Does anyone have any experiences, good or bad, with the use of PEOs as a replacement for human resources?

QUESTION:

Does anyone have any experiences, good or bad, with the use of PEOs as a replacement for human resources? We are currently evaluating both SharedHR and Trinet to see if something in that vein would be a good move for the company.

ANSWER:

by Sebastian Jacobs, Trinet

I am in the PEO industry so I can’t give you an unbiased opinion on whether or not this will help your company. I can give you a couple tips on what I would do during the evaluation process.

1. Co-employment. You are looking at a company that uses co-employment (Trinet) and one that doesn’t (SharedHR). I would be very clear on what it means (both positive and negative) to be in a co-employment relationship. I for one believe the positives outweigh any negatives.

2. Contract. Take an hour to read the fine print. In the Trinet contract, the exact breakdown of responsibilities is listed.

3. Extra fees. There are no companies in the HR industry that I know of that don’t have some extra fees. Trinet does a good job of listing those. You may want to provide some “what if” scenarios as well. For example, what if there is a harrassment claim. Who does internal investigation? Am i covered with EPLI? How much? What is my exposure? Etc.

4. Meet your service support folks.

5. Demo the product(s).

6. Financial Analysis. I would build a quick financial model of what my internal costs are (Payroll/Benefits/Taxes/Comp/Hard & Soft Costs of running business) and share this with vendors. Let them put their pricing into your model. This way it is a little easier to compare the two.

ADDITIONAL ANSWER:

Steve Hoffman (a.k.a. Captain Hoff)

Steve Hoffman (a.k.a. Captain Hoff)

by Captain Hoff

I’ve used Trinet and they’re good. It really depends on the needs of your organization.

If you’re very early stage, you can probably do most of it yourself. As you grow, you may need the added benefits that PEOs have to offer.

As for Trinet, it took a little while to set it up, but once we got it set up, it was easy enough for an assistant right out of college to manage. Trinet also has a pretty complete solution.

I’d recommend looking over all the things you needs and seeing which provider covers all your requirements. Also, there often is room to bargain if you’re an early-stage growth company. You can negotiate a better deal, especially if you have another provider willing to discount.

I hope this helps!

ADDITIONAL ANSWER:

Brian Hassan

Brian Hassan

by Brian Hassan, Managing Director of BayPoint Benefits

1. The PEO’s Claim to Eliminate Employer Liability

PEOs often say that becoming the employer of record eliminates your liability.  However, this is not a true statement, even according to the NAPEO.  “The PEO will generally only assume responsibilities and liabilities associated with a ‘general’ employer for purposes of administration, payroll, taxes, and benefits.  The client will continue to have responsibility for worksite safety and compliance.  So even with a PEO, you – the site employer – still have the same responsibilities before and maybe more due to OSHA and Cal-OSHA.

2.  A PEO’s Claim to Buying Power and Fortune 500 Employee Benefits

When it comes to benefits, PEOs talk a lot about their ‘economies of scale,’ the benefits of a large insurance pool, and “Fortune 500″ offerings.  They would have you believe that they can provide benefits of a caliber that would normally be well out of reach for small businesses, and offer them at rates they would never qualify for on their own.  But benefits through a PEO aren’t always a bargain.

Contrary to what they would have you believe, employers with under 50 employees can offer their employees a variety of plans on their own, including MORE choices in carriers, plans, design, and type.  Trinet, as an example, only offers Blue Shield and Kaiser in California – not Aetna, UnitedHealthcare, HealthNet, Blue Cross, or PacifiCare.  As far as the cost of benefits, if your company has an average age of <40 years old the rates that you can obtain on your own will most often times be less than the PEO.  Reason being is that the PEO pools you with all companies’ employees where the average age is much higher – thus your company would be paying additional premium to subsidize their costs.  In addition, you have to be aware that PEOs also charge $100 – $500 per employee per month for “admin” services.

You can imagine that as you scale, this becomes too large of a cost to bear with less of a benefit.  This is the design of the PEO – and how they drive their revenue, as it is very cumbersome and difficult to leave a PEO once you are with them.

There are 4 good reasons for a PEO, on the other hand:

1 – If you have a small company that is not going to experience significant growth

2 – If your workers compensation and related risk-management needs are straightforward  and require little or no assistance from an outside party

3 – If employee benefits are not important to your growth, stability, and long term goals

4 – If you’d be more comfortable handing over control of your HR management and control of your employees

Comments & Advice:
  1. Guest says:

    With the way healthcare is blowing up as the industry prepares for Obamacare, not even most PEOs can contain your medical costs any better than what you can do on your own. They'll tell you they have 'buying power', but truth is they route your info through a broker to the carrier, and you're still priced as a small company. They might get some upfront discounts due to volume, but when it comes time to renew, you're on an island. No 'buying power' there.

    As for trinet, word on the street is that they lost $90M on their healthplans last year. When you're funded by private equity, that doesn't go over well. So, the only place to make it up is with 40%+ increases to the clients. I've seen a ton of them this year.

    I'd also find out when their medical plan renews. If you join Jan 1, you'll get an increase in June (ADP) or Oct (trinet). Get it in writing that your rates are guaranteed for one year.

    I think a PEO can be a great solution for a small business. Just be sure you know what you're getting. Go to http://www.esacorp.org and find one that is at least a member of that organization.

  2. Kmcgraw says:

    I have had very bad experiences with TriNet. The call center takes 20 minutes to answer a call. Support is poor. Turnover among the service staff has been huge, and our insurance increased by an unreasonable amount this year. Be very wary entering into a relationship with them.

  3. Geof Wilkens says:

    Just wanted to echo the sentiments of the two commenters above me. Outsourcing personal can be a great service for a business of any size, but its an important partnership and you should do a good deal of research before making a choice.

    My employer uses Doherty HRO (http://www.dohertyhro.com)and we’ve had a great experience so far. (they’re on the website linked to by guest)

  4. Geof Wilkens says:

    whoops… looks like I screwed up that formatting, apologies to all. this link should work: http://www.dohertyhro.com

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  6. Jay Jones says:

    Having worked with TriNet for over 4 years I can attest to the level of service and support they offer. Although several good points have been made regarding the pros and cons of PEO, I think some of the comments are highly misleading. TriNet has never made me wait 20 minutes on the phone or even 10. All requests I have made are answered in a timely manner. Their employee online portal gives me 24-7 access to all my information and I can manage all my HR needs in a fast and efficient manner.
    Regarding medical increases, I know Trinet works primarily with white-collar companies which places your employees in a low-risk pool allowing for more predictability and stability regarding your healthcare increases year over year. Companies that underwrite ALL types of businesses will not offer you this type of value and predictability.

  7. I manage a PEO brokers company http://thehuldischgroup.com and our every day job is to find best suited PEOs for our clients. We work with multiple PEO and other providers and between those two PEOs the answer is –It depends.

    SharedHR functions more as an ASO/HRO solution and Trinet more of a PEO. They essentially handle the same functions with some differences. One key difference is with Trinet you can use their master health insurance plan as opposed to just having the provider administer your own independent health plan.

    Also keep in mind Trinet has been acquiring other PEOs and growing considerably by acquisition. They acquired Accord, SOI and Ambrose in the last 18 months or so. They recently also announced they are going public. This has affected the psyche of many prospects and clients I have been in contact with sharing concerns of Trinet becoming less personable and less responsive than before as well as for some of the acquired PEOs. Is Trinet the next ADP? Who knows but some opinions reside in that bucket. Trinet has traditionally been a pretty good PEO with some advantages such as no tax resets when one makes a transition into their platform mid-year.

    I would consider Trinet but would also look at other options as well. We focus on smaller and more boutique like PEOs. Feel free to reach me if you need more info to help you decide or do a PEO comparison shopping. We do it for free.

  8. Brittany says:

    My company used Gevity before it became TriNet, so our relationship has extended many years. We have been unhappy with TriNet for some time and are taking action to switch providers. Their online payroll entry system isn’t bad, but their communication about the system’s capabilities and parameters are. Deadlines feel arbitrary and not communicated. We have had several incidents with payroll directly related to this system and its deadlines–you’d think one would be enough. Despite my attempts to ask, “Can I please get a comprehensive list of the system rules?” I’ve yet to get an answer.

    We’ve also experienced their high turnover, going through four human capital consultants in four years. Some have been better than others, with a quick response time and friendly demeanor.

    We also feel they haven’t been focused on making us happy as customers. When an issue has arisen, our impression is that responses are generally defensive, not accommodating and solution-oriented. We’re not looking to play the blame game, we want the issue fixed. And if, in the course of completing the fix, we believe the error was on TriNet’s end, we want them to own the fix and do it in a way that leaves us feeling that TriNet gives a fig about our customer satisfaction.

    The problem is, even if this isn’t how these situations have played out the majority of the time, it’s our impression and it’s not going away. We’ve got a bad taste in our mouths and we don’t think TriNet has any interest in addressing that. As a result, we will seek out other PEO options.

  9. Joseph Naddy says:

    We offer something a little different then your normal everyday PEO. We are partnered with several of the nation’s largest PEO’s and have incorporated complimentary recruiting and staffing as part of our package. We do the shopping and you do the saving!

    http://www.humanresourcealliance.com

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