The great debate of the PEO industry is what is your administrative fee. First let’s examine what this means, in a PEO model the PEOs charge an administrative fee. This fee charged for the services of the PEO. Now understanding what this fee is let’s uncover the differences in how it’s charged.
For the Payroll and big box PEOs, many of them charge a percentage of payroll, this is confusing for the client company. Here’s why when a PEO charges you a percentage of payroll, if your payroll increases so does the administrative fee you pay. After all if your payroll increases, that’s a good thing because you are growing and hiring more people to in turn grow the company.
Often we find that very intelligent CFOs and CEOs are still challenged to figure out exactly what they are paying. While the Payroll and big box PEOs show the client the administrative percentage. It’s still very difficult to decipher what you are paying because your State Unemployment Rate Assessment (SUTA, SUI), Workers’ Compensation, Medical costs, as well as your State and Federal taxes being included in that number. So to accurately identify what you are paying you have to mathematically back out the Figures. This is a laborious task and can be challenging at best.
So what’s the solution? First is to ask blatantly what you are paying per employee per month and don’t be afraid to drill down and get the exact number from your PEO. If the PEO isn’t willing to disclose this information or isn’t being transparent in providing this to you, then it’s time to find another PEO. PEOs play a vital role in all of their clients’ companies, so it’s only natural to know what you are paying.
There are currently about 700 PEOs nationally and regionally. Just as you would shop for a new home, new car or a new job, it’s always in your best interest to shop around to find the best deal for you. The same applies to vendors, more specifically here PEO providers. The challenge many companies and executives find is how to comparatively shop and find the best PEO for your companies specific needs.
One way to solve all of these problems is to find a company like Dinsmore Steele, who comparatively shops the entire PEO market and then offers unbiased guidance to you. We vet all of our PEOs; to ensure their financial stability, their service levels, and that their master medical and workers’ compensation policy increases are in line. Most importantly that they are transparent in their pricing and offer a detailed breakdown of what they charge.
All of our PEO providers adhere to our policy that pricing remain clear and offer only a defined, flat, fixed administrative fee. So if you are in a PEO currently, looking at a PEO, then it’s best to get a partner that has expertise and can provide clear-cut, transparent answers.