Lykes Insurance Advises Companies with Changing HR Needs
TAMPA, Fla. – (Sept. 19, 2017) — For some companies, a Professional Employer Organization (PEO) may make sense, but many small- to mid-sized organizations find they have more options than they had thought, according to Lykes Insurance, a Florida-based commercial insurance firm.
“Although startup businesses may find a PEO valuable, they often outgrow its value for a number of reasons,” says Brittany Spaziano, employee benefits advisor at Lykes Insurance. “No two businesses or PEOs are the same. Some are high touch and some are not. Some offer insurance discounts, while some do not…or only did a few renewals ago.”
Spaziano says the first question to ask is which PEO services your business actually uses. Some businesses use all of the PEO services and some take only a few. It can be expensive paying for unused services. Likewise, if those attractive insurance rates that drew you in have steadily increased, you could be overpaying.
Suppose your business is faced with an expensive medical benefit renewal. You can’t leverage or change carriers because the PEO generally offers a one-carrier solution. Your options are to absorb the increase or leave the PEO altogether, often without adequate time for a smooth transition. Some PEOs may let you “carve out” the benefits but then you lose some of the main advantages of the PEO — services like benefit administration, ACA reporting and COBRA just to name a few.
Outside of a PEO, mid-sized organizations have more options than ever. Full or partial benefits self-funding is one that is gaining popularity due to tax savings and opportunities to manage health benefits with actual data. Unfortunately, it’s prohibited within PEOs.
Further, PEOs provide little or no claim data, making getting competitive proposals from other carriers extremely difficult. Other carriers have little choice but to shadow price the increasing PEO rates. The catch 22 is, if you are performing poorly, the PEO will pass along increases well above their standard increase. If you are performing well, you would surely benefit from being on your own.
But putting the price factor aside, a PEO is a one-stop shop that only sells a one-size-fits-all client (and industry) solution. However, not only do companies like yours face different legal challenges and have different work forces, but they may also be quite different culturally.
The HR person at a PEO, with 30 or more other clients, will never understand your business as well as a person who spends every day working exclusively for your business. At some point, it’s more cost effective to employ one person, hired by you to serve your employees and your culture.
By this measure, if your admin fees are higher than the cost of an HR person’s salary, you may have outgrown your PEO.
So have you outgrown your PEO? Spaziano recommends that you do the analysis today on your own terms, not when you are faced with a budget-crushing renewal and a tight timeline. It is possible that you are best served on the open market, in a PEO or maybe even a different PEO than you are in now, but you will not have the answer without an analysis.
About Lykes Insurance
Lykes Insurance was founded in 1925 by Lykes Bros. Inc., a 101-year-old privately held Florida-based company. As a premier commercial insurance firm with offices in Tampa, Fort Myers, Winter Park and Sarasota, Lykes Insurance focuses on building long lasting partnerships with companies and individuals, providing protection for businesses, managing risk and designing innovative employee benefit solutions. For more information, please visit www.lykesinsurance.com.
# # #