What to Consider When Joining a PEO

What to Consider When Joining a PEO

The decision to join a Professional Employer Organization (PEO) should not be made solely on employee count and should consider other factors. Engaging an advisor who can evaluate multiple PEOs as well as the traditional insurance market, outsourced HR, and payroll services will provide the best results to make an informed decision. There are positives and negatives that must be weighed to determine the best solution for your company.

According to NAPEO’s, “An Economic Analysis: The PEO Industry Footprint in 2018,” PEO clients represent 15% of all employers with 10-99 employees, with an average size of 21.2 employees. However, the graph below adds important context to the 15% considering that 80% of employers in the 10-99 space are under 50 employees. From this perspective, it is evident that far fewer companies with over 50 employees find PEO’s as attractive.

Factors to consider when Evaluating a PEO

When choosing a PEO for your company, consider the following factors:

  • Is co-employment best for the company?
  • Costs:
    • Percentage of payroll
    • Benefits are often offered at reduced rates, but margin is built into service or admin fees
  • Control:
    • Is the ease of an off-the-shelf solution worth sacrificing a customized program?
    • There is a loss of control in the buying process and the ability to make decisions that fit the corporate culture.
    • Employee engagement is bundled with other employers. Usually not good for larger organizations, but efficient for small employers.

As a general rule, the efficiencies and cost-effectiveness hit a tipping point for companies once they break the 50-employee threshold. The status quo is usually stronger than the desire to change, but thoughtfully performing due diligence is a best practice that companies should be doing as they grow.

No Comments yet!

Table of Contents

Recents Post
June Pulse
June 2024 The Pulse Newsletter
Golf cc hospitality state of the market
Hospitality, Golf, and Country Club Market Update
Heat Related webpage
Heat Illness and Workers' Safety Precautions

This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The content of this document is made available on an “as is” basis, without warranty of any kind. Baldwin Risk Partners, LLC (“BRP”), its affiliates, and subsidiaries do not guarantee that this information is, or can be relied on for, compliance with any law or regulation, assurance against preventable losses, or freedom from legal liability. This publication is not intended to be legal, underwriting, or any other type of professional advice. BRP does not guarantee any particular outcome and makes no commitment to update any information herein or remove any items that are no longer accurate or complete. Furthermore, BRP does not assume any liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Persons requiring advice should always consult an independent adviser.

Baldwin Risk Partners, LLC offers insurance services through one or more of its insurance licensed entities. Each of the entities may be known by one or more of the logos displayed; all insurance commerce is only conducted through BRP insurance licensed entities. This material is not an offer to sell insurance.

Get in contact with an advisor today to see how BKS can support you.