Professional Employer Organizations: Is it a Benefit for Small Business?

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Person flipping an "open" sign in the window of a small business who may be debating using a Professional Employer Organization

 

Small business owners wear a lot of hats. Professional employer organizations (PEOs) leave non-revenue-producing activities to third parties. Time is the one thing that no one has more of. Many small businesses use PEOs to manage tasks such as payroll, benefits administration, and HR compliance but is it always the right choice?

Making the decision to move to a PEO should be considered carefully. Decision-makers should work with a broker, like AUI, who can conduct a true cost-benefit analysis of overall product pricing. One should never anticipate a PEO is going to save money on health insurance; instead, they should look at overall savings.

Small business owners have many important decisions to make, and one of the most important is how to manage their employee benefits and insurance needs. Two common options for small businesses are to use a professional employer organization (PEO) or to work with an insurance broker. While both options have their advantages, using an insurance broker like AUI can be a better choice for many small businesses.

 

Disadvantages of a Professional Employer Organization:

A Professional Employer Organization (PEO) is a company that provides limited HR, payroll, benefits, and other employment-related services to businesses. While there are some benefits of working with a PEO, there are also some disadvantages to consider.

  • Loss of control: When you work with a PEO, you are outsourcing your HR and payroll functions to another company. This means that you may lose some control over how those functions are managed.
  • Limited customization: PEOs typically offer pre-packaged solutions that may not be fully customizable to your business’s specific needs. This can be a disadvantage if your business has unique HR or payroll requirements.
  • Cost: While working with a PEO can save you money in some areas, it can also be expensive. Professional Employer Organization typically charge a fee based on a percentage of your payroll, which can add up quickly.
  • Integration challenges: Integrating a PEO’s services with your existing systems and processes can be challenging, especially if you have a complex HR or payroll infrastructure.
  • Communication challenges: With a third-party provider, there may be communication challenges. This can be especially problematic if you need to resolve a time-sensitive HR or payroll issue quickly.

 

How to Gauge the Cost of a PEO:

One of the biggest disadvantages of using a Professional Employer Organization is the cost of the programs. There is a lot of information gathering that must take place to project costs correctly. A business should not consider a PEO if they are not willing to pull together the key information to conduct a cost-benefit audit.

PEO costs can vary based on the size of your organization, the services you need, and the level of support required. Here are some factors to consider when gauging the cost of a PEO correctly:

  • Number of employees: The cost of a PEO typically increases with the number of employees you have. Some PEOs charge a flat rate per employee, while others offer volume discounts for larger organizations.
  • Services required: The cost of a PEO also depends on the services you need. If you require more comprehensive HR services, such as benefits administration and compliance management, you can expect to pay more.
  • Contract terms: PEOs typically require a contract for a specified period. Longer-term contracts may offer lower pricing than short-term agreements.
  • Additional fees: Some PEOs may charge additional fees for specific services or require a setup fee. It is important to understand all the upfront costs.

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AUI is an Alternative to the Typical PEO Solution

AUI is one of the few brokers to offer an alternative to PEO. We offer a team of professionals that love the world of healthcare benefits. Working with an insurance broker can offer more choice, customization, personalized service, and control. Not only do we know the laws, but we know the options you have inside and out. No business owner should have to live in a box.

When you call AUI you get a direct line to your broker to answer any questions you have about your health insurance benefits policies. They know your benefits packages inside and out and can help you maximize the choices you made for your business. At AUI we do not outsource our call center and we are an extension of your team.

If you are interested in learning more about AUI contact us today.

 

We do more than cover small businesses and individuals with the right insurance policies and benefit plans – what motivates our team is helping you save more so you can invest more in your team, family, and goals.

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