOs, EORs, and other service providers, it is able to serve clients across the United States, Canada, and other geographic regions.

Regardless of what your preference may be, it is important to ask potential PEO providers about state-specific concerns you have when researching your options.

Pricing and Contract Terms

PEOs can differ in pricing structures and contract terms. For example, pricing can be based on the number of employees a business employs or a percentage of overall payroll. When it comes to contract terms, some PEOs will require a commitment, such as 12 months. And if you’re new to PEO partnership, that can be a risk you’re not confident in taking.

Though investing in a PEO is a serious financial consideration, it can also save you up to 35% on HR costs, including giving you back the money lost on time spent managing back-office administration. The main thing to remember in researching PEOs is to ask questions.

Finding the right PEO for your business requires careful exploration and analysis, so take advantage of National PEO Week to start your search for a PEO that will help your business thrive. If you’re not sure where to start—learn more about VensureHR!