‹ Back

Knowing what is, and what isn't negotiable in PEO Contracts is a huge part of the game!  In this article we'll attempt to delineate where you should focus your pencil sharpening skills when it comes time to choose a PEO partner.

 

1.) Medical

 

Medical is very often the big number.  Most PEOs operate with a set margin built in to the into the medical premiums they put in front of the customer the first time they present pricing.  The flexibility is given the nature of the PEO's relationship with their carrier.  Very often the Carrier gives initial pricing for each group to the PEO and the PEO changes then modifies that pricing based upon what they think the reps can sell and it is incumbent upon the future client to say they want that rate lowered!!  Not every PEO does this, but it never hurts to ask.

 

2.) Worker's Comp Rates

 

Worker's Comp has a similar position in the negotiable heirarchy!  Often times we'll see tech clients on PEOs like Rippling and TriNet getting absolutely gouged by the PEO on an insurance they'll probably never use in their entire relationship with the PEO.  Get a quote from an "open market carrier" to make sure the PEO isn't building in margin on the "after-thought" insurances.  We do it in every single deal.

 

3.) Per Employee Per Month cost (or percentage of payroll)

 

The service fee is always negotiable.  And negotiate you should.  Scrupulous PEOs will tell you this is where the PEO makes it's money and there's no reason you need to be their most profitable client!!  Having several PEOs compete is the quickest way to the "street price" but if you just want to shop one PEO don't forget to negotiate heavily on this front.

 

4.) SUTA

 

Wait... you're telling me I can negotiate on what taxes I'm paying!?  I thought the only sure things were death and taxes.  Well... turns out PEOs have several entities and quite a bit of flexibility as to what EIN they file under for SUTA.  We've even seen some PEOs reporting under their own EDD number in client report states like California.  So digging in to the weeds here is crucial for making sure you aren't paying more than your fair share of taxes to Uncle Sam.

 

5.) Nickle and Dime Fees

 

Don't want that Cobra administration fee?  Ask for it to be removed?  Is there a newhire fee?  Get it gone or I'm not coming aboard.  Implementation fee!?  JustWorks doesn't charge one of those, why on earth should I pay you one?!  Ask on every single one and you'll be shocked how quickly those fees fall off the contract.

 

6.) Renewals and growth

 

Don't for one second think that once you're on a PEO you're stuck at the price you were given when you came onboard.  Every year you should negotiate at renewal for better rates if you've grown and if you've proven you're low risk.  Far too often we see clients take a super low renewal increase and be extremely happy about it.  Those are your years to be negotiating hard for NEGATIVE renewals since you've proven you're low risk!  Don't only try to negotiate when you've had a rough year!

 

In summation, everything is negotiable!  But these 6 areas are where you should focus and we're here to help!