It’s time to call BS on PEO’s, or for those not in the know, Professional Employment Organizations.
While there are companies that are just the right fit for them, we’ll let a recent comment in a prospect meeting say it for us – “So, what you do is what we thought we were getting when we bought into a PEO?”
Our answer of course was yes. The challenge is that while the notion of one-stop-shopping is appealing to many business owners, many don’t know what they’re getting themselves into until they’re unhappy and they try to get out. We aren’t a PEO, and we cringe when we’re likened to one. Why?
Myth # 1 – PEO’s provide HR support
They’ll help you with human resources, oh yes they will. Or, at least, they’ll tell you that. And, that HR support is going to cost you anywhere from a 3% to 15% skim of your gross payroll. That means, that for every $35,000 employee you’re paying, on the lower end at 5%, $1,750.00 a year to have the ability to call someone when you run into HR troubles. If you have thirty $35,000.00 employees, you’re paying $52,500.00 a year. And, that’s over and above the benefits costs you’ll already be paying more for.
PEO’s will give their HR person 30 or so clients to manage – HR is all part of the service you see. But, that HR person’s responsibility will be to ensure that they’ve made contact with you once a month, and be there when you call with a problem. It’s reactive, not proactive. For the same amount a month, you’ve got someone (an hr-havenite) in the trenches with you for 38 hours a month, actually helping you do the work, actually helping you plan, and actually helping you build a better culture which leads to building a better business. That’s real HR support.
Myth # 2 – PEO’s reduce cost
See Myth 1 above. Those kinds of numbers are a little difficult to offset with savings on health and welfare benefits. Oh, did we mention that your friends at the PEO are often picking up the commissions on your benefits too? Add that to the numbers above and you’ll see why Myth # 3 might start to ring true to you.
Myth # 3 – We’re in it for your people
You see most PEO organizations aren’t really in it for the people; they’re in it for the money. How do we know? Truthfully, these companies are really sales organizations, putting all their efforts into salespeople instead of putting their efforts into great HR folks who care
about your company.
First of all, if you’ve ever looked at a PEO invoice you’ll notice that it’s really hard to distinguish where the money is going. In fact, it’s really pretty expensive to have someone lease your employees back to you – all in the name of relieving you of liability – which it doesn’t because of Myth #4.
Myth # 4 – Liability and the small print
The salesperson is going to make a case for reduced liability because you’re leasing your employees from them – for a fee of course. Rest assured, whatever happens on your premises is going to rest squarely on your shoulders if anything law-suit-worthy happens.
You’re not removing liability, but you are adding a few things they might not tell you about during their sales call. Next time you’re being pitched by one of their sales folks, ask them about FMLA would you?
Look, everyone has choices, but we hate to see small and mid-sized businesses get taken for a ride. If you want help, real life, honest to goodness, roll up our sleeves and get to work to help you kind of help, a PEO isn’t it.