Diverging from Professional Employer Organizations

Benefits Case Study

Managing human resources, payroll and benefits for a rapidly growing company can be overwhelming.  In these cases, some companies choose to partner with a professional employer organization (PEO), which allows these important responsibilities to be outsourced to a specialized team for a fee.

When a group partners with a PEO, they are entering a co-employment contract with a PEO vendor, making the members of the group employed by the PEO instead of the actual employer. This gives the group access to volume discounts and administrative services they may not be able to access independently. Although PEOs often seem like the clear, cost-effective, easy way to administer human resources, benefits, payroll or staff training, the amount of control an employer relinquishes when entering a co-employment contract often restricts the freedom to make changes year-to-year. This can result in the arrangement becoming unsustainable for the company, and ending the contract can be rather difficult.

Summit has a relationship with a home health care business that entered into a PEO contract many years ago. The original agreement allowed the PEO to assist the company in payroll and employee training during the initial years of rapid growth. However, once the business passed a certain size, company leadership found the group incapable of offering truly specialized expertise. In addition, increased cost and slow customer service response time was creating dissatisfaction among company employees.

Summit’s Solution

To address these issues, the chief financial officer contacted a Summit associate to see how they could dissolve the current PEO agreement. In partnership with one of Summit’s affiliate companies, Proliance Resource Group, Summit marketed the case to its vendors to fill in the gaps left by the current PEO organization. This would give company leadership control again and allow them to tweak pieces on an as-needed basis.

Summit’s ultimate solution provided a majority of the PEO services in the proposal, excluding the co-employment arrangement. Rather than see costs increase by breaking away from the original PEO group, Summit presented a much more flexible platform that could be tailored to the client’s needs and result in a 35 percent cost reduction across all services. The new solution did require some staff training on areas previously covered by the PEO, but the benefits of having an independent and flexible platform with lower costs far outweighed this small inconvenience.

Overall, the solution to unbundle the PEO exceeded the group’s expectations regarding cost and functionality. Following the implementation, the group saw immediate cost savings and the greatly improved turnaround time on HR issues. Going forward, the group has a greater ability to reevaluate policies year-to-year and restructure them to fit their changing needs.

Dick Evans

President/CEO- Proliance Resource Group

These results are for illustrative purposes only and should not be deemed a representation of future results. Circumstances, solutions, and/or results are based on specific facts tied to unique client situations. Favorable results cannot be guaranteed even in a similar scenario. Each specific set of circumstances will differ depending on client needs and profile. Actual results may be more or may be less than those shown. Past performance does not guarantee future results. This assessment is that of the writer, and not the recommendations or responsibility of Cetera Advisor Networks LLC or its representatives. The solutions presented in this scenario are being offered through Summit or Proliance Resource Group.