Choosing a PEO is a significant business decision with long-term implications. Asking the right questions before signing protects you from costly mistakes and ensures you’re partnering with a provider that truly meets your needs.
Here are the essential questions to ask every PEO you’re considering.
About Their Experience and Reputation
1. How long have you been in business? Established PEOs with 10+ years demonstrate stability. Newer providers aren’t necessarily bad, but require extra diligence.
2. How many clients and employees do you currently serve? Size indicates scale, stability, and purchasing power. Very small PEOs may lack resources; very large ones may lack personalized attention.
3. What’s your client retention rate? PEOs with 90%+ annual retention typically deliver strong service. High turnover indicates problems.
4. Can you provide three client references in my industry and size? Always check references. If a PEO can’t provide them, that’s a red flag.
5. What’s your rating with the Better Business Bureau? Check BBB ratings and read complaints to understand common issues.
6. Are you CPEO certified and ESAC accredited? These certifications indicate financial stability and operational standards. While not required, they significantly reduce your risk.
About Service Delivery
7. Who will be my dedicated account manager? Meet your actual account manager (not just the sales rep) before signing. Your experience largely depends on this person.
8. How many clients does my account manager handle? Reps handling 30-40 clients provide better attention than those with 80-100. More than 100 is a red flag.
9. What’s your average response time for urgent issues? “Same day” or “within 2-4 hours” is reasonable. “24-48 hours” for urgent matters is problematic.
10. How do my employees get benefits and HR questions answered? Understand the process. Dedicated support line? Portal? Email? Average response time?
11. What happens if I’m unhappy with my account manager? Can you request a different rep? What’s the process? Good PEOs accommodate this.
12. Do you provide on-site support or is everything remote? Some PEOs offer on-site visits; others are entirely virtual. Know what to expect.
About Technology
13. Can I see a demo of your platform? Always see the actual system you’ll use. Test it from both employer and employee perspectives.
14. Is your platform mobile-accessible? Modern employees expect mobile access for pay stubs, time-off requests, and benefits information.
15. What integrations do you offer? If you use accounting software, time tracking systems, or other tools, verify integration capabilities.
16. How often do you update your platform? Technology should be continuously improved. Platforms that haven’t changed in years will frustrate you.
17. What reporting capabilities do you provide? Verify you can generate the reports you need: payroll summaries, benefits participation, workers’ comp data, etc.
About Benefits
18. Which health insurance carriers do you work with? Multiple major carriers (Blue Cross, Aetna, UnitedHealthcare, Cigna) provide better options than single-carrier arrangements.
19. How many health plan options will my employees have? Ideally 3-5 plans with varying deductibles and premium levels.
20. What are your benefits costs for my company? Request specific quotes for plans appropriate to your workforce.
21. Do you mark up benefits costs beyond actual premiums? Some PEOs add margins to insurance premiums. Ask for transparency about actual carrier costs vs. what you’re charged.
22. What 401(k) provider do you use, and what are the fees? 401(k) quality and costs vary significantly. Understand investment options and administrative fees.
23. What happens during open enrollment? How is it managed? What support do employees receive? How long does the process take?
About Workers’ Compensation
24. What’s your experience modification rate (e-mod)? Lower is better. The PEO’s e-mod affects your workers’ comp rates.
25. Which workers’ comp carrier provides coverage? Established carriers with strong reputations are preferable to unknowns.
26. What safety programs do you provide? Training, on-site assessments, safety committee support, and other programs reduce claims and costs.
27. How do you handle workers’ comp claims? What’s the process? Who’s the point of contact? Average claim resolution time?
28. What’s included in your workers’ comp rate quote? Verify the quote includes everything (no hidden fees or charges).
About Compliance
29. How do you stay current with changing employment laws? Do they have dedicated compliance staff? How do they communicate changes to clients?
30. What compliance support do you provide? Employee handbooks? Policy updates? Multi-state compliance? Training?
31. Do you have experience with [specific regulation relevant to your industry]? If you’re in healthcare, construction, or other regulated industries, verify relevant expertise.
32. What happens if you make a compliance mistake? Who’s liable? How do they correct errors? Have they ever faced penalties?
About Pricing
33. What’s your complete pricing including all fees? Don’t accept vague answers. Get a complete breakdown of every cost.
34. Are there implementation or setup fees? Many PEOs charge $500-$5,000 to onboard new clients. Ask if this can be waived.
35. What services are included vs. extra cost? Clarify exactly what’s covered by your base rate.
36. How much do rates typically increase at renewal? Understanding annual rate increases helps with long-term budgeting.
37. Can you guarantee rates for multiple years? Some PEOs offer 2-3 year rate guarantees. Worth asking about.
About the Contract
38. What’s the contract term and renewal process? Most are annual with auto-renewal. Understand notice requirements to avoid getting locked in unwittingly.
39. What are the termination provisions? Can you leave at any time? Are there penalties? What’s required notice?
40. What happens if you fail to pay payroll taxes? For CPEOs, they’re liable. For non-certified PEOs, you might be. Clarify this explicitly.
41. Can I have my attorney review the contract before signing? Any reputable PEO should welcome this. Resistance is a red flag.
About Their Company
42. Who owns your company? Family-owned? Private equity? Public? Ownership affects priorities and stability.
43. What’s your financial stability? While they won’t share detailed financials, you can ask about bonding, insurance, and general financial health.
44. Have you ever had certification suspended or revoked? If yes, understanding why is critical.
45. Are there any lawsuits or regulatory actions against your company? Public companies have this information available. Private companies should answer honestly.
Industry-Specific Questions
If you’re in construction:
- Do you have experience with certified payroll and prevailing wage?
- Can you handle union contractors?
- What construction-specific safety programs do you offer?
If you’re in healthcare:
- Do you understand HIPAA requirements?
- Can you handle credentialing and licensing tracking?
- Do you provide Business Associate Agreements?
If you’re distributed/remote:
- How many states do you currently serve?
- How efficiently can you add employees in new states?
- What’s your experience with multi-state compliance?
Red Flags in Responses
Watch out for:
- Evasive or vague answers to direct questions
- Unwillingness to provide references
- Pressure to sign quickly without time to review
- Inability to provide clear, written pricing
- Reluctance to allow contract review by attorney
- Defensive responses to reasonable questions
- Answers that sound too good to be true
Using Answers to Make Decisions
Create a scorecard comparing PEOs on:
- Service quality indicators (response time, account manager load)
- Technology capabilities
- Benefits options and pricing
- Workers’ comp rates
- Compliance support
- Overall costs
- Cultural fit with your company
Weight factors based on your priorities. If benefits are your main concern, weight that heavily. If technology matters most, prioritize accordingly.
The Questions PEOs Should Ask You
Good PEOs also ask detailed questions about:
- Your business, industry, and operations
- Your current pain points with HR
- Your growth plans
- Your budget parameters
- Your technology needs
- Your compliance concerns
If a PEO doesn’t ask detailed questions about YOUR needs, they’re not truly trying to determine if they’re a good fit—they’re just trying to close a sale.
Moving Forward
Don’t sign with any PEO until you’ve:
- Asked all relevant questions from this list
- Checked references thoroughly
- Seen the platform demo
- Had your attorney review the contract
- Compared at least 3 different providers
- Met your actual account manager
- Verified accreditation and ratings
Taking time upfront prevents years of regret.
Want expert guidance on evaluating PEOs and asking the right questions? Contact PEO Consulting Partners for a free consultation. We know exactly what questions matter most for your situation and ensure you get complete, honest answers before you commit—at no cost to you.