Are all Professional Employer Organizations the same?

Each week I’ll get at least 3-5 emails and calls from PEOs looking to become a part of our network of providers. Some of them are beneficial and others are a waste of time, often it’s hard to know which ones will be worth taking the call and which ones to ignore. That got me to thinking it must be even harder for companies whose business isn’t PEO.

Over the last 8 years I’ve spoken to a lot of companies, founders, CEOs, CFOs and solopreneurs - one thing always remains constant with all of them. They want a solution that makes their life easier, they don’t want to hassle with the details and they think health insurance costs are out of control.  It’s impossible not to agree with them on each point.

It seems for all the advancements made in managing human capital (staff) it’s gotten much harder to do just that. Increased federal and state regulation, changes in health care has made it a task just to operate a business. Enter PEOs they streamline the administrative tasks associated with all aspects of hiring, enrolling, managing and firing staff.

PEOs give SMBs access to Fortune 500 employee benefit plans, savings on Workers’ Compensation, freeing up cash usually reserved to funding policies, payroll and an HRMS system to manage every aspect of an employee’s life. PEOs do so much for SMBs that we started Dinsmore/Steele specifically to price, shop, compare and buy PEO.

This post isn’t about the merits of PEO, it’s about the differences in PEOs and what that means for you. The easiest way to look at the over 700 PEOs operating today is in three categories. They are National PEOs, Regional PEOs and Niche PEOs. Each is unique in its own right and serves a very valuable purpose to who they serve. Let’s take a look at each one.

  1. National PEOs operate in each and every state, with most having offices in every major metropolitan area of each state. They have large sales forces, advertise on major media outlets and have the largest number of client companies. National PEOs have the largest pool of employees that help when they purchase their insurances and various services. The pros of working with a National PEO are their size, having offices in every state. The cons are they have large expenses which are passed on to their clients’, many of them bill in confusing percentages and often their service levels are less than stellar.
  2. Regional PEOs operate in specific states and regions, offering specialized service to their clients. They normally have small sales forces, advertise locally and have the second largest number of client companies behind National PEOs. Regional PEOs offer national medical plans that can be used in every state and have great rates. The pros of working of with a Regional PEO are their service levels, access to regional medical plans and their transparent pricing practices.  The cons are size and lack of having a physical presence in every state.

  3. Niche PEOs  operate to serve specific niche businesses, like golf courses, construction companies, generally higher risk or highly specialized industries. Often times Niche PEOs are focused on more than the general items National and Regional PEOs are. Workers’ Compensation plays a large part for Niche PEO clients, as well as State Unemployment Tax Assessment (SUTA) arbitrage. If you are in a niche industry there really aren’t a lot of options for PEO, other than a Niche PEO. They vary in how they price and their service levels, but they will accomplish what you can’t with other PEOs, so it’s worth it.

Each PEO has a place and serves its audience.  A good rule of thumb to know if a PEO is right for you is this. If you are a company that operates in multi-states across the country your best option is a National PEO. If you operate in one state or in multi-states regionally then a Regional PEO is the best option. If you have a higher risk business or one that has large turnover because of the nature of the business, then a Niche PEO is for you.

If you would like to know more about the PEOs mentioned above, feel free to contact us and we will help you find the right PEO for you.