PEO Contract Terms to Check
The clauses to review before signing a PEO service agreement.
A PEO agreement sets cost, risk and how easy it is to leave. Review these terms and have an attorney read the final contract.
Checklist
- Term and renewal: length, auto-renewal and cancellation notice.
- Termination fees: early-exit charges and what happens to unpaid fees.
- Fees: per-employee or percentage of payroll, minimum fees, and how increases are set.
- Benefits: carriers, plan renewal dates, contribution rules and participation minimums.
- Workers' comp and unemployment tax: who holds the account, how rates are set and what transfers when you leave.
- Liability: who is responsible for compliance, claims and indemnification.
- Data: ability to export payroll and employee records at exit.
- Certification: whether the entity is an IRS certified PEO and ESAC accredited.
Questions
Are PEO contracts auto-renewing?
Many are. Check the renewal clause and the notice period required to cancel.
Who controls my workers' comp and unemployment tax rates?
Under a PEO, rates may be based on the PEO's pool or account rather than your own history, which affects cost and what you take with you when you leave.
General information, not legal advice.