Efficiently running a business without outsourcing tasks can be a major challenge in the fast-paced world that we live in. As ProfessionalEmployer.net states, business operations such as accounting, tax filing, and human resources take up a huge amount of time and generate zero profit for the business, however, they are essential operations. This can be a large pitfall for business owners. While some companies choose to hire in-house employees to handle these areas of the business, others hire third party companies to do the work for them.
Professional Employer Organizations can be a great fit for many organizations and absolutely serve a purpose in the market. That being said, there are many cases where business owners do not properly utilize a majority of the services provided. As a result, owners are paying a higher administrative fee for a complete package of services that are potentially unneeded. Some key areas to be aware of include:
- Potentially Higher Insurance Cost
For a long time, PEOs have claimed that they have the ability to obtain cheaper health insurance prices for their clients’ employees. While this is true in some cases, it’s not always that way. If a PEO has lots of clients, there is a decent chance that some of their clients have unhealthy employees in high numbers. In a case like this, the rate you are quoted by the PEO might be the same, or even higher, than the rate you could obtain on your own. This is entirely case-by-case, and it never hurts to compare rates.
- Unneeded Services
PEOs offer business owners an array of services to choose from. While they are all useful, they may not all be needed based on the circumstances of your company. Some PEO’s package too many unneeded services together and charge for them whether or not they are used. An example of this would be recruitment and selection services. When selecting a PEO, it’s important to select a company that offers flexibility within their offering.
- PEOs Need to Be Profitable
Unlike an in-house HR representative, a PEO is a business on its own. In order to stay in business, it needs to maintain profitability. So, if your business starts costing them too much time or money, they may place you in a higher-risk category, and may even raise your rates. As they say, there are no free lunches!
- The Fine Print
Every PEO has different rules and terms. It’s important to review each and every detail of the contract before you sign it. It would be wise to consult with a third party attorney, as well. Short of that, you should talk to the PEO’s legal advisor. You should be 100% sure about every aspect of the contract before signing it.
When signing up for a PEO, I highly encourage business owners to ask as many questions as possible on the front end to ensure that they are clear on services provided and setting proper expectations. If you have any questions, please contact a knowledge broker for additional information.
Dan is currently a Benefits Consultant with R&R Insurance. With over 14 years of experience, he has an extensive background in the payroll, PEO, and HR related field.
