Significant changes in the health insurance and Workers’ Compensation insurance markets over the last several years make review of your Employee Leasing/Professional Employer Organization (PEO) relationships a worthwhile exercise in 2011.
Employee Leasing has been, and for some continues to be, an appropriate solution for employers with particular needs. Seitlin brokers for a number of Professional Employer Organizations so as to provide this solution to our clients when it makes sense. We are often finding, however, that what made financial sense several years ago no longer does.
There are three basic changes in the landscape that have eliminated much of the cost-savings that used to drive employers toward the PEO package:
- Health Insurance - PEOs no longer have the latitude they had in the past to artificially reduce the health insurance rates they deliver to their clients. Insurance carriers realized they were often seeing the same employee groups shift to PEOs at much lower premiums; not a very profitable outcome for the carriers. Today, most PEO contracts with health insurance carriers severely limit the variance between PEO health rates and the carrier rates for the same group.
- Workers’ Compensation – rates in Florida have decreased nearly 65% since 2003, primarily due to changes in tort law with respect to Workers’ Compensation claims. The current low rates leave less room for PEOs to provide discounts that translate into meaningful premium reductions.
- Payroll technology - PEOs were often an administrative solution for companies that did not have strong internal payroll and benefits administration systems. Advances in payroll technology now allow payroll companies to offer robust and varied administrative options at a fraction of the cost of PEO fees.
Seitlin has found significant cost savings for a number of our clients by unbundling the employee benefits, Workers’ Compensation and payroll services previously provided as a package by Professional Employer Organizations. We recently reduced annual cost for a group of approximately 100 employees by $130,000 while improving their benefits offering. Seitlin has the expertise in house to provide your client with unbundled options in all these areas and perform the analysis to determine the financial impact of unbundling. Cost efficiencies usually become meaningful with groups of 50 employees or larger.
We would be happy to help any company involved in employee leasing review their options to determine the most cost effective way to operate as employers moving forward.
For more information, please contact:
Steve Light, MBA, CIC
Vice President
Tel: 954.267.8559
Email: slight@seitlin.com
