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Peo Gold Rush

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How to make serious money referring your clients to a Professional Employer Organization while keeping your insurance business.

How to make serious money referring your clients to a Professional Employer Organization while keeping your insurance business.

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  • 1. PEO Gold Rush The Insurance Agents Guide to Making Money with Professional Employer OrganizationsA Brief History of PEOs and Why You Should CareTechnically Professional Employer Organizations (PEOs) have been around since the late 1960s as theyare an evolution of employee leasing. As of 2010, there were more than 700 PEOs operating in theUnited States covering 2-3 million workers.1 Considering there are over 140,000,000 civilian workers inthe U.S.2, the PEO industry has less than 2% market penetration. PEOs typically work with employersthat employ between 10 and 500 employees which equate to nearly 47,000,0003 civilian workers in theUnited States. If we base market penetration off of this smaller number, the PEO industry still has lessthan 7% market penetration. Unlike the insurance industry where there are only a handful ofcompetitors chasing every premium dollar, the PEO Gold Rush TM has spawned hundreds of profitableProfessional Employer Organizations and has attracted hundreds of millions of dollars from privateequity firms. What are these 700 PEOs and private equity firms chasing? Let’s show the math:46,729,649 WorkersX$42,979.61 Average Wage4--------------$2,008,422,089,456.89 Potential Annual PayrollYeah, that’s over $2 trillion in potential annual payroll, of which PEOs typically charge on average 3% fortheir services, which equates to $60 billion in potential annual revenue.1 Industry Facts, NAPEO2 United States Department of Labor Bureau of Labor Statistics3 U.S. Department of Commerce United States Census Bureau4 Social Security Administration National Average Wage Index 1 Copyright © 2013 | Chad Simpson | (972) 400-2423 | csimpson@oasisadvantage.com
  • 2. What’s the Difference Between PEOs and Staffing Companies?Staffing companies lease their employees to other companies while PEOs lease small businesses theemployees that already work for them through what is commonly referred to as co-employment. Undera co-employment arrangement, the worksite employer, or common-law employer, still sets wages andhours and makes hiring and firing decisions while instructing employees in their duties. The PEO on theother hand handles most of the administrative and payroll tax requirements which employers arerequired to adhere to freeing up the worksite employer to focus on revenue-producing activities, whilelimiting liability for non-compliance with complex employment regulations and laws.The benefits a small business derives from having a PEO lease their employees back to them variesbased upon the individual business but typically includes: Ensuring regulatory compliance Spreading safety and benefit risks across larger workforces Decreasing internal human resources overhead Stabilizing insurance costs while increasing premium predictabilityWhere’s the Gold?The most difficult part of mining for PEO Gold is finding what’s referred to in gold mining as the “paydirt.” Pay dirt is gold-rich dirt that lies below layers of other dirt called overburden. In PEO the pay dirtis typically sitting in an insurance agent’s client list. Trying to dig through over 1.7 million5 businessesworth of overburden to find the gold-rich pay dirt by cold calling is an impossible and downright naïvetask for a PEO. As an insurance agent, you typically already have access to the decision maker; youknow the number of employees, payroll, and overall risk profile of the client. You can bring a huge5 U.S. Department of Commerce United States Census Bureau 2 Copyright © 2013 | Chad Simpson | (972) 400-2423 | csimpson@oasisadvantage.com
  • 3. value-added service to your clients by introducing them to a trusted PEO partner and do it before a PEOthat is not so insurance agent-friendly tries to steal them away. Many national PEOs require that theirclients take their workers’ compensation insurance and all of their employee benefits. Working with aPEO that allows the agent to maintain agent-of-record status on the employee benefits and workers’compensation insurance, while providing a new income stream by sharing revenue collected fromadministrative fees is a win-win-win for everyone involved.What Benefits are there to a Business if They Do Not Take the PEO’s Employee Benefits or WorkersCompensation?The best PEO clients do not partner with a PEO solely because of lower insurance costs but because ofthe human resources administration assistance and transfer of employment regulatory liability. Thebest prospects for PEO services have growing businesses with many moving parts. Multi-statebusinesses can especially benefit from a PEO’s services by having instant human resources infrastructureand state unemployment tax accounts already established. There can be arbitrage on stateunemployment tax rates between the rates currently being paid by the client and the rates charged bythe PEO. With the proper PEO, an employee handbook can become a living, breathing document thatchanges as necessary to adhere to changes in state and federal employment law or as worksite policiesand procedures are added or amended. New-hire on boarding can be done 100% electronically,eliminating the need for paper W-4s and I9s. Payroll can be accomplished online utilizing a robust HRIS(Human Resources Information System) with free direct deposits. Quarterly payroll taxes become thelegal liability of the PEO, thus eliminating one of the primary ways the IRS can pierce a corporate veil forunpaid payroll taxes. Employee reviews can be completed and stored online and compensation can bebenchmarked to ensure your compensation is in line with your competitors. Would your clients see youin a new light if you were the one introducing them to these services? 3 Copyright © 2013 | Chad Simpson | (972) 400-2423 | csimpson@oasisadvantage.com
  • 4. Leasing Your “Mineral Rights”There are several large PEOs that also operate even larger payroll companies. These payroll companiesfeed their PEO businesses leads from their payroll clients since PEO business is traditionally moreprofitable. Since a majority of small businesses outsource payroll to a third party, chances are, thesepayroll providers are after your clients right now. These payroll providers also sell pay-as-you-goworkers’ compensation insurance as well as employee benefits and 401(k) services. By partnering witha PEO, and introducing your clients to the PEO solution first, they are less likely to be led astray by theirpayroll provider. By allowing a PEO to pan your pay dirt, you can play defense against the competitionwhile also increasing your income.Partnering with a PEO is like a landowner leasing a gold miner his mineral rights. The PEO does the hardwork and you get your cut, typically a percentage of the administrative fees collected, for the life of theclient. When these commissions are added to what you are already collecting for the policies the clienthas with you, your per-client revenues can greatly increase. A sample commission chart is availableupon request. 4 Copyright © 2013 | Chad Simpson | (972) 400-2423 | csimpson@oasisadvantage.com

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