We say a lot of great things about Professional Employer Organizations because we know how much they can help small and medium-sized businesses offer better benefits, reduce costs, and improve productivity. However…
… PEOs are a business, too, and they need to make money. In our experience, PEOs are excellent about making sure the price you pay is fair and comes with a high level of value. Even so, there are three things that PEOs don’t want you to know.
The Admin Fee is Negotiable
A PEO’s administration fee is the basic charge for managing your services, including payroll, benefits administration and more. The admin fee can come in two different forms: a fee based on a percentage of overall payroll, or a flat fee (we think a flat per-employee fee is best).
There’s no way around paying an admin fee since that covers the bulk of a PEO’s service to you -- but the admin fee is negotiable. Remember, hundreds of PEOs are competing against each other for your business, and chances are that their initial admin fee quote is exactly what they’d like you to pay. That’s likely to be a bit higher than the number they’re willing to accept to take on your business.
The Enrollment Fee is Negotiable
When you sign on with a PEO, the setup and on-boarding process takes a significant amount of work. For that, most PEOs charge some sort of enrollment fee, which can be a flat cost or a per-employee fee. A rule of thumb is $50-75 per employee, but it can vary based on your unique situation.
That enrollment fee is also negotiable. Again, PEOs want your business, and they recognize that they don’t need to make optimal profit at every single stage of the transaction -- it’s more important to them that they secure your business and then deliver outstanding results to keep that business.
Put yourself in their shoes: If a customer asked you to negotiate a fee related to their acquisition, would you consider it? Or would you reject them away and guarantee that you won’t make any money off what could be a lifetime of business with them?
Workers’ Compensation is Negotiable
You might be sensing a pattern here -- a lot of basic, important elements to your relationship with a PEO have some wiggle room, and workers’ compensation is no different.
Whether a PEO offers a multiple coordinated policy (MCP) through which each client has their own agreement or a master policy (MP) that covers all of its clients, workers’ compensation services are a solid profit center for most PEOs. In short, the premium collected above what is paid out goes to the PEO.
PEOs won’t undercharge you on Workers’ Comp. Like all insurers, their estimate for premiums skews toward favoring them over you -- otherwise they’d be out of business. But is it possible to trim a bit off those premiums and still fall within a range that’s acceptable to a PEO? Probably.
You Can Ask For a Better Deal
The key to negotiating with PEOs is to start the negotiation in the first place. Few PEO clients even realize that basics like admin fee, enrollment, and workers’ comp can be adjusted. As a potential customer with hundreds of PEOs competing for your business, you’re in a position to ask for a better deal. Don’t be shy about asking a PEO to break down numbers in detail and then see whether those fees can be reduced -- because if they don’t do it, another PEO probably will.