Workers Compensation Savings with a PEO - How Employee Leasing and Professional Employment Companies Do It?

By Bruce Silver

Employers Rx LLC

Workers Compensation Savings with a PEO - How Employee Leasing and Professional Employment Companies Do It?

You have read all of the claims how employee leasing and professional employer organizations can reduce your workers compensation costs by 10% or 20%. If your company has developed a high experience mod rate as a result of a large "shock" claim, or claims that may be questionable, it is possible to receive rate reductions of over 25% from employee leasing companies that are competing for your business. Have you ever wondered how this is possible? How do PEOs do it?

The Rule of Large Numbers

All employee leasing companies carry workers compensation coverage just as any small business is required to do (except Texas). However, because they are "pooling the risk" of hundreds of companies and thousands of employees, they have the ability to "self insure" the risk up to a certain amount, the deductible. Some PEOs purchase workers compensation policies that pay only after the first $250,000 of a claim, others are responsible for the first $500,00.

Skin In The Game

What does this mean for the small business owner who is with a PEO or employee leasing company? Because PEOs really have "skin in the game" when your employees submit a claim, and claims paid come from reserves that will be returned as profits, it is much more likely that claims will be vigorously investigated and contested than in the standard markets.

Some employee leasing companies have more flexibility than others. They can offer small employers unique WC programs containing a claims "cost sharing" arrangement that can further reduce your rates and improve cash flow. Your company assumes more of the risk, but shares in the rewards of maintaining a safety conscience and healthy workplace. Workers compensation programs like this and others, are not available to small and midsize companies because of insufficient premium. Entrepreneurs and business owners who take advantage of the benefit's of using a PEO, now have the ability to compete, and beat a larger company when bidding for that "prize" contract.

Caveat Emptor - Let The Buyer Beware

You've learned how most large employee leasing companies and PEOs essentially "self -insure" their workers compensation risk. It is equally important to understand that the ratings of the insurance carrier hardly matter because they will only be responsible for expenses that exceed the plan deductible. Since only the most traumatic claims with extensive medical bills and long term disability will be covered, it much more important to know the financial soundness of the employee leasing company or professional employer organization.

Below is a press release from Gevity, a leading professional employer based in Bradenton, FL.

Gevity Announces 2009 Workers' Compensation Insurance Renewal

BRADENTON, Fla., Dec. 30, 2008 (GLOBE NEWSWIRE) -- Gevity (Nasdaq:GVHR), a leading professional employer organization (PEO) that provides HR services to businesses nationwide, today announced that the Company has renewed its 2009 workers' compensation insurance agreement with member companies of American International Group (AIG) Commercial Insurance.

Consistent with 2008, Gevity will maintain a $1 million per occurrence deductible and will make monthly payments to AIG for program costs and estimated future claims costs in the form of loss collateral funds, which will be approximately $17 million lower in 2009. Garry J. Welsh, Chief Financial Officer, commented that "We are very pleased with the terms and conditions of our renewal for 2009. Moreover, we are encouraged that our effective risk management practices and continuing favorable trends in claims costs have resulted in lower loss collateral funding requirements from AIG."

Another Professional Employer Organization Horror Story

By Bruce Silver
Employers Rx LLC

Another Professional Employer Organization Horror Story

I came across an interesting website developed by Mr. Ed Shull called Filthy Lucre. Ed owns and operates USWeb LLC, a small online marketing and website development company based in Henderson, Nevada. Ed's website Filty Lucre not only is a showcase for his talented firm's programming capabilities and techniques, but he created a thought provoking community where visitors and members can post and exchange photos, videos and join in the "conversation".

From: "You Can't Make This Up" Department

The website has many interesting articles on a wide range of subject matters, including Health and Medicine, Lifestyle, Money and Community. While checking out some of the articles and comments, I came across a section aptly entitled The Working Affluent. The next thing to catch my eye is the headline - Complaints about TriNet HR Services.

Ed had recently signed on with TriNet HR Services for his small company at the relatively small fee of $1,860 per employee. Almost twice the average industry rate of $1,000 - $1,200 per employee.

Like I said, you can't make this up.







By Ed Shull, CEO USWeb LLC

I’m not a paperwork guy. As the CEO of a small business, with a few contractors (that really felt more like employees after a while), I decided that if I was going to take the step to have employees, I would need to do it right. I wanted to make sure I offered a competitive compensation package that included 401k, health insurance, life insurance, etc…

So I started to search around for ways solutions I came across a company that was referred to me a few years ago, Trinet. Trinet offers HR services as a PEO (professional employment organization). People often refer to this as employee leasing. Think of it as hiring whoever you want through a temp agency like Kelly Services. They take care of all the tax and insurance paperwork, and you just pay the agency a fee as a vendor. The fee was relatively small at $1,860 per employee, per year, so I decided that this would be the best of both worlds.

The Sign Up Process for Trinet

I have to say that of all the vendors I have ever worked with, none seemed so utterly incompetent as Trinet when it came to the sign up process. They would send over documents without instructions, or that were dated wrong. They would lose stuff I sent. The best part is that I would go through long spurts of not hearing from them, after confirming that everything was ready to go, and then all of sudden get a flurry of emails from them marked as urgent, saying they needed more paperwork from me.

Once, and I swear this is true, I was told weeks before that we were truly ready to go. There would be no further delays. A couple days before the payroll date, I contacted my rep there to ask about the amount they would be taking out. I didn’t hear back. But then , a day or two before payday, I get around 3 - 4 emails, all marked urgent, saying I need to call them right away. I happened to be out of town, so I didn’t get these messages until around 2pm. I called the main rep, she wasn’t around. So I called another rep I had dealt with, who had also emailed me saying I needed to call him and that it was urgent. When I got a hold of him and asked what they needed, he said, I and I swear this is true, he didn’t know. So they had spent most of the morning trying to reach me, but didn’t know why. I asked him if my payroll was going to go out. He didn’t know.

Payroll didn’t go out that week, so once again I had to scramble to cut checks myself. This went of for literally months. The best part is, they charged me retroactively for this time with the insurance. Insurance my employees weren’t aware they had. We had received no ID cards or selected any plans yet. But of course I had to pay for it.

The ongoing problems with Trinet

Since we worked out those initial issues, I would love to say things have gotten better, but I cannot. Each pay period is an exercise in patients, and comes with it’s own little set of grief. I have asked Trinet on numerous occasions to send me an email letting me know the exact dollar amount they attend on deducting. I set up a bank account specifically for payroll, and I need to transfer the funds into that account. Each time I ask, I’m assured that invoices are sent out ahead of time. The closest this has come unsolicited was last pay period when I got a notice after 3:30pm that funds would be taken out the next day. I got a follow up email from Trinet the next morning that they were unable to get the funds. So despite me asking for several days notice, I couldn’t even get a 24 hour notice.

One of the documents I filled out was to my bank, allowing Trinet to request a funds transfer. I had this hand walked into my banker, as well as got Trinet a copy in case of any issues. My bank has done things like this for me in the past without incident. And there have been no incident on the money transfer issue until this past payment. All of a sudden, after 3 - 4 consecutive successful transfers, Trinet is reporting my bank will not honor the request. They tell me this on Christmas eve and they want me to go to the bank “right away” to wire the fund manually. I explained to them that I was on vacation with my family and that they needed to work this out with the bank directly (that’s why they have a copy of that document), but for some reason it was determined that the easiest way for this to be handled was to have me go down to the bank on Christmas Eve. By the time we went back and forth on this, it was late enough that going to the bank was not an option. So they said I could cut my vacation short and go on the 26th.

Trinet had not real response to my question about why my bank would not honor the document I gave them. They just decided that it was too much trouble I guess. So as of now, employees checks have not been cut.

For the sake of not rambling on forever, I have actually not gone into other issues I have encountered with Trinet. I have not gone into the fact that none of the amounts they deduct make a lot of sense. But they are so screwed up, I know that if I open that can of worms, it will never be solved.

I do have to say that the main rep I deal with there, Angela, is quite nice. I feel genuinely bad when I start bitching about things to her because she clearly doesn’t control any of it. But she doesn’t strike me as overly surprised with all these issues. I get the feeling this must happen a lot.

There have also been issue with their website when trying to make changes for employees, or anything else. They brag that their technology is based around Peoplesoft. As someone who has worked with Peoplesoft, I know that’s not something to brag about. I have never seen a successful Peoplesoft implementation. And I don’t believe Trinet has either. It’s a crap system, and is likely the cause to much of Trinet’s issues.

So if you’re looking for something to make Hr a little more simple, I would not look at Trinet. I spend an obscene amount of time dealing with their issues, and apologizing to employees, which is exactly the opposite of what they are supposed to be doing. You’re better off looking to your bank or other places. I’m not saying that PEO’s or employee leasing is a bad model, I’m just saying that Trinet is not a company I would recommend trusting with your business.

A Sign of the Times - Recruiting Website Cuts 15% of Workforce

Bruce Silver, Founder
Employers Rx LLC
December 12, 2008

Report: CareerBuilder Slashes Jobs

Another ominous headline. This one from the Washington Business Journal. Simply a sign of the times. It feels very much like the early 80's. Do you remember the oil embargo, odd and even days, rationing? Jimmy Carter was out, Ronald Reagan was in. Reagan broke the backs of the unions when he fired the air controllers. He brought in Paul Volker to wring out inflation, partially caused by high oil prices. He did it by ratcheting up interest rates which sent a slowing economy into a tailspin.

The saying then was "if you had a job you were in a recession, if not, it felt like the depression".

Washington Business Journal

by Jeff Clabaugh Staff Reporter

Hundreds of jobs have been cut at a company that is supposed to help people find jobs.

Job posting Web site CareerBuilder has slashed 300 jobs, or about 15 percent of its workforce, according to the Chicago Tribune. The cuts were across the board, but mostly in its small business segment, the Tribune reports, citing chief marketing officer Richard Castellini.

The cuts took place last week, the newspaper reported. (Happy Holidays)

CareerBuilder is majority-owned by Gannett Co. Inc. and Tribune Co., both companies that have struggled with dropping advertising revenue at their publishing businesses. Gannett has responded by cutting hundreds of jobs this year. Tribune this week filed for Chapter 11 bankruptcy protection.

“When we forecast our business for 2009, the growth rates we had anticipated weren’t going to be in line with where we were currently seeing the business,” The Tribune quoated Castellini as saying about the job cuts at CareerBuilder.

Gannett (NYSE: GCI) upped its stake in CareerBuilder earlier this year to 50.8 percent, buying part of Tribune’s interest for $135 million. Tribune still holds a 30.8 percent stake. Publisher McClatchy Co. (NYSE: MNI) and Microsoft (NASDAQ: MSFT) are minority owners.

Administaff - An Employee's Prospective

By Bruce Silver, Founder

Employers Rx LLC

December 6, 2008

Administaff - An Employee's Prospective

I came across an interesting website this morning. It is aptly named JobVent.com .

The purpose of this website appears to be just that.

JobVent is the web site for anyone who has ever said 'I hate my job', or 'I love my job'. JobVent is the web site for people who are about to start a new job, and want to see what other people think of working there.

Topping the list for most hated employer was the Progressive Insurance Company, who scored a resounding minus -7708 from no less than 1181 reviewers. Coming in second place was, of all companies, the worlds leading human resource management and outsourcing organization, Hewitt Associates with a score of minus -4331.  There were 269 Hewitt employees who took the time to let their feelings be known. By doing the math, I calculate that the level of dissatisfaction among Hewitt's employees is much greater than at Progressive.

Guess you might call this a case of the blind leading the blind.

While were on the topic. I was surprised to find a posting from an employee who apparently works for Administaff, a leading professional employer organization based in Kingwood, Texas. I say apparently because all postings on JobVent are anonymous. Here is one insiders view of Administaff, another HR outsourcing company who claims to be an employee management expert.

You be the judge.

Posting on JobVent 12/06/2008 - Administaff

The pay is the most I've ever had and they can afford that because they charge more than any other PEO. The benefits are better than most, but not the best I've ever had. I'd like to have better, but honestly we're struggling in our economy. I rated the job security as 0, but that's because this company prides themselves on never having a layoff....however they will drive you to the point to where you quit or they'll make reasons to let you go. Work/life balance is pretty good. They are really involved in the community. The PTO is decent. Just a couple of people with a few loose screws that try to control when you take your time off and how. They preach how you can grow with the company, but all I've ever seen is friends of friends get promoted and praised. The few supervisors I've seen that weren't friends with anyone, ended up leaving. The location is good for me because I live so close, but that's with anyone who works around the corner from their job. My coworkers know their work, but this is all they know. They have never worked with real software or in a professional environment. This place is pretty similar to putting a bunch of hillbillies in suits and asking them to be pro's. The work environment is the worst. The management claims they don't want to micromanage, when they very well do. They walk around the work area to spy on you and see if you're at your desk. God forbid you have to use the rest room because they'll question where you have been.

It appears to me that Administaff knows how to "Talk the Talk", but do they really "Walk the Walk"?

Common Mistakes of Shopping for PEOs and Employee Leasing on the Web

By Bruce Silver, Founder

Employers Rx LLC 

Third of a three part series.

What is Behind Door Number # 1, 2 or 3? 

When searching the internet for a PEO, it is important for a busy executive to have some idea of what your needs are, and understand the process you are about to undertake, before starting on your virtual journey. We have identified three types of websites that Google and Yahoo link to when searching for employee leasing or professional employer organizations. The first type of website that visitors will encounter are “Provider” sites, next are “Leads” sites, and last but not least, websites of PEO “Brokers” or consultants.

Is your company among the thousands who are looking for affordable health insurance coverage? You probably have read that professional employer organizations can save business owners 20% to 30% on their health insurance premiums because of their large group health plan. While this claim may be slightly exaggerated, the fact is that less then 10% of all professional employer organizations actually have a master group health plan.

Door # 1 – Are You A PEO Provider?

So how do you know if the website you visit belongs to a true employee leasing or professional employer organization? Look for logos of national and local industry associations like NAPEO, ESAC, FAPEO and others. At the same time, logos from payroll or staffing associations may mean the company is not focused on providing comprehensive human resource services or the “Fortune 500” benefits plans you want.

The “About Us” section should identify the management, their background and expertise. Are you looking for a company that offers a true “master” group health plan? Click on the employee or benefits section to see what types of employee benefits programs are available. Don’t be fooled by insurance company logos. Linking to the websites of Aetna, Blue Cross, or any of the national or regional health plans networks, does not indicate that a company has a large group health plan to offer.

 

Many PEO’s claim to save you money because of their “large group purchasing power”. In reality, all you get is their insurance broker shopping the market. You may be better of with your own broker. It is important to read between the lines. Here are a few examples.

 

We offer customized, tailored benefits programs, suited to meet each of our clients’ needs, objectives, demands, and budget. We negotiate contract renewals or we handle receipt of carrier billing and payments.

Be prepared to ask tough questions when you contact the PEO or employee leasing company. Ask about renewals and underwriting. Remember that you will be speaking with someone who represents only that company, and it’s their job to “close the sale”.

Door # 2 – You’re Leading Me On?

Next stop on our virtual tour are the nefarious “Leads” websites. Many of these websites are very attractive, easy to navigate and usually feature information taken directly from websites of established companies (without their knowledge). A typical example is the website SmallBusinessExpo.com. Notice the last sentence at the bottom of the page. 

Are you Gevity? Call to customize this page at no charge. Contact us by phone or email.

Google links to obvious “Leads” websites like BuyerZone.com and Staffmarket.com. It is relatively easy to see that these sites collect your company information and sell it to the highest bidders. Many “Leads” websites provide visitors pages of information on topics relevant to employee leasing such as payroll processing and workers compensation. Often the articles are written offshore or copied from legitimate HR blogs and websites.

 

Websites carrying ads from Google is another clear sign to move on. Why would any employee leasing, PEO or HR company want a competitor advertising on their website. Beware of companies who consistently rank first or second place in Google or Yahoo. In a recent search of Google for employee leasing, first position linked to wiseGeek.com. wiseGeek is owned and operated by Conjecture Corporation of Sparks, Nevada who “creates and manages a portfolio of informational and entertaining consumer web sites”.

Door # 3 – PEO Broker, Who’s Side Are You On? 

Our last stop takes us to websites of “Brokers” or consultants specializing in employee leasing, HR outsourcing and the professional employer industry. You will find there are exceptional professionals across the country, many have years of industry experience, with backgrounds in accounting, banking, and insurance. But, how will you know if you have found a qualified consulting firm or PEO brokerage that will help you find and negotiate for a suitable provider? My best advice comes from President Ronald Reagan, who when dealing with the USSR on nuclear disarmament said; “trust but verify”. 

“Brokers” websites typically offer business owners and executives a choice of leasing firms and PEOs to select from. Some consultants specialize in a particular region of the country, or have experience with certain industries. The demands and requirements of a client in the trucking business is not the same as an IT company. An industry professional will know exactly which PEOs to contact for a proposal. Ask the firm for their years in business, background, industry experience and expertise, and how they are compensated?

Website testimonials may indicate client satisfaction, but it is always a good idea to ask for, and follow-up on references from both their clients, and the companies they work with. LinkedIn members can access groups dedicated to the PEO industry where you can ask industry professionals about a particular broker or consultant’s reputation. Buyer beware is the rule of the day when shopping for payroll, HR outsourcing and professional employer services.

Tell us if we removed some of the bumps on your road to finding the right employee leasing company or professional employer organization for your business.