With more than 980 professional employer organizations currently operating in the U.S., PEOs provide services to between 156,000 and 180,000 small businesses nationwide — and that number is growing as the number of small businesses increases. The current size of the PEO industry is between $136 and $156 billion as measured in gross revenues, according to NAPEO, the national association for PEOs.
Why partner with a PEO?
Any broker looking for a competitive edge in their market can partner with a PEO to provide services beyond the traditional broker-model offerings. PEOs may offer strategic benefit and risk management consulting, payroll administration, and HR support, or any combination of these services.
Offering these additional services can have a positive impact on current client relationships and conversations with prospects who are looking for a more involved partner. Brokers who partner with a PEO have a robust solution for prospects, increasing the effectiveness of conversational marketing efforts that focus on reducing pain points and finding the best fit for a potential client’s broader business strategy.
A partnership with a PEO allows brokers the ability to offer services like payroll administration and HR support and compliance, and help ease the pain of employer-facing regulations and deadlines for small- or mid-size companies who may not have the time or resources to perform these tasks efficiently in-house. These days, many brokers are finding that the large, national payroll companies pitch their own PEO to their clients, moving the client’s business from the broker to the payroll company. If that broker instead partners with a PEO, they can solidify the relationship with the client.
Most PEO providers will have expertise and resources that help streamline non-revenue producing tasks for businesses, including compliance, HR, accounting, payroll, benefits, employee-facing communication and technology, wellness, employee engagement, and more, for less than the cost of one employee.
Partnering with a PEO can add a significant additional revenue stream for brokers who currently offer only insurance benefits, workers’ compensation, or liability insurance for clients.
What does a partnership with a PEO look like?
The relationship between a PEO provider and insurance broker is flexible, giving brokers the option to maintain a hands-on consulting role throughout the client experience.
Many brokers will identify organizations who would benefit from a PEO’s services and split administration when the prospect signs on. Others will introduce the PEO as a part of their team during the prospecting phase, allowing them to work together to bring a value proposition to the client.
All PEOs work to help place insurance plans with clients and usually assist with employee education, open enrollment, and servicing throughout the year. In a PEO arrangement, the PEO has contractual liability to ensure that the client complies with myriad of employment laws, Department of Labor requirements, employee benefit regulations, and other HR and payroll rules.
Because of the nature of the co-employment arrangement, the PEO is involved in the client’s day-to-day needs and brings an in-depth solution to clients who need to take the time and paperwork off their desk.
Who is a good fit for a PEO?
If a client utilizes multiple vendors for outsourced services, the company will save resources by rolling all the services into one provider. Streamlining the communication and administration that goes along with having various vendor relationships also reduces time spent for the client’s benefit manager and accounting staff.
Any client who is on an ACA-rated or grandmothered health plan is a great candidate for a PEO, as rates can be underwritten just like the old days. Finally, if your contact seems to wear a lot of hats and is in need of organizational assistance, a PEO if a perfect fit for them as well.
The growth of the PEO industry is an indicator that companies nationwide value the ability to streamline tasks and reduce liability. For brokers looking to offer clients more than the medical insurance and employee benefit plans they see year after year, a relationship with a PEO is the next step to becoming a more involved partner that makes an impact on a client’s overall business strategy.
Lecie Steinbaum, CPA Chief Operating Officer - Cornerstone Employer Solutions, Director of Plan Services - Cornerstone Insurance Group