He also suggests picking several different PEOs from your market area and having each present a proposal and contract for comparison. The contracts should stipulate as many details as possible about the PEO-client relationship. Some specify how much you must have in liability insurance, stock option plans, management practices, and optional benefits. The Institute for the Accreditation of Professional Employer Organizations, based in Little Rock, Ark., began accrediting PEOs in 1996, based on stringent financial, ethical, and operational standards. Only a handful of PEOs have passed muster.
Due diligence is vital.
If a PEO goes broke, your business is liable for back taxes, unemployment insurance, workers comp premiums, and so on. A professional employer organization will check out your record, too. It will review your financial and safety history, workers comp claims, risk-management plans, status of employment taxes, employee turnover, and even whether you tend to change benefits packages frequently. If there is a work-site accident, for instance, your business will be responsible. But if you skip town, the PEO has a legal obligation to pay your employees for one pay period and meet the requirements of the federal Fair Labor Standards Act, Hall says.