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You may have some clients who are so tired of human resources issues that they want to outsource some or all of their employees.

One way to give those clients administrative relief may be to hook them up with a good professional employer organization, a company that will act as the employer for your clients employees.

But finding the right “co-employer” is easier said than done. What your client needs is the PEO equivalent of a low-price, off-the-rack suit that fits as if it were custom-tailored. Otherwise, the results could be disastrous.

Here are some ways to separate the wheat from the chaff.

1. Make sure the price makes sense.

In the PEO market, a price that looks too good to be true probably is too good to be true. A PEO that advertises an unrealistically low initial rate may up its rates 6 months down the road.

2. Find a PEO with a benefits package designed especially for workers who resemble your clients current workers.

A PEO that mixes your clients healthy, well-behaved bookkeepers and secretaries with other employers hard-living riffraff almost guarantees that your clients health insurance rates and workers comp rates will skyrocket.

Along the same lines, even something that sounds as if it ought to be pretty basic, such as payroll, ends up working much differently for some types of workers than for others. Payroll for a successful sales rep will not be the same as payroll for a factory worker who earns the minimum wage.

3. Demand a solid benefits package.

To make the cut, PEO candidates should offer a benefits package that:

–Provides coverage for new hires soon after they start working.

–Has no pre-existing condition exclusionary clauses.

–Contains no individual underwriting.

–Offers guaranteed issue coverage.

4. Look for a quality provider network.

Your clients need a PEO that has a stable health care provider network and modern administration systems. For clients who have any employees working out of state, picking a PEO with a national presence is also important.

5. See if the PEO employs solid professionals in its own organization.

Does the PEO you are considering have the expertise and the cash to deploy human resources managers who understand your clients business? If PEO HR managers havent provided services to workers who look like your clients workers, you and they may encounter some sticky problems down the road.

6. Opt for a PEO with a brand-name, Web-enabled human resources information system.

Web tools may look like a frill today, but they could be a godsend around midnight some night when your client really, really needs HR information.

7. Ask for references.

Of course. But someone should actually check the references. Can the PEO provide valid contact information?

is general counsel and executive vice president of strategic development at TriNet Group Inc., San Leandro, Calif., a human resources outsourcing firm. He can be reached at greg.hammond@trinet.com.


Reproduced from National Underwriter Edition, August 5, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.