Tag Archives: 401k

Advantages of Professional Employer Organizations (PEO)

One of the immediate advantages of PEO or employee leasing is that management’s time that was previously spent on personnel management and accounting can now be directed toward activities that effect earnings and profit.

In addition, a company that arranges with a PEO will find immediate economies of scale in providing benefits, especially healthcare. Other benefits, such as cafeteria plans, life insurance, disability insurance and 401k plans, are not often offered by smaller companies, but through a PEO, they are all available at no additional costs.

Lastly, a PEO or employee leasing firm provides assistance in defining personnel policies and compiling employee handbooks as well as compiling and recording employee files.

Why would an employee/worker want to be employed by a PEO?

This is a topic or question we hear quite often.  Usually it is the client company posing the question. 

The easy answer is that the employees of a PEO have access to the benefits package normally only seen at a Fortune 500 company.  That is, major medical, dental, vision, 401k and various other insurance products.  The economies of scale that the PEO enables for its client companies allows the employees to save quite a bit on the cost of benefits. 

The longer answer is that the PEO has the human resources expertise to be sure that its shared employees are taken care of from a risk management standpoint as well.  We often have business referred to us from employees of companies that were in a co-employment arrangement at a previous employer and have seen the benefits first hand.

 

 

Does HR Outsourcing save Money?

A better question would be, is time = money?
 

If you recognize that time is money, then a company that engages a PEO or ASO or other HR outsourcing solutions will definitely save money.  In particular, there are areas where a company employs staff to handle time consuming hr functions.  This time can be freed up with a PEO or ASO, allowing more time on strategic functions or revenue generating areas of the business.
 

A PEO or ASO will save a company time by writing employment policies and producing employee handbooks, researching medical insurance plans, implementing a loss control program, providing HR and compliance training for managers and supervisors, benefits administration, vacation and sick leave tracking, responding to unemployment claims, records administration, and many other hr functions.
 

In addition, you will possibly see hard dollar savings by consolidating your current hr functions to one provider.  For instance, instead of separate payroll provider, 401(k) administrator, workers’ compensation and unemployment claims management, Section 125 administration, insurance plans, COBRA administration, etc., and paying fees for these services as a small business to multiple vendors, with a PEO or ASO, you are paying one vendor.  Thus, eliminating margins to various vendors and saving money. 

Free HR Services for Manufacturing companies

I just completed a conference call with a manufacturing company with more than 400 employees.  The savings from the PEO on the workers comp and benefits pay for the hr services…payroll, benefits admin, hr consulting, compliance. 

I am amazed sometimes at why more companies, especially those with high mod’s (modifier rating) do not explore this opportunity for their companies. 

My calculation, and this is hard dollar savings, is more than $300,000 annually.  That is more than $700 per employee per year.  Every year.  That does not include the savings of having a separate 401k and other benefits.

 

 

How HR outsourcing and PEO can help your recruiting

By working with a PEO (professional employer organization) or other HR outsourcing provider, you have taken the first step in making your business one that potential employees will flock.

How so?  Due to the nature of most HR outsourcing providers, including PEO, you are now able to offer a benefits package that is as good, if not better, than most Fortune 500 companies.  Full health, dental, vision, 401k, short and long term disability…all at your employees’ fingertips. 

In addition, due to the immediate economies of scale that you will recognize, these benefits will likely be priced lower than you can get on your own.