Wondering what a contract with a professional employer organization (PEO) might entail? In this post, we’ll go through what you can expect to find in a PEO agreement—and how this agreement is important to your relationship with a PEO.
What is a PEO agreement?
A PEO agreement (also known as a PEO client service agreement) is a legal document that precisely spells out who’s responsible for what in the co-employer arrangement. In addition to identifying responsibilities of each party, the agreement also defines what employees are covered under the agreement.A PEO agreement (also known as a PEO client service agreement) is a legal document that precisely spells out who’s responsible for what in the co-employer arrangement. Click To Tweet
Get an in-depth explanation of what PEOs are and how they benefit small businesses. Download Everything you need to know about PEOs: A step-by-step guide today!
What does a PEO agreement contain?
At Genesis, our PEO agreement has two parts: Part A, a client service agreement and Part B, which includes terms and conditions, fees and payment terms, a schedule of employee benefit plans, and state-specific provisions.
Part A is about two pages long and contains the following:
- A statement of the relationship established and restriction of liabilities between Genesis and the client.
- The services Genesis will provide, including:
- Employee benefits
- 401(k) plans
- Workers’ compensation
- Employer compliance
- Employer practices liability insurance
- Payroll processing and tax administration
- Human resource policies and practices
- Access to online HR information systems
- Personnel records
- Additional elective services
- The terms of the contract: the date on which the PEO agreement becomes effective and the length of the agreement.
- Terms and conditions (outlined in part B of this article).
- Signature lines for both the client and the PEO.
Part B is longer than Part A and contains the meat of the document—a line-item look at the expected costs of the PEO relationship. It includes the following sections:
- Terms and conditions
- Fees and payment terms
- A schedule of employee benefit plans
- State-specific provisions.
Part B goes through the details of each aspect of the PEO relationship from a legal perspective, from processing payroll to securing insurance to remitting taxes to 401(k) administration.
It also defines the co-employment relationship—responsibilities touch both employers, but the PEO takes the burden of administration.
Why PEO Agreements Matter: Transparency & Expectations
Everything outlined in your PEO agreement should be clear to you. In plain English, it should explain your company’s expectations, the PEO’s expectations, and the cost of the services the PEO will provide.
Additionally, the PEO arrangement you sign should set clear expectations of both the PEO and the PEO client. It’s imperative to read through your PEO agreement and understand what exactly you’re entering into, just like with any legal document. (Practically, that means don’t stop reading your agreement just because it’s long!)
One benefit of a PEO agreement that sometimes surprises clients: It may help your company identify where it can reassign administrative resources. Because the HR roles and responsibilities are outlined in the contract, you can clearly see what’s shifting over to Genesis; you can then use this as a template for identifying areas that can be reassigned to other, more important roles within the business.
We might be the PEO company you’re looking for. Let’s find out!
If you’d like to find out more about PEO arrangements, let’s schedule a free discovery call now. We’ll show you how we can help your organization relieve the burden of HR, payroll, benefits administration, and more.