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PEO (Outsourced HR/Payroll/Benefits) providers

Now that I've moved over to start up companies, I encounter PEO's (e.g. Trinet, Insperity, ADP) more often. I've used several of them at start ups that I advise. I'm interested in hearing other peoples' experience vs doing the HR, Payroll and Benefits "in-house". In general, I do not see a lot of value to these PEO providers in terms of cost savings (some impound broker commissions and markups to the Benefits; all of them charge $150-250 per employee per month processing fee and lots of one-off charges), and not much in terms of timely and value-added services (their HR advisors are usually booked up, slow to respond when I have urgent matters like firings or RiFs). I've found for certain that when a start up gets to over 45 employees, the fees that we pay to a PEO are equal to hiring a payroll clerk AND a junior HR ops staff full time. With those 2 positions, my start ups could do 5-8 times the amount of work that I receive from the PEO provider, plus these staff would be in-house and build better repoire with the management and team. Also, some of the PEO providers use average rates for the benefits that they charge client companies. Most start ups tend to have younger workers, which if you get a broker quote, the benefits could come in lower than the PEO benefits rates. In summary, found that PEO's are useful and worth the not-insignificant cost and relatively low level of service, if you are a really small start up (e.g. under 15 people) and you have almost no G&A staff and the management has no time to deal with any HR ops, payroll admin or benefits issues. Otherwise, probably better value-for-money to perform these in-house, particularly with more efficient tools like Gusto payroll, Zenefits or having an outsourced accounting firm help manage these.

Answers

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

I would also factor in....

1. Knowledge/Experience of staff (you just can't hire fresh grads and expect they know what they are doing)
2. Compliance Liability Risk (in case of staff error)
3. Difference in insurance premiums
4. As you said, cost of management time guiding the staff and opportunity cost on the things management needs to focus on.

Are they worth the "premium" or what the PEOs charge against the cost/s of processing in house?

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

Anon,

I forgot to add one MAJOR consideration. Your "scaling" time frame. If you intend to stay in the under 45 FTE for a few years (while you develop your product/service/ideam, then a PEO would makes sense (at least in the meantime). But if you are looking at a hockey stick, then it would be another consideration. It would make sense to get it inhouse and prepare for the scale.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

What I like about their sales pitch is they take care of all of the hassle of chasing down paperwork and paying someone to add new hires to several different portals. I have not used one however mostly due to cost. It's still cheaper for me to pay someone to do these types of things, even with the headache. Emerson has some excellent points for consideration though.

Hazel Swaid
Title: Small Business Consultant
Company: ADP
(Small Business Consultant, ADP) |

Hello! This is a little belated but I would love to talk to you about what benefits a PEO solution can have for your organization! My name is Hazel Swaid, a small business consultant with ADP, please feel free to reach out and ask any and all questions.

hazel [dot] swaidatadp [dot] com
610-572-2011

Warmest regards,
Hazel

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