:: Managing Your Employee Administration - An Outsourcing Solution

The PEO industry has been operating in America since the 1920s. Formerly referred to as “employee leasing companies”, well managed PEOs enable organizations to outsource time-consuming human resource functions, including payroll processing, worker’s compensation insurance, risk management, and employee benefits administration. PEOs are essentially risk managers that pool the risk of many smaller and medium size companies.

Not all PEOs are alike. There are various types of PEOs, some with very strong Human Resources support and a menu of benefit plans, while others provide only a basic level of services. Some PEOs focus on serving local firms in their region, or specialize in one industry, while others serve a diverse cross-section of industries, or target national clients. The key to outsourcing your employee administrative tasks is selecting a PEO that will provide the level of services, and benefits your organization requires.

Understanding all the nuances and profit centers of a PEO is a challenge that requires a diverse range of financial and insurance expertise. Evaluating the various benefit plans requires careful analysis. Several PEOs provide a choice of health insurance plans from the same insurer. They offer slightly different benefit designs, with different premium structures, and varying renewal dates.

Successful PEOs have stringent underwriting requirements and introduce policies, programs and incentives to reduce the claims and exposure of their client companies. Thereby, resulting in fewer claims, reduced costs, and a safer, more productive workforce. PEOs also are also able to provide lower costs benefits, since the PEO is usually larger than their client company; they are able to better negotiate health insurance, workers compensation, and ancillary insurance providers, resulting in lower costs to their client companies.

PEOs generally provide four main services to clients:

1. Payroll processing. The PEO becomes the employer of record for payroll services. They take on the responsibility of withholding payroll taxes, garnishments, court order and child support. 2. Employee benefits, including insurance, pension and other group benefits. 3. Workers' Compensation insurance and risk management. 4. Human resource management, including maintenance of policy and personal manuals, compliance with fair labor standards, compliance with family and medical leave act and Americans with disabilities act.

A word of caution… often, the individual selling the PEO services is an employee of the PEO. Therefore, it may not be in their best interest to provide your organization with the lowest administration rates, or provide you with the best benefit plan costs and structure. If you have a concern, check it out before you move ahead. Like any new relationship, you need to confirm that the company has a staff of specialists to provide you the expertise, and support personnel to deliver services they claim to offer.

That is where we come in. We have the knowledge and experience with various PEOs to identify if your company is being treated fairly. We understand the benefits of outsourcing and can help you navigate this complicated transaction.

Mark J. Burger, CPA/PFS is CEO of PEO Solution Advisors LLC, providing companies with outsourced human resource solutions. Mark can be reached by telephone at 561-889-3503.