Small Businesses - "Buyer Beware!"

For those of you who are a small business and not aware of the term PEO or ASO you need to be. They are nothing new however; their numbers are on the rise and their increase in business is staggering. Most of all they target small businesses. I do not mean this is a negative way as most are without a doubt the best thing that could have happened to a small business.
The problem is the lack of state or federal regulation which has and could put many more American workers and their employees at risk. For anyone who does not understand the term PEO it stands for Professional Employer Organization and places the small business’ employees under the PEO’s worker’s comp insurance master policy thus in many cases reducing the rates for the small business. The PEO is responsible for the collection of all payroll expenses and payment of payroll costs such as FUTA, SUTA, payroll taxes, etc, The PEO also has other responsibilities depending on the agreement with the client. Here is where the problem comes into play. If the PEO fails to report or pay properly it is still remains the responsibility and problem for the small business. The have been recent cases where the PEO collected SUTA and did not and not pay the state on the client’s behalf leaving many employers without WC coverage and wondering how to pay the state for unpaid debts. In almost every case payroll is sold in conjunction with the PEO plan (which is a great thing unless your PEO fails in their duties). This caused our company to start investing more time into checking out the PEOs we broker for. What we found was no less than shocking. When we called the states to see if the PEO was properly licensed they were not allowed to provide that information Even in states where the PEOs fall under the jurisdiction of the Insurance Commissions office. If someone had a real estate license was not problem or an insurance license was very easy. But to inquire about proper licensing of at PEO was not possible.  We stated reviewing the laws from each state and went back better armed and found that not one state oversight office we spoke with had any real efforts underway to put forth investigations of even those who violate the law. One state told us that they really don’t do anything if they catch a company violating the law except ask them to get licensed. What??? I would recommend checking your PEO out for its financial strength to ensure they can pay the bills. If you have not selected one read your agreement prior to signing and if you do not fully understand it or what could happen to you should they become neglectful in their responsibilities, then have either a PEO broker or an attorney (one who specializes in either labor law or PEOs) review your contract. Each of them can shed some light on the subject. Understand that the broker is going to try to show you a better deal and the attorney is most likely going to want to charge a good bit. PEO are the best thing that has happened to the small business sector since the SBA loan. If the company is strong/reliable and the agreement you sign is a good one then I could not give a higher thumbs up to moving ahead. If you are unsure? BUY BEWARE!!! Prior to becoming a PEO broker I was first introduced to the idea by a person who walked into our small business. He sat down and explained that I could reduce my workload, cut employee liability and in the long run increase revenues. I was sold hook line and sinker. I later owned another small company and the PEO was my first call.I guess you could say I was sold into the business and love my decisions.I was in the mortgage industry and saw who lack of regulation could take down a whole industry and harm the consumer. The PEO industry is much the same. It is such a great concept that many small businesses have and will continue to sign on to the program. Along with great ideas and large sums of money (saved or spent) comes the wolves in sheep’s clothing.My only caution is again, BUYER BEWARE! If this post helps one business to not be taken for a ride and at the same time benefit from what is a great concept then the  purpose of this post has been served.