An end to annoying paperwork?

FSB Magazine -- Dear FSB: I enjoyed the March 2007 article "Cure Your HR Ills." I own a small real estate firm that began using a Professional Employer Organization (PEO) years ago when I saw I couldn't compete with larger companies' benefits. But because of huge increases in our medical-benefits costs, I'm reassessing our current PEO and talking to others. What's the best way to choose the right PEO? - James R. Wacht, New York City

Dear James: Some firms in this fast-growing industry generate lots of complaints, so use the National Association of Professional Employer Organizations, which gives tips for choosing a PEO on its website, napeo.org. Check the site's directory to ensure that any PEO you're considering is a NAPEO member and meets its standards. Then, NAPEO suggests, you should research the company's background and ask for banking and credit references.

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The association also urges you to review each PEO's service agreement, or have your lawyer do so, with special attention to any guarantees. Consider which PEOs know your industry. "Trucking firms need different services from law firms," says Layne Davlin, CEO of NetPEO (netpeo.com), based in Lawrenceville, Ga. NetPEO represents PEOs and matches them with the companies that use them, collecting a commission from the PEOs. "Ask how many other real estate firm clients the PEO has had. Then ask to speak to some of them. See if they're happy." Davlin adds, "Any firm that handles complex employee-benefits programs and payroll operations can make an occasional mistake. But ask how quickly, politely, and effectively the PEO fixed any errors. That's what separates the good ones from the bad apples."