The Tennessee Insuror May/June 21

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Daniel Talks Insurance: PEOs part 2 Making Sure Any PEO You Partner With is Bringing Value to Your Clients

In this series, Insurors CMO/COO Daniel Smith will talk with industry experts about some of the behind-the-scenes information that agents may not always be aware is relevant. The following is a continuation of our article in the last issue about professional employer organizations (PEOs).

ployees; hiring, firing and managing. The employer of record, PEO, is just the administrative employer for the purposes of providing the products of the PEO; benefits, WC, payroll, technology, 401K, Compliance – types of products will vary from PEO to PEO.

As we discussed in our last issue, there are advantages to working with PEOs, and there are also concerns if you are not partnered with the right organization. So which PEOs can benefit your agency and your clients, which should you be concerned about and how do you know the difference? To get some answers, we talked with PEO experts at two of our Partners Program companies – Engage PEO and Human Capital Concepts (HCC).

What concerns should agents have about cyber and data security when working with PEOs, and how do you address those?

There are often concerns and confusion and PEOs and "employee leasing" agreements. Can you help clarify the differences for us? Jeff Hallam, Vice President of Business Development for Human Capital Concepts (HCC): There can be confusion on this, as the terms have been used (mistakenly) interchangeably over the years. But there are very clear differences between the two. PEOs don’t supply employees to worksites. Instead, PEOs provide services to a business client and their existing worksite employees through a co-employment arrangement. These services typically include all of the employee administration duties like payroll, benefit plan administration, retirement plans, and human resource compliance. If a client terminates their relationship with a PEO, the worksite employees continue as employees of the client. In contrast, a leasing service supplies workers to a business client. Often these workers are supplied for a temporary or specific period of time. When their time at a business client’s workplace is finished, leased employees return to the leasing service for assignment to another business client. If a client terminates their relationship with a leasing service, the leased workers have no ongoing employment relationship with that client. Cindy Edwards, Vice President of Sales for Engage PEO: PEOs do not lease out employees or provide staff to their clients. When a client partners with a PEO, their workers enter into a co-employment arrangement in which they have two employers – the client company and the PEO (the employer of record). The client company maintains control over the em14

Edwards: The agent should question the amount of encryption the PEO provides in addition to the encryption provided by the IT vendor (systems used for payroll, HRIS, benefits administration, etc.). Engage hosts its technology platform in its own high-availability cloud environment. And internal processes and system capabilities are routinely tested internally by external security audit firms. Also several certifications that demonstrate the high standards the company demands – these would include certifications like SSAE-18, CPEO and ESAC. Hallam: This is a reasonable concern for any provider dealing with sensitive data, including employee information. Different PEOs use different software platforms to help administer employee HR information. Speaking for HCC, we use the largest industry-specific platform in our space. One of the reasons we selected them and continue to work with them relates specifically to this very issue. They utilize globally-recognized data security measures like data encryption, hosting facilities with on-site physical security and advanced firewalls, and two-factor authentication for system users.

Is there a "sweet spot" for businesses that should be discussing PEO opportunities? Hallam: While there are different sweet spots for different PEOs, we typically find our sweet spots to be: start-up companies; established businesses with 5-75 employees; and nonprofit organizations looking to compete for talent with forprofit companies. Edwards: It will depend on the PEO, if the PEO mandates the work comp be moved to the PEO then the sweet spot will depend on the PEOs work comp appetite for risk. If the PEO does not mandate the work comp be moved that opens the doors for any company with employees ranging from 20-1,000 employees. Any group smaller than 20 generally doesn’t have a need for a PEO unless it’s a start-up company looking to expand. The Tennessee Insuror