In my previous posts, I have discussed what is a PEO and what the benefits are to startups and established companies. Now I dig in deeper.
It is important to know what type of Professional Employer Organization you need or what type of PEO you have if you already partnered up with one.
Choosing the right type of PEO will help increase your bottom line while avoiding the need for a second HR Outsourcing transition at a later time.
There are three major PEO Company types.
NICHE PEO COMPANIES
Niche PEO companies serve a particular industry type. Niche PEOs vary from manufacturing, construction, staffing, drivers, security, etc.
Understanding risk differences
In the case your company is very specialized and has either a high employee turnover or a higher employee injury risk; the average PEO will not be a good fit for your organization.
Conversely, if your company is at very low risk of its employees suffering from injuries at the workplace then a Niche PEO that specializes in manufacturing or construction will not be a good fit for you.
Pairing yourself with the wrong niche PEO company can be costly.
If your company is at low risk of the above and you are with a PEO that services blue-collar companies then you are paring yourself with a higher risk pool therefore raising your costs. Your worker’s compensation costs and health insurance costs will be best mitigated with a low-risk white-collar servicing PEO.
Unique Industry
If your industry is very specialized, it will be more difficult to find the right PEO for you which will accept you as a client.
A Niche PEO who knows your industry well will be best suited if your company is part of this highly specialized area.
REGIONAL PEO COMPANIES
Regional PEOs cover a number of states usually located near each other within a geographic area.
These PEOs are licensed to conduct business in those states and not nationwide.
As an example, there are PEOs that service the NY, NJ, and CT area and others that service FL, GA, SC, etc.
Regional PEOs can be ideal for companies that operate in only a few closely located states.
Check PEO coverage area
Regional PEOs are in most cases more adept at knowing all the finer details of local laws and regulations further reducing regulatory risk.
If your expectations are to expand operations to other states you may need to consult with the PEO for their coverage area to make sure as you expand, you will continue to receive their service beyond your initial location.
Superior Service
These PEOs offer greater flexibility to their clients in their region than larger PEOs.
Regional PEOs are more likely to become available to come on-site to your organization when needed versus a PEO that is headquartered far away.
Also as a client of a smaller Regional PEO, you are more valuable to them than to a National PEO since they have a lesser number of clients leading to a higher personalized service. Because of this, Regional PEOs tend to act quickly to fix a problem or implement a change.
Regional PEOs tend to have a larger client retention ratio than the largest National PEOs.
NATIONAL PEO COMPANIES
National PEOs cover most of the US territory. These are PEOs that cover 45 to all 52 states.
These PEOs are suited for companies who want the ability to grow geographically within the US without the worry of lack of service.
There are fewer National PEOs than other types and many of them such as Insperity or ADP are publicly traded companies while some are not.
Lower rates
National PEOs have a larger client base than Niche or Regional PEOs.
Because of their size, National PEOs possess the highest buying power and because of it, they are able largely to provide lower health insurance rates and other products at a discount for their clients.
Less personal service
Many of the giant National PEOs are viewed as less flexible and less personalized.
Some lack a dedicated small team to service the client where the same person is always available to service them but this varies between providers.
Some PEOs have noticed this drawback and put special effort in this area adjusting their call centers to provide better service.
Different types of PEO companies lead to different outcomes.
It’s not easy to find a PEO company that will best represent your interests the most.
A PEO broker will be very helpful to make the right provider introduction for you.
The Huldisch Group is here to help you identify the right type of PEO for your current and future needs keeping in mind your expectations. We do this as a free service. Get in touch with us today.
