Are you getting the best deal on your PEO?

If you're currently in a Professional Employer Organization (PEO), you've probably wondered if you should have played the field a little more. PEOs are guilty of relying on the complexity of their set-up to obscure costs and keep you from being as well-informed a customer as you might for other services like an accountant or a software vendor.

But "difficult to tell" doesn't mean unknowable. Read on to find out how to do your due diligence with any PEO.

What are you paying for?

In any PEO relationship, you're paying for quite a few things. These include:

• An Administration Fee

• Your Health insurance premiums

• Your Workers’ Compensation premiums

• Your State Unemployment Tax Assessment (SUTA)

• Miscellaneous Fees

Let’s take a look at each of those:

Administration Fees

Your administration fees are what you pay per employee per month (sometimes labeled PEPM in your invoice) for the PEO’s services. The fee is most often either a flat fixed fee per employee per month, or it can be a total percentage of your payroll per month. Either has equal potential for being fair or a rip-off.

No matter how it's billed, your administration fee is based upon a few things — typically how many employees you have, where you're located and, of course, how skilled you or your broker are at negotiating.

Watch out! Some PEOs bundle their administration fees together with your taxes and workers’ comp insurance cost, making it difficult to judge just how much you're paying the PEO itself. We created a "unbundling" calculator that can give you a rough estimate based on just a few questions. If you think you're paying too much, a broker like Dinsmore/Steele can negotiate on your behalf for lower rates. Schedule a quick chat to see how.

Health Insurance Premiums

Your health insurance premiums are based on the demographics of your group, your location, and the rates your PEO have obtained from their carrier. When you join a PEO, your group is underwritten and assigned a risk score, then enjoys the benefits of being a part of the larger PEO body for discounted rates. But not every PEO is equal in its negotiating tactics, member demographics or simple willingness pass savings on to you.

The best way to know if you're getting the best prices from your PEO is to get quotes from other PEOs. While this would take hours and days manually, you can apply to receive quotes from a number of PEOs that match your business in just a few minutes right here.

Workers’ Compensation Premiums

Your workers’ compensation premiums are based on the work your company does, your location(s) and your previous experience with your prior workers’ comp carrier. Each PEO prices your Workers’ Compensation based on your Class codes, the PEO’s own rates and how skilled you (or your broker) are at negotiating.

Typically white collar companies won't find significant savings in workers’ comp with a PEO due to the inherently safer nature of their business, but blue or grey collar companies can realize significant cost reductions.

Not sure you're getting the best deal on workers’ comp? Just like insurance premiums, Dinsmore/Steele is able to source competitive quotes from other PEOs — just take a few minutes to tell us a little more about your business. Its workers' comp without the work.

State Unemployment Tax Assessment (SUTA)

Your State Unemployment Tax Assessment (SUTA) rate is what you and your employees pay towards unemployment programs. This rate is based upon your turnover of employees, so in a PEO, it’s based upon the entire PEO group's SUTA rate. Typically, this means savings.

In certain states like Connecticut, regardless of whether you're in a PEO or not, you will pay your current rate as though you were not in a PEO. States like this are known as a client-reporting state. If you're not in a state like Connecticut, you'll pay what the PEO decides to charge.

In order to know if you are getting the best SUTA rate, compare your current SUTA rate (often you can request your former rate from your current PEO if you're in one) to the one offered by the PEO. If it's higher, request a change. It doesn't hurt to have other, lower quotes from competing PEOs on hand, which you can get right here.

Miscellaneous Fees

Like anything in business, there will always be "miscellaneous" fees. Your PEO should provide you with a list of those fees as well as list which ones are in effect. Some examples of reasonable miscellaneous fees are a new hire fee or additional payroll changes.

If you're unsure of your current miscellaneous fees, you should specifically request a list from your provider. Still a bit vague? We can help you decipher the "PEO-ese" — just schedule a call with one our staff members to review your fees.

So what now?

If you know what you're paying for the above fees and don't like it — or can't find out exactly how much you're paying for them from your current PEO — it's time to get quotes from other PEOs. You'll almost certainly get lower rates (and clearer invoices) for your business.

The hard way to do that is by yourself, hour after hour, submitting the same form a dozen times …. the easiest way, of course, is to skip the paperwork and use our free service to solicit proposals from PEOs who know they're competing for your business. Get started here.