Entering into a co-employment with a PEO offers various benefits. It lets you focus on other crucial activities by offloading HR roles and reducing risks and liabilities. As such, it is essential to understand the structure and terms of a PEO agreement.
What is a PEO contract?
A PEO agreement is a legally binding document that contains all the terms and conditions of your business with the PEO company. The contract begins a relationship and defines and allocates responsibilities between your business and the PEO provider. It will include the terms of PEO Payroll Services, employee benefit plans, and other services. A PEO contract contains numerous clauses and details, and there is a lot you need to know about it.
Here are the agreement terms you need to know about a PEO contract
The PEO company will describe its scope of services under this section. Also, it shows the terms and conditions for any employees the PEO leases. Their services are ideal for Streamlining Business Operations and enhancing efficiency.
- 2. Workers Compensation
PEO can manage your worker compensation coverage, adhering to local compensation laws. The contract will contain a workers’ compensation section acknowledging the PEO’s responsibility for managing workers’ compensation claims and related issues.
- Term of agreement
The term of agreement section contains the rules surrounding the beginning of the relationship. Also, it reveals the duration of the contract and contract renewal cycles and states the nature of the relationship if you lay off your employees under unforeseen circumstances.
- 4. Limit of services
A PEO company will provide essential services like Efficient Payroll Management. However, the contract will include services that the provider does not offer. Check the section to know the limit of services, as it will affect most of your business-related decisions.
- Benefit plan
A PEO contract contains a section that details benefits plans offered to your employees. Also, it includes the terms and conditions for any changes the PEO makes regarding the benefits plans during the contract period.
- Service fee
As a business owner, you’ll need to know the cost of acquiring the services of a PEO. The contract contains payment details, including payment modes, time of payment, penalties for delayed payments, etc.
Benefits of signing a PEO contract
- Sets the right expectations: a PEO contract states the correct range of employment as it has clauses that mention the scope of employment responsibilities that the PEO will cover.
- Gives clarity of risks and liabilities: partnering with a PEO enables you to comply with all local payroll and taxes laws. The scope of employment terms gives you a proper understanding of the compliance risks.
- Provides more transparency: A PEO contract outlines the terms, conditions, processes, pricing and everything regarding the relationship. As such, it increases the transparency levels, increasing your confidence to work with the provider.
- Clarity on termination: Terminating a PEO contract is risky and can cost your business when wronged. Fortunately, a PEO agreement contains clauses detailing your exit to ensure your termination is managed by settling all final dues and compliance with local laws.
Signing a PEO agreement is essential for all businesses. It allows you to enjoy all the benefits of working with a PEO, such as peace of mind and improved efficiency, and stay compliant. But before that, you need to know the above things about your contract to ensure it suits your company.