The concept of a PEO (professional employer organization) makes great sense on the surface.
Why not outsource the employee management and HR functions to a third party so you can focus on growing your business? The challenge becomes dealing with the strict guidelines that many PEO’s require. The largest PEO’s typically require that clients use them for Worker’s Comp, Group Medical Insurance, and Payroll. But, what happens if one or more of those services are not the most suitable for you?
Manufacturing Company in New Jersey
This company used a well-known PEO. The initial attraction to that model was the unique relationship this PEO had with a large national medical insurance carrier. The premium they received via the PEO was less than they could have gotten from the same carrier outside of the PEO so it was a no brainer. Unfortunately, when their worker’s compensation renewed, the PEO DOUBLED the premium. When they challenged the decision, their rep at the PEO reminded them that they couldn’t leave the PEO to obtain worker’s compensation outside unless they were willing to also lose their “discounted” medical insurance. When the client decided to explore their options, they were able to obtain worker’s compensation at a dramatically lower rate and even though they paid a slightly higher cost for their medical benefits, they realized a NET SAVINGS by breaking away from their PEO.
"The team at Clearscope arranged for us to have all the same coverages at a net reduction in cost. And more importantly, since we’re not obligated to use them for all lines, they have to continue to earn our business."
UPDATE: While their initial engagement with us was to handle the medical insurance benefits only, they client has since CHOSEN to expand their relationship with Clearscope to include dental, vision, HR management, and 401(k).