Expanding your business means hiring more support staff to help operate your growing enterprise. Companies always have the option to do their recruitment in-house or partner with a reputable HR solutions firm to manage their recruitment process. Hiring more than fifty employees requires businesses to provide health insurance under current US federal law. As an employer, you don’t want your time to be tied too much to HR processes including payroll and benefits.
You have several options for these matters to be resolved. You can call an insurance broker to help you get the right insurance policy based on your company’s needs, or hire a Professional Employer Organization (PEO) and enjoy the full benefits of their well-rounded services such as HR functions and compliance support.
Insurance brokers belong to a network of insurance providers. They will find competitive offers and help you make informed decisions. They earn a commission when they successfully close an insurance sale. PEO, on the other hand, is a third-party providing staffing service and employee management tasks such as payroll and workers’ compensation, employee benefits, compliance assistance, talent management and more.
PEO vs Insurance Brokers
Choosing between a PEO and an insurance broker depends on your business goals, the size of your company and budget. Of course, companies would opt for a comprehensive yet cost-effective product or service. While PEO offers more business solutions, some SMB companies may not always need all of them except for accessing health coverage.
Insurance brokers pros:
- They are licensed specialists regulated by the state who are experts in benefit plan design and claims management.
- They can provide many options when shopping for health insurance on your behalf.
- They provide long-term strategies, risk evaluation, coaching and flexibility.
Insurance brokers cons:
- Broker plans have deductibles, copays and out-of-pocket limits.
- There is a higher insurance premium for the insurer’s risk considerations.
- They can only help you with health insurance.
Pros and cons of PEO:
Hiring a PEO means they become your co-employer. They run your business on the ground in terms of employee management, payroll, compliance and other HR responsibilities. Your company agrees with the risk-sharing involved such as sharing tax ID for payroll and when reporting for taxes. When it comes to healthcare coverage, here are the pros and cons:
- Under a co-employment model, a small business can access high quality healthcare plans that are usually for less-risky and larger companies.
- PEO is compliant to critical federal and state regulations such as the Affordable Care Act, Consolidated Omnibus Budget Reconciliation Act and Employee Retirement Income Security Act.
- There is liability assurance as their co-employer.
- There is a limited and inflexible health plan, which might not meet some requirements even for a small company.
- PEO charges monthly administrative fees that may be charged per employee or percentage of total payroll.
Should you go with PEO or an insurance broker?
As mentioned earlier, your decision will be based on the number of employees working in your company, your budget and business goals. PEOs are suitable for companies with an international presence because they can benefit from the HR solutions that they offer. However, small businesses with less than 100 employees who choose to go with an insurance broker might find it challenging to get high quality insurance with lower cost.
Choosing the right PEO
If prefer partnering with a PEO, consider these following criteria when choosing the right PEO for your business:
- Is the PEO IRS-certified? The IRS doesn’t endorse any certified PEO. The benefits of choosing a CPEO is that they are solely liable for federal employment tax payments and your business can have certain tax credits.
- Pricing structure: do they offer a per-employee basis or percentage basis? If they’re offering introductory pricing, find out about the cost increase upfront rather than asking later. Evaluate what other services they offer that will benefit your business.
- Will the group health insurance be sponsored by PEO? Is the health plan fully insured or self-funded? The insurance carrier deals with the employee claims while a self-funded plan is managed and funded by the employer.
CXC is a global HR outsourcing organization with 30 years of experience in workforce management. Our innovative and cost-effective solutions help companies gain a competitive advantage by improving efficiency while reducing risks.