SITUATION
When Peter Mathis learned that a former employee had fi led a complaint alleging that Ready Delivery, his Albuquerque-based freight hauling business, had fi red her because of her race, it seemed like the right time to rethink his company's human resource management methods. The complaint was eventually dismissed, but that didn't stop Mathis from worrying about the possibility that other employee problems might arise in the future. And with 12 workers already on the payroll, he was finding that the paperwork associated with payroll preparation, government regulation, tax reporting, and other human resource management matters was beginning to consume too much of his time at the office.

A professional employer organization (PEO) approached him about taking over much of Ready Delivery's human resource management work. It would cost the company 3 percent of payroll, but the PEO could also offer additional benefits and services (at additional cost, of course) that might help the company in other ways, too. For example, joining the PEO would give Mathis's employees access to better health and dental care plans that would actually be less expensive than those the company currently offered. It could also provide affordable group life insurance benefits, making the switch even more attractive. Mathis realized that partnering with the PEO could reduce his flexibility in selecting benefit options, but he was nonetheless giving serious consideration to accepting the offer

Question 1 How can Mathis be sure that the PEO is reputable and that his company and employees will receive real value for the money?

Question 2 How might contracting with the PEO affect employee relationships at Ready Delivery? Is there any chance that his employees' loyalty might be transferred to their new "employer"?

Question 3 What steps should Mathis take before entering into an agreement with the PEO?