Here at Employers Resource, we recently published our newest eBook, The Anatomy of a PEO Invoice. This eBook is an in-depth guide to PEO billing, and covers a variety of topics that many small business owners interested in PEO services have questions about.
We want to give all of you a small preview of what we cover in the eBook, and will be posting sections of it this month. We previously posted our sections on what’s in a PEO invoice that you’re already paying for, and PEO admin fees and types of PEO invoices. This week, we’re bringing you the sections on the fine print in a PEO invoice, and what additional costs may be hidden in there that you should watch out for.
Keep an eye out for the final section in the coming weeks for more information on PEO billing and invoices, or just download the full eBook here!
The Fine Print
Let’s discuss a few small details to pay attention to that could have a big impact on the amount you pay your PEO in a given year. You should always pay attention to the fine print, but we’ll make it a little easier for you by telling you what to watch out for.
It’s very important to consider what will cost you extra in a given billing cycle with your PEO. Some PEOs will include the following services in their standard admin fees. Others will charge you extra using an à la carte service model, and you’ll pay for it when you need those extra services.
Ask the sales representative what your setup fees will look like. Setup fees vary greatly from PEO to PEO. Setup fees can be a large check you have to cut right after signing up. It’s important to know the per employee setup fees you will be paying the PEO and factor it in while choosing between PEO companies. Some sales teams are given complete freedom to set these fees at whatever they can get away with and pocket the extra! It’s also a common trick to use setup fees to recoup dollars lost because of low admin fees that were set as a first year rate to lock the client in and then raise their rate each year.
It’s also important to ask the PEO whether they charge extra for things like:
- Background Checks.
- EPLI (for example: $0.75 per employee, per week).
- Pre-employment testing.
- Additional cost per-claim, and flat fees for claims over a certain dollar amount.
- Resume screening.
- Customized employee handbooks.
- Performance appraisals.
- Rewards and recognition programs.
- Position descriptions.
- Wellness programs and tools.
- Drug-free workplace.
- Training (employee and managerial).
- W2 reprints.
- Bank wires.
- Unemployment claims processing.
- 1099 year-end processing.
- Specialty reporting for job costing or certified payroll.
- Other specialty reporting.
- Online access to payment information or reports.
- HR software like HRIS.
- Timekeeping software and hardware.
- Software integrations and custom imports/exports of data.
- Payroll delivery (multiple check delivery locations will usually incur a Fedex charge).
Caps vs. No Caps (Wage Limits)
Does the PEO Paying out caps vs. not paying out caps? Do they honor wage limits or caps?
It has finally become very rare. But, there are still some PEOs that do not recognize wage caps.
When negotiating with a PEO company, make sure you ask this question: “Do you honor wage limits?” Some PEOs don’t and they simply won’t bring it up. We at Employers Resource do honor wage limits that affect these key areas:
- Tax limitations.
- Executive wage caps (Work comp premiums).
- Some states’ disability insurance benefits.
Sometimes, a PEO will collect more SUI funds than are needed on behalf of the client. The state will issue a refund to the PEO for what was overpaid. Most PEOs refund this money to the client, but not all of them.
Check the fine print here. It can be a significant amount of money at the end of a given year.
Client Service Agreement
Make sure you take a close look at the Client Service Agreement. This is what the PEO is actually agreeing to do at the rate they have quoted you. Make sure you understand the terms. Look for any fees that might surface if you choose to end the relationship, as well as any other hidden fees or charges. Look for clear and simple language.
Is it saturated with legal jargon and attempt to confuse their clients? This can be a warning sign.