PEO Service Agreements; Know What to look for and Who to TRUST.
John Crochet • July 14, 2023
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When reviewing a Professional Employer Organization (PEO) service agreement or contract, there are several important aspects to consider. Here are some key factors to look for:
- Services and Scope: Understand the specific services the PEO will provide to your business, such as payroll administration, employee benefits management, risk management, HR support, and compliance assistance. Ensure that the contract clearly outlines the scope of services and any limitations or exclusions.
- Service Level Agreements (SLAs): Check if the contract includes service level agreements that define performance standards and response times for different aspects of the PEO's services. SLAs provide measurable benchmarks for evaluating the PEO's performance.
- Pricing and Fees: Review the pricing structure and fees associated with the PEO's services. Understand how costs are calculated, whether it's based on a percentage of payroll, a fixed fee, or other factors. Pay attention to additional charges or hidden fees that may apply.
- Contract Term and Renewal: Determine the contract duration and any automatic renewal clauses. Look for provisions that allow for termination or renegotiation of the contract if necessary. Be aware of any notice periods required for termination.
- Liability and Insurance: Clarify the allocation of liabilities between your business and the PEO. Review the insurance coverage the PEO provides, such as workers' compensation insurance, professional liability insurance, and employment practices liability insurance (EPLI).
- Data Security and Confidentiality: Ensure that the contract includes provisions to protect the confidentiality and security of your business's data. Look for clauses that outline the PEO's data protection measures, compliance with data privacy laws, and restrictions on the use of your business's information.
- Compliance and Legal Responsibilities: Verify that the PEO contract explicitly states the PEO's responsibility for compliance with employment laws, tax obligations, and regulatory requirements. Understand how the PEO manages employee-related legal matters and any shared responsibilities between your business and the PEO.
- Dispute Resolution and Contract Termination: Review the dispute resolution process outlined in the contract, including mediation, arbitration, or litigation. Understand the conditions and procedures for contract termination by either party and any associated penalties or obligations.
- Client References and Reviews: Consider requesting references from current or past clients of the PEO. Read reviews or testimonials to gather insights into their experience with the PEO's services and contract terms.
- Legal Review: It's advisable to have the PEO contract reviewed by an attorney who specializes in employment law or contracts. They can provide guidance, identify any potential risks, and ensure that your interests are adequately protected.
Remember, thoroughly reviewing and understanding the PEO contract before signing is crucial to establishing a mutually beneficial relationship and mitigating potential risks or misunderstandings. Engaging a PEO independent broker can provide you with an expert evaluation of the PEO contract, highlighting any potential risks, gaps, or areas that need further negotiation. Their knowledge and experience can help you make an informed decision and choose the right PEO for your business.
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