PEO Danger Signs

 

Partnering with a professional employer organization can help you offer better benefits, but there are risks to consider. Most states have lax regulations on PEOs, warns David West, executive director of the Center for a Changing Workforce, a workers' rights advocacy group based in Seattle. If your PEO is poorly managed, or goes bankrupt, you could wind up with an office full of uninsured workers. To make sure that doesn't happen, watch for these four warning signs while shopping for a PEO.

  1. Lax due diligence
    PEOs share liability with clients, so expect them to quiz you extensively about your company's workplace safety and HR policies. If a PEO is looking for a fast deal, think twice about the partnership.

  2. A leave-the-details-to-us attitude
    Before signing a contract, ask the PEO for specifics on insurance providers and creditors. Some PEOs will even turn over their financials. A PEO that isn't forthcoming could be hiding something.

  3. A recent name change
    This could be a sign that the company has had trouble in the past. To cover your bases, search the Internet for news stories about the PEO--and, of course, ask for references.

  4. The promise of huge savings
    Responsible PEOs don't tout cost cutting as their main function. You may save some money by partnering with one, but be suspicious of savings greater than a small percentage.

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    • Max Chafkin

    Senior writer Max Chafkin has profiled companies such as Yelp, Zappos, Twitter, Threadless, and Tesla for the magazine. He lives in Brooklyn, New York.


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