The PEO People | March 14, 2019

PEOs for Dummies Continued…

PEOs have evolved to make life easier, better, and cheaper and to eliminate waste-of-time processes for important parts of a business.

AND, all the stuff you read about how great they are and how much money they can save you CAN BE TRUE – SOMETIMES. Sometimes, though, the numbers are really compelling, but there are reasons why a PEO isn’t right for you or why that vendor’s sales pitch just isn’t true. We will help make sure you don’t make the wrong choice for the wrong reasons. We’ll make sure you KNOW the hidden facts so you do make the right choice for the right reasons – and maybe decide a PEO isn’t right for you for the right reasons.

Let’s be clear when I say that this industry is evolving. Up until 5 years ago, this was not in general a quality industry. AND IT’S STILL RAMPANT WITH BAD ACTORS – bad players, inconsistent service, and software that really isn’t user friendly or integrated along the whole employment spectrum.

Many vendors in the PEO industry are great. It can be a legitimate outsourcing/insourcing solution that does make things better for HR finance employees executives. It can make processes and reports better, and it’s less expensive for lodge line items like health insurance and workers comp. And, very important in today’s world, it provides protection against all kinds of lawsuits for all kinds of reasons, legitimate AND non-legitimate – either way, expensive.

But again, you don’t want to pick the wrong one. Hint: the best ones aren’t necessarily the ones that spend the most on advertising, Google searches, blogs, and selected internet endorsements by some of their customers. So how do you get the real objective facts from objective sources? Well, that’s just one of the important and practical topics we’re here to help you find out.

ThePEOPeople let you know things that you need to know and things you wouldn’t even think you need to know or ask.

Let’s start off with an example that most firms, even those that have a PEO, don’t realize is happening. Do you know the word “scooping”?


You want health insurance now, and you charge your employees some portion of the premium. It’s likely that you put in a section 125 plan to make this cost sharing tax deductible to the employee and also save you as a company on FICA tax. There’s no revelation here – but what’s eye opening is that many PEOs take that savings of FICA and keep it without telling you! We are not exaggerating this!

Here is a dollar example. Let’s say you have 50 employees on benefits, and you charge each of them $200 a month, which is $60,000 a year. 7.65% of that is $9,180, which your company saved in Federal C taxes. The PEO should reduce the tax that it pays the government on your behalf and charge less to you, but most don’t. They keep it and add to their profits.

And you would never think to even ask that question, would you? It doesn’t even seem legal – but it happens all the time. 

Continued- Until next time……

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