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.
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.
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!
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