A professional employer organisation contract is a client service agreement, and the clauses that decide how the relationship goes are rarely the ones buyers read hardest. The fee is negotiated and the term, the indemnities and the exit are usually accepted as drafted, which is the wrong way round.
Term, notice and renewal
Look for the initial term, the notice period and whether renewal is automatic. Auto-renewal with a long notice window is the clause that quietly removes your option to leave, because the moment you want to go is rarely the moment the window is open. Negotiate the notice before you sign; it is far easier than negotiating it later.
Allocation of duties and indemnities
The agreement should say which employer duties sit with the provider and which with you, and the indemnities should follow that split. Read them against the way claims actually arise: allegations about how somebody was treated follow the party doing the treating, so an indemnity that appears to cover conduct is worth reading twice. If the split in the contract does not match the split you were sold, the contract is the one that governs.
Fees, pass-throughs and the exit
Get the administrative fee, everything passed through, and every one-off charge into the same schedule: setup, benefit costs, workers' compensation premium, state unemployment, and anything payable on termination. Then ask what happens at exit to benefits, to your state unemployment accounts and rate, and to your workers' compensation loss history. Those answers belong in the contract rather than in an email from a salesperson.
Questions people ask about peo contract
What should I check in a PEO contract?
Term, notice and auto-renewal; the allocation of employer duties and the indemnities that follow it; and a single schedule containing the fee, every pass-through and every one-off charge including at exit.
Are PEO contracts negotiable?
The notice period and the fee usually are. The allocation of duties is harder to move but worth understanding precisely, because it is what governs when something goes wrong.
What happens at the end of a PEO contract?
Your staff come off the provider's benefit plans, you may need to re-establish state unemployment accounts and obtain a rate, and you will want your workers' compensation loss history. Get all three into the contract rather than trusting to goodwill.