What is a PEO? An Employee Benefit Option that Saves Businesses Thousands

What is a PEO? What benefits are there in being a part of a PEO? What businesses could use them? And when does it make sense to transition to a PEO? I'm going to break down all that and more today for you here. My name is Matt Vadie. I'm the CEO of Guru Payroll and HR. We are a PEO that is licensed nationally and here to serve small businesses all around the country by helping them to streamline and automate their HR, payroll, and benefits functions. And today I'm just going to give you a quick breakdown on what a PEO is and share who would benefit from working with one. So let's talk about some of the challenges. This is something that I'm very familiar with. I own multiple small businesses, so I deal with this stuff all the time. We have uncertainty and complexity when it comes to HR, benefits, admin, and compliance. When I move into a new state, when I add a new employee who's remote, Now I have to deal with the ever-changing laws and regulations, not just federally but in each state as well, which can make it very challenging when we try to grow and expand our team. Big HR companies and benefits companies have terrible support. Uh, we also see it from the local brokers as well. Sometimes your broker just won't come by but once a year with a renewal, and if it's good, he takes you golfing. If it's bad, he prays for the best. And so, you know, we find that whether they're big or small, it's hard for small businesses because we don't have that big buying power, and we don't represent a huge monthly invoice to our vendors to really get the attention we crave and deserve. And one of the reasons why I started a PEO is because the age-banded plans make it so hard to recruit and forecast expenses. So if you have less than 50 employees in the United States, you're subject to the Affordable Care Act age-banded plans. And so that means, you know, whether if I'm 25, I pay one rate, if I'm 45, I pay another rate, if I'm 65, I pay another rate. That can be very hard. So if you're a tech company who's trying to recruit high-end developers, and you're showing them a rate grid based on age, and they're being recruited by Facebook, who's paying 100% of everything all the time, it can get very hard to show up and recruit well. And then it can be very hard to forecast expenses. So if one person, I paid 90% of their employee-only premium, and that's $500 a month, but a different person is $700 a month, and I'm paying 90% of that, then I can't really forecast my costs, which as a small business is very, very, very important to me. And also, one of the things people don't really talk about there is that you can create some biases as well. So in that circumstance, am I going to recruit and hire the 55-year-old or the 25-year-old if one is going to cost me a couple thousand dollars a year less in benefits in addition to the lower salary? It's going to create some age discrimination as well, which is an unfortunate byproduct of the whole thing. And then we've all been conditioned that every year renewals of 7, 10-15% are the normal, and that just creates a crazy high amount of compounding interest for us as small businesses and our costs as well. And for us in South Carolina, we also— it's, it's hard, you know, and I know every state kind of has their premium carrier, but if you can't get access to Blue Cross Blue Shield, Blue Choice, or, you know, some of the other major carriers, then you're going to struggle as a small business owner to attract recruit and retain top talent. You know, I was just speaking to a group yesterday that was using Aetna here in Columbia, South Carolina. They just don't have as good of a network. The employees don't like it as much. And so even though Aetna is providing some decent benefits at a decent price, it's not really helping their employees the way that working with a more premium carrier would, particularly in this market. And then finally, if you're a small business owner, trying to build out all your own payroll, HR, and benefits processes from scratch is just expensive and time-consuming. And why would you build something from scratch that you can copy-paste or buy from somebody that's already built it. So what is a PEO? Well, first of all, PEO stands for Professional Employer Organization. And what we do is we combine employees from many companies into a single group to create economies of scale to help create mass purchasing power when it comes to things like healthcare benefits, ancillary benefits, retirement accounts, things that are hard for us as small business owners to do individually. We have created one large group to help make sure that it is more effective and affordable for the entire group. So one example of this would be, you know, if I go back to our company as a small business, if I went to a traditional broker, I would be able to offer one plan and it would be age-banded. Inside of the PEO, I can offer multiple plans and they're composite rates, which means they're flat rates and they're better priced than the open market because I'm taking advantage of the thousands of employees that are in this group together instead of just the tens of employees on my team. And let's talk about those increases. Let's talk about those renewals, man. We've been brainwashed into thinking a 7% renewal every year is a great deal by the carriers. But let's look at how that compounds over time. So if I take a 7% renewal 3 years in a row on the average premium that an employer pays, $600 a month, that is going to be an extra $1,600 per employee per year after just 3 years. Yeah, $16,000 increase in my healthcare spend every 3 years by just simply taking what I would be quote unquote happy with as a market renewal of 7%. So what we do in a PEO is we underwrite that risk on the front end by only accepting moderate to low-risk groups to create a somewhat healthy pool of people that can get lower renewals because we're managing the risk of the group for the entire group. As a matter of fact, I just had to turn away a rather large group for us, 100+ employee group, which is on the higher side of the groups that we serve. And even, you know, and for me, it's a great deal. I'm really excited about bringing it in. We would love the revenue, but they're just going to muddy up our pool. And we can't do it because it would be— it would take away from the integrity integrity for everybody else in this group that's taking advantage of this group buying power and all the amazing benefits of being in a PEO. We can't let one bad apple spoil the batch. So we need to make sure that we're managing it so that you get the benefits of being part of this larger group. Now, the cool thing about the PEO industry is that we have NAPO, the National Association of PEOs, who does a lot of research and lobbying on our behalf to make sure that we're providing the value that we should and that we're licensed and regulated the way we should be. So how do we get to that 27.3%? Well, the average annual cost savings per employee is traditionally driven by the reduction in need for internal HR salary and teams, then those health benefits costs. Those are the two biggest drivers that are going to reduce your costs and help you to focus on what matters as an employer. How else do we save you money? Well, we talked about that group buying power, Let's talk about the efficiency. Think about it. If you work with us, you're going to get— and we're going to talk about in a few minutes everything that's included inside of a PEO— but you're going to have less vendors because your payroll, HR, benefits all under one roof. The old one throat to choke mantra and less hands in the pot. And we have established processes. So if you reach out and you say, hey, we want to roll out a performance management program, we go boom, pick from one of these three options. You say, hey, I need an offer letter. Boom, here you go. Like, you don't have to create things from scratch. We've got them all for you, and they're ready to roll and deploy very, very quickly. So what is included in a PEO? Well, you get the paperless payroll, HR, and timekeeping, and benefits administration system. So everything you need to manage your employment lifecycle available in an online system, from employee onboarding to benefits enrollment to performance management to time and attendance tracking. Everything in a singular system, which is wildly valuable in and of itself. Next up, we're flexible and scalable. So our transparent pricing model, we're one of the few PEOs out there, when you go to our website, you're going to find our pricing. We don't hide it. We sell things the way we want to buy them. Our pricing model combined with our proprietary HR platform allows you to grow with ease. Our system scales to thousands of employees. So as you grow, it gives you a great opportunity. And if at some point you decide, hey, look, we just don't want the benefits inside of this PEO, we want to peel those off, we can. We just want to continue to use the system and get the HR support. We have that flexibility and scalability to grow with you. And we're a massive time saver. So when you start to look at the amount of time these payroll, HR, benefits, admin things take you, it's going to release a ton of your time, whether you're the business owner or administrator. We also provide those big company benefits. Again, one of our first customers, the primary reason they wanted— they were pushing us to start this PEO was, hey, Look, Matt, we need a slick benefits package to put in front of these people. We need the videos that walk them through the plans. We need the PDF that shows them everything that's included. We need somebody for them to call when they have a question about should I enroll in this plan or that plan? You get that dedicated benefits specialist in the PEO model. It's a comprehensive HR solution. HR is entirely taken off your plate. So, you have a dedicated HR business partner who also has an HR assistant and they have teammates in redundancy behind them. And they will handle anything from, hey, writing that employee handbook to, I'm getting ready to fire Susie this afternoon. What should I say? What shouldn't I say? Help me document it. You'll have a comprehensive, not only online HR solution, but access to dedicated HR professionals. And finally, we're going to be there to help with that compliance risk, whether you're going into a new state or you simply just have a question about, you know, again, I've got a hire, fire. Those are the two biggest transactions in an employment lifecycle is that hiring and firing. And we are there for you during those critical moments. So why are people partnering with us? Well, we have the best network. So we work with the premium carriers, premium providers, to make sure, you know, you're not getting second-rate carriers. We have Blue Choice National plans, so no matter where your employees are in the country, we can offer them health benefits that are premium, top-tier plans. And we also give you that ability to offer multiple plans. We work with MetLife and Delta Dental for our ancillary benefits, along with offering other things such as legal advisement and things for your employees that they purchase pet insurance. They'll get all sorts of different options you can roll out, but nothing that you don't need. One of the biggest challenges I had with PEOs is that it was just filled with all this fluff and junk that we were paying for that nobody used and just confused our employees. And then finally, we use Transamerica for our retirement in a premium, premium capacity. So how does the whole thing work? Sometimes people get a little concerned about the employment relationship because a PEO, professional employer organization, is technically called co-employment. So what we do is we share our Fed ID with you, For tax filing purposes, it is the tie that binds the entire group together. So that's why payroll is so critical to the entire thing, because we file everybody's 941s together as one batch 941 under our Fed ID, along with other annual payroll reports and quarterly and ongoing reports. So people start to get concerned, well, are they my employees or they, they your employees? Well, they're your employees. The way it works is you continue to maintain the responsibility of all business operations, employee direction, day-to-day decision. Where we share responsibilities is regulatory compliance and hiring and termination processing. So we have a vested skin in the game to make sure that your employees don't sue you, to make sure that you take all the proper steps when it comes to hiring and terminations and employment conversation, because we do have a vested interest in the success of your team, but also in the compliance of the organization. Our responsibility is on the administration side. So we handle payroll, we handle HR management and assistance there, we help with benefits administration and BRISC management, but at no point can we make any hiring, firing decisions or have any impact over your business operations. So what all is included? You get our payroll and HR system, our Ben Admin, our compliance support, all the HR automations, workers' comp policies and administration, training and education resources, integrations with your favorite tools like QuickBooks and, and more. And we do all the new hire processing including E-Verify and COBRA administration.. And we do all that for one flat per employee per month fee. And I think that's a very important thing. Because if you start to look at some of these companies that do a percentage of payroll, which is a very common model in the PEO space, is they say, hey, just this small percentage of payroll comes up to our administrative fee. And then it's very hard to calculate. And if you're a white-collar company that pays out a big bonus run, they're charging you a percentage of the bonus run, or they're just, you know, as you continue to increase salaries, your fees go up. On what planet does that make sense, dude? It only makes sense to them because they're the ones profiting from your growth. We only want to charge you a fair price for a fair service, and we believe in that model. Sell it like we would want to buy it. Everything you see on this screen is included in this price. Obviously, health insurance premiums are an additional cost in and of themselves, and your workers' comp is an additional cost, but everything else is included., and we just want to make it as simple as humanly possible. And so why are more companies coming and working with Guru? Well, one of our clients recently told me this, and I thought it was a wonderful way of putting it. He said, Matt, you guys are small enough to care but big enough to matter. And that's a great compliment to me because it tells me we have that national reach. This was a client on the West Coast. We're on the East Coast. We're in South Carolina. We've answered over 100,000 HR questions. This is actually a dated slide. We've been in business over 11 years. We have a 99% customer satisfaction score and a 77 net promoter score. If you're familiar with net promoter score, goes -100 to +100. 77 is off the charts in our industry. The average is a 30. And we're a mission-first company. We give away 3% of all of our revenue, 1% of our time, and 1% of our product to nonprofits. So if you're interested in learning more about working with APEO, please give us a shot. One of the things we really pride ourselves on is you'll probably talk to me or one of my close teammates, and we just want to help to put you in the right place for your business. I start and end every call with, hey, if we can't help you, then I will help you find someone who can. I take that very seriously. From one small business owner to another, I wish you the best of luck. And if you're a new teammate watching this at Guru, thank you for joining us. I'll talk to you soon. Have a blessed day.