I had lunch today with the PEO area rep to whom I had just referred a new client. For those unfamiliar with the term, PEO is Professional Employer Organization, the current term for the practice of employee leasing in which a provider pools the employees of many typically small client organizations to achieve the critical mass needed to command lower insurance rates, better benefits, robust payroll services, and a variety of other HR advantages that small companies can’t get by themselves. It’s a great idea for small organizations, both for profit and not-for-profit, if it’s done right by a reputable provider.

My lunch companion related a story of another PEO, a competitor of course, who got themselves into a servicing dilemma and messed up a bunch of client relationships because of a back office practice you wouldn’t normally think to ask about. It went like this:
The company with the employees enters their payroll data via some online data entry form. Pretty common practice with all payroll companies these days. We assume the data gets moved automatically through the payroll process and checks come out the other end reflecting the exact data we entered. Well, maybe not. Turns out one very large PEO has a quirk in their system in which they actually print out the data that their client company has just keyed into the internet, and then they key it a second time into their payroll software! Ouch! Can you just imagine the opportunity for errors in that process? Printing errors, reading errors, keypunch errors, the works.
PEOs are a great idea. I highly recommend the concept. But we always go through a detailed analysis of a company’s needs and how a PEO provider plans to service those needs, and we always have at least 3 PEO companies competing for the business to get the best advantages for our clients. Time intensive? Yes. Worth every minute of it in the long run? You bet.
I welcome your stories about PEOs – the good, the bad, and the ugly. Let me know your thoughts so we can all benefit from your experience.
And if you’re thinking about the idea but don’t know where to start, call me at 888-788-6534.

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