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Understanding the PEO Agreement Before You Sign It

Signing a PEO agreement without a complete understanding of its implications is like buying a house in an unfamiliar location without first looking it over. It can be a huge mistake with costly consequences. Still, many business owners don’t know what to look for when signing a PEO services agreement.

They’re left vulnerable to unfair PEO pricing, low-quality workers, and worker payments that aren’t going to the right people.

Read through this guide, and you’ll find a lot of information to help you understand how PEOs work and what to check before you sign a contract.

What is PEO?

A Professional Employer Organization, or PEO, is a company that provides payroll services, benefits administration, workers’ compensation coverage, and other related services to businesses and self-employed individuals. They help businesses streamline processes and improve employee morale in exchange for a fee.

PEOs mostly handle HR and payroll functions, and they provide services to a variety of businesses.

What does a PEO Contract Outline?

A PEO contract outlines the services that they will be providing to your business. For example, some PEOs will have operational expertise as experts in handling claims, altering payroll, or implementing stock options. Others specialize in social media management and administering company events like employee appreciation weeks.

A PEO agreement describes the rights and responsibilities of the company and the employee. The following are some important parts or sections of a PEO agreement:

Company Information

This section describes how long your company has been in business, its many employees, and other relevant information.

Rights and Responsibilities

This section describes what you may expect from your PEO services, such as what benefits you’ll receive, when you start work and leave work, whether you can participate in certain activities with colleagues outside of work hours, as well as any time limits for performance evaluations.

Notice of Termination

 This section addresses what will happen if either party wants to end their relationship at any point in time.   

Some of the sections in a PEO agreement also include:

  • The job description
  • HR policies and procedures
  • Employee benefits
  • Work schedule, hours, holidays, vacation time, and personal days
  • Confidentiality of information
  • Anti-discrimination policies

What Companies Look for When seeking a PEO?

When it comes to a PEO, employers look for a company with a strong reputation in the industry. In addition, they are looking for PEOs committed to providing exceptional service to their clients by building strong partnerships with them.

To find a PEO that is suited for their needs, employers should look at the following:

• The level of experience

• How long they have been in business

• The size of their workforce

How Can You Find the Right PEO For Your Business?

There are a few ways to find the right PEO. You can use your network, ask friends for referrals, and look at the PEOs that are already on the market.

The first step is to seek out PEOs who have experience in your industry or niche. If you are hiring someone for their expertise, choosing a PEO who has experience in your field will make sense.

After finding some people with experience or expertise in your field, you should contact them to let them know what you’re looking for and what kind of rates you’re willing to pay. Some factors that business owners should consider when looking for a PEO include:

  • Service level agreement (SLA)
  • Capacity and scalability
  • Compliant with GDPR
  • Qualified staff
  • Quality of services offered

How Can A Small Business Use A PEO Agreement to Boost Profits and Growth?

A PEO agreement can be a great way for a small business to grow by taking advantage of the expertise and experience of a larger company while still being able to retain the personal touch and ownership of their business.

PEO services allow for greater levels of efficiency and access to resources that are typically not available to smaller businesses. There are three main types of PEO agreements: employee leasing, operating leases, and agency leases.

This type of agreement typically saves small businesses time by allowing them to focus on growing their business without worrying about payroll or other HR-related tasks associated with managing employees.

PEOs help small firms expand 7-9 percent better and quicker, have 10-14 percent reduced staff turnover, and are 50% less prone to failure.

How Much Do PEO Agreements Cost?

The cost of PEO services varies according to various factors such as company size, location, and even the industry sector. Therefore, it is best to consult with several companies before setting up an arrangement with them to find out how much your agreement will cost you.

Summing Up

The benefits of outsourcing to a PEO provider are plentiful. Not only do you save money, but you also get to spend more time on the important tasks that make your business thrive. Just keep the above points in mind before signing an agreement.