Before joining my current company I had never even heard of a PEO (Professional Employer Organization). I’ve now come to work closely with Insperity for years and thought I’d share what I’ve learned.
The basic premise of a PEO is that you can be a small business, but by leveraging a PEO you can get benefits that rival those of a large corporation. Insperity, in particular, is United Healthcare’s single biggest client I’m told. This means that the usual outrageous small group health insurance premiums small businesses have to deal with can be mitigated and you can reduce your company and employee’s exposure to the big rate hikes. When you compare the premiums offered by Insperity to ones you could get on the open market, you’ll see a difference that is somewhere around a full-time senior hr manager’s salary (if you’re around 40-50 employees). Conveniently, having a PEO like Insperity removes the need to really have HR in-house, since they provide you with HR support, so for many people moving to a PEO will represent savings instead of an increased cost, all while improving overall benefits to the company.
So to help you decide if this is something that’d be right for you I’ve come up with my personal pros/cons list. This is not an exhaustive list of all the benefits and drawbacks, but these are the main ones for me and based on my experience using Insperity for 3 1/2 years now.
Pros
Drastically Cheaper Health/Dental/Vision Insurance This is the obvious one and it’s pretty much 90% of the benefit of using a PEO. The rates are much lower and based on the last few years in my experience they tend to be increased annually at lower percentages than the national average. This allows you to compete with the big corporations in your benefits offerings, which your employees will love you for, and it can be a hugely effective recruiting tool.
Outsourced Payroll In order to legally be part of the PEO’s health insurance group you have to actually be co-employed by them. This means that your paychecks come from Insperity and they go under their Tax ID. So all you have to do is simply submit the hours to them and they manage payroll. This is again another opportunity for savings since you no longer need to do this in-house.
401k Management Insperity also has a nicely integrated 401k program you can incorporate. They don’t explicitly charge any fees for it either, aside from the normal fund fees. The entire management of it can be done easily by the employee in their online account, and their 401k support has been great. You just have to decide on the match. They offer a Roth 401k which is pretty rare, and all the loans and contribution changes in the backend are super easy for employees to manage. Basically, it’s an effortless setup for the employer.
Excellent Employee Database All relevant employee information is stored in their database and is easy to find and update. This has been a huge help to me as I’ve taken over all HR management at my company without any assistance from others. Using their tools to manage everything and made this tedious ordeal of managing tons of paperwork very simple, and more importantly, quick.
Human Resources Support This has been huge for me. Every time I’m confronted with a difficult situation in the office, I can call our HR Specialist and get proper advice on how to manage it, what to document, and who needs to do what. If I need them to, they even come by and deal with it themselves, or act as a witness, or join by phone, or write up the notes for it. It’s a complete safety net and I’ve received hugely crucial advice on many occasions when inevitably terrible HR stuff needed to be dealt with at work.
Cons
Low Transparency in Their Billing This has been an issue for us as we’ve price shopped PEOs. Insperity doesn’t break out many of their fees, so all you can compare is the total cost. It also means we can’t track individual costs in our ledger, which has been frustrating for accounting.
One of the most expensive PEOs I’ve shopped around quite a bit for PEOs and they can generally beat Insperity to some degree on price. I’ve never seen them beat on insurance premiums, but other PEOs make this up in the fees. You do get what you paid for with Insperity though. They offer countless benefits that I’m too lazy to list here and really do put you on par with a giant corporation, whereas the other PEOs strip away many of the benefits to make up those fees. So if you’re trying to get better health insurance rates, but you’d like to be spartan on everything else, they probably aren’t for you.
Lack of Control in Creating Benefits This applies to any PEO. When you do this in-house you can shop any insurance company, any 401k plan, and cherry pick every benefit you offer. When you work with a PEO they’ll usually only have one company for you to select from so your options are more limited. This doesn’t have to be a bad thing though when you consider the paradox of choice.
So all in all for us using Insperity has been a great experience and I’d recommend you at least consider this model. Those who recruit for small businesses will know that poor benefits are the primary concern of top recruits. Using a PEO such as Insperity is a way to level the playing field, and maybe even generate overall savings!
