The biggest draw of a PEO is its ability to save businesses money by providing a variety of HR-related services at an affordable price. PEOs, or Professional Employer Organizations, partner with a client firm through a co-employment arrangement in which the PEO handles many critical administrative and human resources-related tasks. In return for these services, PEOs typically charge a percent fee, sometimes referred to as an “administrative percentage”. The percent fee is where things can become a little confusing.
Many established PEOs typically charge a percentage of payroll as the cost of using their services. This means as your company grows, and you hire more people, so too will the fees, since it is a percentage of payroll. This fee structure is justified by many since the more employees you have, the more work a PEO has on their end.
What becomes confusing though is what those fees entail and how a PEO arrives at their numbers. Often times, included in the administrative percentage a company pays to a PEO are State Unemployment Rate Assessment (SUTA, SUI) fees, Workers’ Compensation, Medical costs, as well as State and Federal taxes that a company would have to pay regardless. To complicate matters, many PEOs offer a bundled product, much like your local cable company, or new car dealerships. While bundling services can indeed yield savings for client companies, they often confuse an already opaque pricing model.
So what can a business looking to procure the services of a PEO do?
First, secure the services of a reputable PEO broker specialist — like PEO Broker. A PEO broker specialist can take the tedium and uncertainty out of the PEO search. Their expertise in the market and understanding your company’s needs and requirements allow them to secure the ideal match with a PEO that can deliver. They can see through otherwise convoluted pricing schemes and help you shop comparatively and with confidence for the best PEO services.
Shopping for a PEO is intimidating. Make the wise decision to have the right advocate in your corner, someone like PEO Broker.
