Few, if any, small businesses can afford a full-time staff consisting of a human resource professional, a risk manager, payroll specialist, and a benefits manager. We had received phone calls from companies in the past wanting to discuss how they could take over some of these human resource responsibilities, but I always felt it was soft dollars and wasn’t really interested. Then, I was introduced to someone from a Professional Employer Organization (PEO) company in a Networking Group, and learned that we could save money on health insurance and other areas of the business, so I decided to do some investigating.
A Professional Employer Organization enables clients to cost-effectively outsource the management of human resources, employee benefits and administration, payroll, payroll taxes, workers’ compensation, unemployment administration and retirement services.
The initial driving force for Innerspace was to save money on health insurance. We had an employee who had the family plan and it was so expensive that we were afraid we might lose a valuable employee to another industry. We were paying 50% of the individual rate for all our employees plus providing each person with an HRA (Heath Reimbursement Arrangement) that covered most of the deductible, but it just wasn’t enough.
Our Controller took on the task of getting presentations from six different PEO companies.
Those six companies were Prestige, ADP, Tri-Net, Insperity, Paychex, and Marshall & Sterling. After a few months of evaluation, we decided on Prestige. What we liked about Prestige was we could still use our health insurance broker, as another layer of communication to resolve insurance issues. Also, we liked that Prestige had a “boutique style” to their customer support.
Our employees now have sixteen different health insurance options to choose from versus two to choose from on our old plan. Each employee receives $10,000 in life insurance at no cost, and have the ability to buy more at very reasonable prices. There are better vision and dental plans to choose from than we were able to get as a small company, and our 401K administration costs are less expensive than what we were paying.
For the company, we are provided with $1,000,000 EPLI (Employment Practices Liability Insurance). Something we never had. We also have access to their lawyers, at no charge, for any employment related issue. Additionally, we will not have to do a yearly Workman’s Compensation audit each year, as the PEO will handle that for us.
We also have access to unlimited seminars and training for safety in the workplace, including, quit smoking programs, hiring and termination, sexual harassment etc. Our PEO completes our COBRA filing and collections, and they are able to complete a much more thorough background check than we ever could; this is part of the hiring process and there is no extra fee involved.
Be aware that a plan is expensive to implement due to the salesperson’s commission. That being said, it appears we will enjoy a savings of $22,000 in 2017, along with all the additional services that I’ve discussed above. Our medical plans went from $ 148,000 in 2016 to $ 128, 000, and that does not take into account that our insurance plan would have increased at a minimum of 12% starting May 1, 2017. Our Workers Compensation Premium was $36,000 in 2016 and is guaranteed to be 12% less. Our SUI (State Unemployment Insurance) rate was 3.65% and is now 3.4%.
My advice, if you decide to do your own investigation, is to always be inquisitive about what exactly is included in a PEO’s administration fees. Make sure you understand what “extras” you might incur. For example, are there fees to run extra payroll processing like bonus checks, live checks as opposed to direct deposits?
Start by visiting http://www.toptenreviews.com/business/services/best-peo-services/ to become knowledgeable about the process and learn how to become a better manager of the “business of employment.”