In today’s competitive business landscape, small and medium-sized enterprises (SMEs) are constantly seeking ways to optimize their operations and provide top-notch benefits to their employees. One effective strategy is leveraging the combined strengths of a Professional Employer Organization (PEO) and an insurance broker. While each offers unique advantages, using them together can create a powerful synergy that enhances your business’s efficiency and employee satisfaction.
What is a PEO?
A PEO is a company that provides comprehensive HR solutions, including payroll processing, benefits administration, compliance assistance, and more. By entering into a co-employment arrangement, the PEO shares certain employer responsibilities with your business, allowing you to focus on core operations while they handle HR tasks.
What is an Insurance Broker?
Assuming you know this if you’re reading this article, but for keyword and SEO purposes, here we go. 😊 An insurance broker is an independent advisor who helps businesses find and negotiate benefit programs, provides guidance on compliance, and can help in many instances with day to day benefits administration needs. Brokers have extensive knowledge of the insurance and benefits landscape and can help employers tailor their offerings to meet the specific needs of the employer and its employees alike.
The Benefits of Using Both a PEO and a Broker
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Enhanced Insurance Related Programs: PEOs have the buying power of large corporations because their programs cover multiple companies, essentially buying in bulk on behalf of their employee/employer members and leveraging the volume of all of the companies that are members. This can hold true for a number of items, like worker’s comp., various liability coverages and even 401k and non-medical lines of coverage. Most of these types of programs are pretty cookie-cutter and don’t vary too much from one company to another. For a company that doesn’t need a lot of customization in these areas and wants to simply get these types of offerings in place at the lowest price point, this can be a very attractive and affordable approach to these lines of coverage.
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Streamlined HR Processes: One of the main reasons many companies (especially those in high growth mode) prefer to use a PEOs is to get their help with various HR functions, such as payroll, compliance, and employee onboarding. This reduces administrative burdens and ensures the business remains compliant with labor laws (this is super helpful if you have multi-state employees). Many businesses who use PEOs don’t even have HR departments so the offerings of a PEO can be very helpful.
Brokers, on the other hand, focus on finding the best insurance and benefit solutions either through multiple PEO offerings or out in the stand-alone market. There are many PEO’s that will let a company source their health plans or other benefits OUTSIDE of the PEO arrangement while handling all of the other insurance and HR functions inside the PEO. This is referred to as the ASO (Admin. Services Only) model. This can be very valuable when the single health insurance provider that the PEO isn’t a good fit for the company OR the PEO will not take the company on from a health insurance perspective.
PEOs do in fact underwrite their health insurance programs so it’s not uncommon for someone to be told “Thanks but no thanks” if a company’s health risk is bad. The PEO will not want to hurt their risk pool by knowingly bringing on an employer partner whose employee base will drive up their claims costs.
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Cost Savings: By leveraging the PEO’s large-group buying power and the broker’s access to multiple benefit offerings, many businesses can achieve significant cost savings on some of the more standard insurance programs, take advantage of the broker’s access to multiple health providers and get the full-time HR access and support they need. When it makes sense, this can be an amazing three-way partnership with the employer at the center. This approach can help a rapidly growing business allocate resources more effectively and invest in growth opportunities vs having to hire internally for HR.
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Expert Guidance: PEOs provide ongoing support and expertise in HR management, while brokers offer specialized knowledge in insurance and benefits. Together, they ensure your business receives comprehensive advice and support, helping you navigate complex regulations and make informed decisions.
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Improved Employee Satisfaction: Offering competitive benefits and efficient HR services enhances employee satisfaction and engagement. When employees feel valued and supported, they are more likely to be productive and loyal, contributing to your business’s success which is the entire point of having a benefits program in the first place (outside of mandates of course. Thanks Feds. 😊).
Conclusion
Using a PEO and a broker simultaneously can provide your business with a robust framework for managing HR and insurance needs. This combination not only streamlines operations and reduces costs but also ensures your employees receive the best possible benefits and support. By leveraging the strengths of both PEOs and brokers, you can create a thriving work environment that drives growth and success. Stay tuned for our next article where we will write on something very similar, but speak to a broker partnering with an HR Consultant instead of a PEO.
Thanks for the read!!! If the above got your wheels turning, please let me know. Would love to brainstorm with you on this or anything else benefits. Talk soon.
Ryan
