If you are already in a PEO then you are your lone advocate. An annual audit is a good practice for any human resources team using a PEO is to make sure you are getting some of the value they promised. Here are some areas that need to be addressed in your PEO audit:
Many PEOs offer human resources services. Often these services are active at the onset of the contract, but in some cases, the employer will need to seek out resources, which may not be dedicated or knowledgeable about your business. Be sure to review your contract to determine what HR services are covered by your agreement.
Additionally, human resources should be a partner with every business leader in an organization. As a matter of consideration, human resources should help the employer carefully evaluate every one of the following areas.
If payroll taxes are filed under the PEOs tax ID (as they should be) then you should make sure each quarterly tax filing was completed and the taxes deposited with the State and IRS. If they have not or were incorrect or late you may be liable for fines, interest, and/or penalties. Here are some general items to double-check:
If you are not aware of how workers’ compensation is funded or who holds the contract then you need to find out. Here’s how to do that:
Make certain that employees have been compensated as agreed upon. These are areas where mistakes commonly happen:
If you haven’t already, obtain a copy of the PEOs employee handbook, and make sure it is applicable to your state and consistent with your own. If not, be sure to identify the areas of difference. Also, check the leave and return-to-work provisions. This could become critical if you decide to move away from a peo.
The PEO should provide you with a copy of all the employee benefits offered to your employees. Be sure to familiarize yourself with their eligibility rules for employees and dependents, including:
Make sure these policies are compliant with your state and that networks are adequate. Also, check other policy factors such as leave restrictions, rehire provisions, deductible/copay carry-over credits, etc. Make sure that departments, classifications, and any eligibility class differentials are consistent with your policies.
If the PEO requires you to monitor eligibility and enrollment, check with your legal counsel as to how that might affect the PEO’s responsibility and your liability.
Once a year, consider bidding out the benefits just to be sure the PEO is maintaining their commitment to save you money on benefits. Make sure they are not accomplishing savings with cost-shifting to employees (with deductibles, copays, contributions levels, maximum benefit allowances, etc).
Here are other nuts and bolts to review when comes to the PEO’s benefits and COBRA offerings:
Your employees (and you) will be contributing to the PEO’s pension plan/401(k).
You may still be held partially liable so be sure to familiarize yourself with the PEO’s 401(k), including:
Be sure to carefully check the PEO’s policy regarding “leave.” You need to know what their policies are toward vacation, sick leave, disability, FMLA, and other forms of leave and how they might impact your employees.
If your company has less than 50 employees it may not be subject to full FMLA leave requirements on its own, but the PEO will surely have full FMLA policy and, as such, you must operate by those regulations. Be sure you are familiar with this policy and how it might impact you and your employees.
In our experience, employers may feel a little trapped when their PEO begins radically changing the rules and the rates. Evaluating your PEO offerings annually is a strategic move to ensure you’re “getting what you’re paying for.”
In one instance, we were able to help a client save $150,000 in the first year by moving away from a PEO. Read more on our blog.
Our team of experienced HR Consultants works carefully with benefits partners to help businesses evaluate the feasibility of leaving a PEO in terms of customer service, investment, and results.
If you are considering terminating your PEO contract and “unbundling” Human Resources, Payroll and Employee Benefits, contact us for a no-cost consultation.
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