To PEO Or Not To PEO

I have always pondered why small employers have not migrated into the world of Professional Employer Organization’s (PEO’s).  Afterall, who would not want to look, and feel, bigger and better than they do now?  Why would having access to large group benefits as a small employer not be a ticket to cash on in?

Employers are generally aware of the various PEO’s that are available in the market.  Sales reps knock on their doors quite often.  It is also a topic most brokers thoroughly discuss during renewal time.  This conversation should be desired by employers as standard carriers in the health insurance industry continue to raise premiums and reduce their benefits.

The reasons I have heard for not pursuing a proposal from a PEO have been noted over the years.  They range from the requirements to obtain a quote are far too labor intensive; the office manager, or human resource position, is threatened; to the loss in autonomy of the company is not worth giving up.  All valid concerns, but I might question if they have merit and outweigh the advantages a PEO may provide.

The first advantage of a PEO is the employee’s access to Fortune 500 benefits that include Medical, Dental, Life, & Disability Insurance, Voluntary products, and 401k investments.  When it comes to attracting and retaining high level employee’s I can think of no better way than to offer quality benefits at affordable premiums.  Reductions in overall cost to the employer are created when significant medical, and workers compensation, savings are generated by engaging with a PEO.   From my perspective, putting in short-term efforts for a proposal could have advantageous long-term effects for both employer and employee.

The second advantage are the reduction in administrative roles within the company.  These include, but are not limited to, onboarding/terminating employees, payroll deductions, benefit decisions, enrollment, compliance, and conflict resolution. The office manager/HR person must simultaneously juggle all these responsibilities.  Working with a PEO Service expert, who takes over these roles, enables time for more pressing issues a company may experience.  These newfound freedoms can turn out very favorable to the office manager/HR person who is looking to diversify their current role at the company.

The third advantage is peace of mind that a PEO delivers to the employer.  ERISA, OSHA, DOL, etc., have most of us looking in the rear-view mirror all the time.  With all the government regulations, changes in our environment (hello COVID-19!), and litigious nature of employees, a PEO removes these concerns by taking on, and being liable for, these myriads of responsibilities.  Their constantly moving parts are often too difficult to stay on top of by oneself.  Autonomy has its rewards but, unfortunately, the price to pay for taking on everything alone can be steep.

Although identifying the right PEO partner does require you to share more information than you might for a traditional medical quote; when you consider all of the different costs required to run your business such as insurance premiums (medical, dental, vision & others), workers compensation, payroll, compliance, and taxes, there are many different ways that a PEO can provide operational direction,  effectiveness & savings…..providing the required information is often worth seeing how the large employer lives.