PEO Alternative - When a PEO is not the answer

Posted on August 9, 2013 in General

It’s your business.  You had the new idea, or the better process, or you’re carrying on your family legacy.  You know your business better than anyone.  You have had challenges, but you have succeeded.  Your employees depend on you to make good decisions and you don’t let them down. 

One of those decisions is how to employ your people.  Do you choose to control that process, or do you decide to turn that over to a professional employer organization (PEO)?  What is best for you:  hiring a PEO and giving up control of some of the functions of being an employer, or finding a solution that is a PEO alternative?  VistaCore is a PEO alternative. 

Let’s compare how the basic amenities between PEO and a PEO alternative like VistaCore stack up.

PAYROLL.  All employees, including you, expect to be paid.  You can do payroll in-house, outsource to a vendor of your choice, or turn everything over to a PEO.  With respect to payroll, here are some things to consider between hiring a PEO or keeping CONTROL of your payroll using a PEO alternative:

•    Hours worked.  No matter who does payroll, you will need to provide the number of hours each person worked.  If you have job costing, you’ll have to continue to track those records.  ADVANTAGE?  It’s a DRAW – you’ll spend the same amount of effort whether you outsource to a PEO or use a PEO alternative.
•    Taxes.  You are liable for paying all employment related taxes.  The risk you run by using a PEO is that they fail to remit those taxes for you.  You may have paid the PEO, but if they fail to remit the taxes you are on the hook for penalties and interest.  ADVANTAGE? The PEO alternative where you CONTROL the payment of taxes has the advantage.
•    Reports.  If you maintain control over payroll, you can generate reports on demand.  Sometimes these are important to provide to general contractors or the like.  With a PEO you are no longer the employer, so you cannot get any reports specific to your employees.  ADVANTAGE?  The PEO alternative where you CONTROL the report generating feature has the advantage.
•    Timing.  Maybe you would like to pay some employees semi-monthly, but others weekly.  Some PEOs will limit your options with respect to the timing of the employees.  ADVANTAGE? The PEO alternative offers more flexibility with respect to the timing of pay periods.
•    Cost.  A PEO will charge you as a percentage of your gross payroll.  Typically this charge ranges from 12%-15% of your payroll.  For regular payroll periods maybe this is OK.  But should you have to pay the PEO the same override on overtime or on bonus checks?  The PEOs monthly expenses didn’t go up, but yours just did.  ADVANTAGE?  The PEO alternative has the advantage when looking at costs.

WORKERS’ COMPENSATION.  Depending on your industry workers’ compensation premiums may be a significant portion of your overhead.  As a business owner you develop safety measures and provide training to keep your mod rates as low as possible.  Your agent’s helps you find a carrier that will provide protection, support, and if necessary, defense against questionable claims.  Can you really afford to outsource this responsibility?  You have no understanding about the other employees in a PEO, so you have no option for controlling the expense.  Using a PEO alternative like VistaCore offers you the advantage when looking at Workers’ Compensation.

  Whether you provide insurance as a legal requirement, or as an employee benefit you want to get the best coverage for your needs at the most competitive cost.  You have insurance agents who shop the market for you and who provide you with options.  With a PEO you have very limited choice.  You get what they provide whether you want it or not.  And you don’t truly know the cost that you’re paying, because everything is bundled into the payroll burden.  Shed light on the premiums that you pay, and control the benefits that you provide, and you control your expenses.  Until you peel away the layers and costs between a PEO and a PEO alternative you won’t be able to perform a true comparison.

RETIREMENT PLAN.  Most PEOs offer the employees a 401(k) plan.  Depending on the PEO there may or may not be a matching contribution.  If there is, your fees to the PEO will be increased by that match.  Many PEOs will not allow Highly Compensated Employees to participate because of the complexity of testing challenges presented. 

As a business owner, do you want to be excluded from being able to contribute to a retirement plan?  You can establish a plan for your company, but you will have to include your employees in any contributions that you choose to make, even if they are technically employees of the PEO.  By using a PEO alternative like VistaCore the business owner has a significant advantage over the PEO when it comes to retirement planning for the business owner.

HR SUPPORT.  Having employees often results in having questions related to leave and absence issues, harassment, substance abuse testing and so on.  A PEO alternative offers a resource for answering those questions is important to most business owners.  HR support can be hired in house or outsourced.  HR support comes standard as part of most PEO packages.  With a PEO alternative you can dial in the amount of HR support functions that you need.

SUMMARY.  You became a business owner because you wanted to take charge of your career.  You take responsibility for sales, for producing your product or service, of hiring the right people, and for your overall success of failure.  You are good at what you do, and you will continue to maintain more control over your company and its people if you make your own decisions about how to provide payroll, insurance, and retirement benefits.  A PEO may sound like a good way to take things off of your plate, but they limit your options, and they are very expensive.  Control your future and your success.  VistaCore is a PEO alternative with a balance of support to help you and help your team provide the right solutions for your company.

Click here to request a personalized VistaCore quote today!

back to top
« View all Blog Entries
Back to top