Broker-only PEOs may be a new concept to some brokers because these PEOs are few in number, but brokers can benefit in several ways from partnering with them.  (Photo: Getty)

Professional employer organizations (PEO) have been growing at a rapid pace in recent years as more small employers turn to outsourcing solutions to meet their HR needs.

And while PEOs can be a good thing for small-business owners, they are often seen as a negative by brokers. This is because many brokers lose current clients to PEOs that offer a full-suite of HR services.

Related: Third-parties, transparency and the future of brokers

But not all PEOs are looking to take business away from benefits, insurance, and financial brokers. Believe it or not, some PEOs have a broker-only selling model.

What does broker-only mean?

Generally, there are three main ways a PEO will sell their services:

• Direct: A PEO sells their products directly to small and medium-sized business owners
• Broker-only: The PEO works exclusively through a broker to offer their services to a small business client
• Hybrid: Some PEOs sell both directly to businesses and through brokers, essentially combining the two methods

Of these selling models, direct is the most common. This is when a PEO sells their services and solutions to a small or medium-sized business owner, without the use of a broker.

It's also not too uncommon to come across PEOs who have a hybrid-type of business model, where they both work with brokers while also selling directly to potential clients.

Both of these selling models represent competition for brokers, who risk not only losing potential new prospects, but more importantly their current clients.

This is where a broker-only PEO differs from other professional employer organizations, as it represents an opportunity to form true partnership. But how exactly does this partnership work, and what benefits do brokers gain from it?

The benefits of a broker-only PEO

Broker-only PEOs may be a new concept to some brokers due to the fact that these PEOs are few in number. This has also lead to the idea that all PEOs are competitors.

But brokers stand to benefit in a few critical ways by forming a partnership with a broker-only PEO:

• Win new business
• Differentiate by adding new solutions
• Earn recurring revenue
• Compete more effectively, especially against direct-selling PEOs
• Protect your book of business

These benefits allow brokers to grow their business over time and ultimately generate more revenue.

Another thing that is unique is how a partnership between a broker and broker-only PEO operates. The PEO would work with the broker throughout every step in the sales process.

This brief overview highlights how a broker and the PEO would work together:

• Identify an opportunity: The broker and PEO would qualify a potential client together and if there is a fit, the broker would schedule an appointment with the client for both to attend.
• Qualify the client: In the appointment with the client, the broker and PEO would learn more about the client's needs and explain how a PEO solution would work and the potential benefits.
• Develop a proposal: The PEO representative would craft a proposal with HR solutions personalized to the client's needs. The PEO would review and prepare the final proposal with the broker prior to the next client meeting.
• Deliver the proposal: The broker and PEO would present the proposal to the client, answer any questions they may have, and confirm a start date.
• Complete contracting: The broker and PEO would agree on final pricing and timing with the client. All necessary paperwork would be completed, and a kick-off meeting would be scheduled with the broker, client, and representatives from the PEO.

Further exploring the idea of a partnership with a broker-only PEO could help brokers feel more comfortable with this type of solution, especially as competition continues to increase.

These strategic partnerships can ultimately help brokers add new clients while also protecting their book of business.

Jan Kaupas is the senior vice president of sales at Extensis Group, a regional professional employer organization headquartered in the NYC area.