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PEO Insurance & HR

Professional services outsourced for businesses.

While growing your business, there is never a shortage of tasks on your plate. Maintaining your vision and ensuring your future impact may seem like a challenge when you get bogged down with back-office administration. Some organizations may find that PEOs are able to take those cumbersome tasks off their plate.

What is a PEO?

A PEO, or Professional Employer Organization, is an outsourcing option for payroll, human resources, employee benefits, workers comp, and compliance. When you hire a PEO, they become the professional employer of record (also known as a co-employment relationship). Through this contractual agreement, your payroll is run under the PEO’s Tax ID, which allows them to take on certain aspects associated with your company’s HR functions.

Why would an employer consider using a PEO?

Pros of a PEO:

  • Consolidation: Employers are able to focus on what is important to them by outsourcing any HR-specific responsibilities they don’t want to be burdened with. Additionally, it is all done by one organization which simplifies the process further.
  • Pooled Medical Insurance: For small to mid-sized businesses, medical insurance can be a huge expense. PEOs are able to offer competitive pricing in this space because they group other businesses they work with into a larger “pool” that the insurance carriers find more favorable. As a result, organizations utilizing PEOs for employee benefits generally see competitive premiums on their insurance.
  • Compliance and Regulation: Your company is able to stay up to date on compliance-related issues with the backing that PEOs offer. They are able to provide assistance with the ever-changing rules and regulations, ensuring that you and your company have up-to-date employee handbooks. Additionally, they offer access to certified HR professionals that are there to provide trustworthy guidance in order to prevent and resolve challenging situations and compliance issues.

Cons of a PEO:

  • Cost: The two main ways in which they charge for their services are either through a percentage of payroll or using a set per-employee-per-month (PEPM) fee. With the percentage of payroll method, the PEO can charge up to 15% of your total payroll for each pay period; additionally, there is an administrative fee that can vary throughout the year. With the PEPM model, the fee is negotiated directly with the PEO when you sign up, but there is also an initial setup fee. Furthermore, it can be difficult to determine how much you are paying for a specific service when the invoice combines them all together. Regardless of which structure is utilized, the pricing of PEOs can be ambiguous, and often have hidden fees.
  • Customer Service: Have you ever called a 1 (800) number and been tossed between several departments to get the answer you called about? With PEOs, that may be the reality simply because they support a wide breadth of businesses and generally do not offer direct contact to a dedicated support member.
  • Limited Plan Options: PEOs offer limited access to health insurance carriers. Although they provide a variety of plan designs, they typically only offer plans from one carrier (i.e. United Healthcare). If you have a desire to be covered by a specific carrier that is not represented by the PEO, then a PEO may not be your best option.
  • Loss of Control: When PEOs become the professional employer of record, you are granting them access to dictate your company’s policies and procedures.
  • Inflexible Contracts: Unlike changing brokers, getting out of your PEO contract can be an inconvenient headache. More often than not, the PEO files the payroll taxes under their own Federal Employer Identification Number. After the separation, you would need to prepare to file them independently, as well as establishing plans for your employee benefits and retirement plans.

Is a PEO Right for Me?

There are a plethora of options out there. PEOs certainly have their niche and some businesses may find that they are the best option for where they currently stand. However, analyzing your company’s needs, long-term objectives, and overarching vision should be a prerequisite before making the decision.

4 Reasons You May Consider a PEO For Your Business

Access to a Pooled Insurance Plan

By pooling all its client companies together, a PEO has greater buying power when it comes to negotiating rates with benefit providers.

Relief From Payroll Overload

Pass off your daily HR duties—administering benefits, managing employee paperwork, processing payroll and tax reporting to a group that specializes in Human Resources.

Ongoing Government Compliance Assistance

It’s your PEOs job to constantly monitor changes to state and federal labor laws that could affect your business as well as advise you on what actions you need to take to comply.

Worker’s Compensation Coverage

A PEO can provide Worker’s comp coverage to protect you from work-related injury claims.

Employees Desire Additional Lines of Coverage

In addition to the direct financial return on investment, companies have seen reductions in employee absenteeism, staff turnover and employee stress. Interested in seeing these results?