If you’ve joined the millions of small firms that outsource HR duties to a professional employer organization (PEO), be careful when considering new vendors or replacing them.
You have a choice of more than 700 PEOs to choose from. Compounding the problem: It’s hard to make apples-to-apples price comparisons because price quotes vary widely based on the capabilities and service packages.
Cut through the clutter by understanding PEO pricing. The basics: PEOs offer most services in packages or “bundles.” Many PEOs have three or more basic bundles and will tailor them to fit an organization’s needs. Bundles include basic services such as payroll and workers’ comp. PEOs also offer “unbundled” services and charge a per-use fee.
4 steps to the best price quote
1. Don’t settle for lump-sum quotes. Determine which services you need and look for bundles that include them. Some PEOs try to bury charges in cost-per-worker fees. Insist on a breakdown of services and a cost for each one. 2. Insist on a discount for including unbundled services in the package. Some PEOs try to generate fees with pricey unbundled services. Ask for a complete price list of the unbundled offerings.
Depending on the PEO, unbundled services can include , résumé screening, pre-hire testing, handbooks, job appraisals, recognition programs, job descriptions, training and recruiting.
For payroll, unbundled services can include W-2 reprints, unemployment claims processing, online access to payment reports and 1099 forms processing.
3. Don’t request a quote for health insurance as part of a basic package. Ask for quotes for health insurance separately.
4. Ask about other costs and reimbursements. Are there fees for early contract termination? What about start-up fees? Will the PEO indemnify or reimburse your organization for costs connected to workers’ legal claims? Ask for references from satisfied PEO clients and from those that no longer use its services. Find out whether the PEO is a member of the National Association of Professional Employer Organizations at www.napeo.org.
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