Beware of PEO Tactics


Recently, we released our own e-book, Get More Done with a PEO, which goes into detail about what a PEO is and how it can help your business. In last week’s blog,we discussed the costs of a PEO and why transparency is so important. Transparency is a key to making sure our customers know what services they will be receiving and paying for. 

After working with and talking to several different companies about their HR needs and current PEOs, our CEO, Mike Kelly, has identified 4 PEO Tactics to be aware of when deciding which PEO is right for your company. 

1. Mark up on the taxes you pay each month.

The government has outlined how much you should withhold monthly for employees, and when you work with a PEO, they ensure the proper amount of taxes are paid.

However, unless you are familiar with the tax rates and scrutinize your bill, you may end up paying more per employee. Some PEOs may add 1 to 2 percent to the tax rate to pad the amount, hoping that you, the business owner, never notice.

2. Minimum Contract Requirements

Some PEOs require their salespeople to obtain a minimum contract amount per client. Therefore, companies with fewer than ten employees seeking the PEO’s assistance may be quoted a high price per employee to hit that minimum amount. Be sure to ask up front if there is a contract minimum in order to engage the PEO, and if so, shop around to find a company who doesn’t have one to make it more economical for you.

3. Percentage of Payroll vs. Fixed Rate

If you have a small team of high-income employees, you need to be aware of how your PEO fees are calculated. If your PEO charges a percentage of payroll, rather than a fixed fee per employee, then you may be paying too much for PEO services.

4. Unclear Billing

Many PEOs offer bundled services for one price, so when the invoice comes, you’ll see a bill without any details or explanation of exactly what you are paying for. How will you know if you’re overpaying for a service, or paying for one that you don’t need? Ask for an itemized bill to make sure your costs line up to what you discussed.

Screenshot (21).png

We believe transparency is incredibly important when working with different companies and clients. We wanted to highlight these different tactics so that you are aware and educated when trying to make an investment in your company, such as using a PEO. 

Find more information about PEOs and why FullStack might be the right PEO for you in our e-book, Get More Done with a PEO.