This is a general question as we are in the process of attempting to take clients out of professional Employer Organizations and allow them to be independent.  It seems to be working pretty well and we had a great success story recently in that we are saving a client over $100K per year - most of which is due to lower medical premiums. 

This company was paying $67,000 per year in admin fees, more than $70,000 more in medical premiums per year than we got on the open market and $5,000 more in workers comp.

My question is are there advantages to being in a co-employment relationship through a PEO that I just don’t see?  My research tells me that there are no advantages unless it is the only way a client can get workers comp.  I do not understand why there are so many companies in this PEO arrangement.

What am I missing?

I suppose PEOs make sense for some companies from an administrative standpoint.

Another issue I have seen, at least here in California, is that unemployment tax payments go to the PEO’s account, not the company’s account. When the company breaks away, those funds stay with the PEO. The company then pays a premium tax rate until its account is adequately funded. It would be my hope that PEOs warn new customers about this issue.

I am an HR Manager with a PEO.  This is the second PEO for which I have worked.  I have also been a client of a large PEO. I have been in the business (PEO) well over 3 years and in HR for over 11 years.  Not all of us (PEOs) are created equal.  I work for a smaller organization, but I am very hands on with my clients, however, they also have a responsibility to keep me informed as well.  Please do your homework before choosing a PEO.  There are some out there that give us a bad rap, but the majority of us are on the “up and up.” There are regulations out there, but some of the bad ones still prevail.  The bigger services are not always the best as they are sometimes too large to be hands on for smaller businesses.  But they also have their advantages as well.  A great place to start researching for PEOs is NAPEO.org.  That is our professional association and will give you the scoop on our business.

I have done the research on NAPEO and other sites, but it appears to be very biased in the favor of PEO’s.  What I am finding in the market is the original and primary benefit of a PEO - providing Fortune 500 benefits for the small to mid-sized companies at a lower cost - is no longer there.  In just about every case I have looked at in the last few months is the cost of each of the services they provide -payroll, workers comp, benefits and HR - is much higher than a smaller company would be able to find separately on the open market. They still claim to save cliients money, but this has not been what I have seen. 

I am asking others what they are seeing in the market and if there is an advantage to going with a PEO.  I have posted this question on a number of other sites as well and so far, I have not had anyone from the PEO industry tell me there is an advantage and I want to know what others expereinces are.

Thanks