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PEO: Friend or Foe?

 Apr 23rd 2018       PEO Articles

What Insurance Agents Should Know About PEOs

Do you view a Professional Employer Organization (PEO) as competition to your growing book of business? If you are an insurance agent and you haven’t been using a PEO as a tool to help build your business, it might be time to take another look at the benefits a PEO can bring you and your clients.

Benefits of a PEO Partner

PEOs provide a vast array of services including payroll, human resources, benefits, and workers’ compensation to their clients. PEOs form co-employment relationships with an employer and typically take over many of these duties. The National Association of Professional Employer Organizations (NAPEO) defines co-employment as the contractual allocation and sharing of employer responsibilities between a PEO and its client. Business owners who align with a PEO in a co-employment relationship transfer a substantial portion of the risk and responsibilities associated with employees to the co-employer. The structure of the relationship allows the PEO to offer better benefits, handling of wage and employment tax responsibility of reporting, collecting and depositing the taxes with state and federal authorities, and assistance with workers’ compensation coverage and claim management.

When an employer forms a co-employer relationship with a PEO, the employer assumes the PEO’s mod, and that can be an instant cost saving benefit for your clients with high experience mods. Also, some clients who work in high-risk industries and class codes can be hard to place. Working with a PEO may actually reduce their worker’s compensation premiums. PEOs provide pay-as-you-go workers’ compensation with no upfront deposits. Your client could save big by avoiding these large deposits, saving on premiums, and eliminating any possible end of the year audits.

The PEO Industry is Growing

The NAPEO estimates there are currently as many as 980 PEOs operating in the United States, providing services to as many as 3.4 million employees. Small businesses that work with a PEO grow 7 to 9 percent faster, have employee turnover that is 10-14% lower, and are 50% less likely to go out of business. 98% of business owners who are currently using a PEO would recommend a PEO to a small business colleague.

Use APR as a Resource For Your Agency

PEOs don’t have to be competition for insurance agents, they can be a resource. Offering your clients these alternative solutions to work with a PEO may solve some of their other business challenges, which helps you solidify a good relationship with your client. You can set yourself apart from the competition by offering a PEO solution to these high-risk, high mod, or other hard-to-place clients. Essentially, you are partnering with a team of PEO professionals who will work alongside you and your clients to help keep them happy and satisfied.