What Types of Businesses are Best for a PEO?

What Types of Businesses are Best for a PEO?

December 15, 2017 | By Tailored Solutions

What if you could offer your clients more than just affordable workers’ compensation coverage? Imagine helping your client solve some of their biggest challenges and pain points, such as concerns about healthcare, taxes, and hiring the right people. When you partner your clients with a PEO, you can provide them with so much more than a stand-alone workers’ compensation policy -- often at no extra cost.

You understand the benefits of a PEO for your clients, but how do you decide which would be the best fit?

What Size is Their Business?

The vast majority of PEO clients are small businesses, according to the National Association of Professional Employer Organizations (NAPEO).

The Small Business Association (SBA) defines small businesses as:

  • Manufacturing and mining firms with 500 employees or fewer, or
  • Non-manufacturing industries with fewer than $7.5M in receipts

Under these broad terms, approximately 99% of the 5.8 million businesses in the U.S. qualify as a small business. That’s a pretty large net to cast when deciding if a client is a good fit for a PEO, however.

NAPEO suggests a PEO “sweet spot” for small businesses with between 10 and 99 employees, based on survey data on average client size.

But at Tailored Solutions, we’ve matched businesses up to 2,000 employees with beneficial PEO solutions.

So which of your clients is the right size for a PEO?

A business with one or two employees probably won’t benefit from the services that a PEO offers, and may not meet the minimum premium requirements, which can vary depending on the provider.

However, a business with dozens or even hundreds of employees can definitely experience both the cost-saving and administrative benefits of a PEO.

In other words, think small… but not too small.

While business size is the first question to consider, your client’s industry may matter even more than the number of employees on their books

How Risky is Their Industry?

There is a wide variation in workers’ compensation costs among states and industries, with the highest rated (riskiest) groups paying vastly more than the lowest rated (safest) groups -- sometimes a hundred times more as a percentage of payroll.

PEOs can be a useful tool to bring down workers’ compensation costs for high-risk clients.

  • PEOs create training programs that prevent workplace accidents and claims.
  • PEOs can cut workers’ comp expenses by negotiating competitive programs with insurance providers.
  • PEOs can provide a pay-as-you-go model billed on earned premium - not estimated.

When considering if a client is a good fit for a PEO, take a look at their industry. Generally, the higher risk class codes will receive the biggest benefits from joining a PEO.

That includes businesses and industries such as:

  • Construction and artisan trades
  • Asbestos abatement
  • Mold remediation
  • Logging
  • Manufacturing
  • Cable installers
  • Solar installers
  • Healthcare
  • Home health and assisted living
  • Mining
  • Ranching and farming
  • Security companies
  • “Highway pickup” towing
  • Temporary staffing

PEOs have proven time and again that high-risk, hard-to-place workers’ comp clients typically reap the biggest benefits of joining a professional employer organization.

How to Match Your Client to the Best PEO

Now that you’ve found a few clients that look like a solid match for a PEO, how do you choose the right one?

Tailored Solutions is here to help you match your client to the perfect PEO for their specific needs.

  • We have industry specific programs that can save your clients 10% to 40% of their premium.
  • We offer coverage for high MOD's (ideally between 1.0 and 3.0) and can provide coverage with A-rated carriers.
  • We have excellent opportunities for difficult class codes.

Our Process

Ready to find the right carrier for your client? We have an easy four-step process to get your client from curious to covered.

  1. Submit your application
  2. We provide a quote and explain the process
  3. Allow us to partner with you on the sale and onboarding process
  4. You take the credit (and commission) for providing the solution to your client

The submission requirements for a PEO are the same as a standard workers’ comp policy. You’ll need the following:

  • MOD score
  • Any supplemental
  • At least 3 years of loss runs

Once you’ve made your submission, our team gets to work for you.

We locate a market that best fits your client’s needs. Then we provide you the quote and one of our team members thoroughly reviews the cost structure, potential areas for savings, and the service model.

When it comes time to present the solution to your client, Tailored Solutions has your back. Our team is here to assist you present the solution to your client through a virtual workshop that can be held onsite with your client.

You don’t have to worry about being asked a question that you’re not prepared to answer. As your virtual sales resource, we can answer any questions your client has and outline the expectation for setup.

When your client has committed to moving forward with their PEO solution, we do a thorough web presentation and provide all the information your client needs to move forward and bind coverage.

You stay apprised of the progress every step of the way, and the client remains on your book.

Which is good news, because PEOs have outstanding retention rates. According to NAPEO, 86% of clients remain with their PEO partner for a year or more. And that means longer-lasting commissions for you.

PEOs can provide big benefits for small businesses across a variety of industries, particularly those that are high-risk and hard-to-place. When you offer a PEO solution to your client, you’re helping them solve some of their biggest business problems. Don’t settle for a stand-alone policy when you can offer your clients so much more.

Become a Producer.