You do more for your clients than just selling insurance. You’re a trusted advisor. And that means you help your clients with some of their biggest business challenges. For some, the best solution is a PEO partnership that can provide pay-as-you-go workers’ comp alongside other employee administration services, such as payroll, benefits, loss prevention, employee management, and so much more.
What’s the easiest way to see if your business owner client will benefit from partnering with a professional employer organization?
Ask them about their biggest business challenges. This consultative approach not only helps your client see you as more than an insurance provider, it also helps you determine if they’re one of these 10 best clients for a PEO.
How many of your clients fit one of these profiles?
1. Business Owners who want to Focus their Time
If you’ve got a small- to mid-sized business owner or executive who is spending all of their time managing the people side of their business and not enough time focused on operations or growth strategies, a PEO can be a perfect solution.
PEOs can help these busy execs free up their time to concentrate on operations, strategy, and innovation. When a PEO handles administrative duties, such as payroll, compliance, and managing benefits, business owners are free to focus on core business operations and expansion efforts.
2. Business Owners Seeking Growth
Is your client seeking to grow their business and profits this year? Partnering with a PEO could be the answer.
According to research by the National Organization of Professional Employer Organizations (NAPEO), PEO clients have growth rates approximately 50% higher than other small businesses.
“Since 2010, employment growth among PEO clients has been 9 percent higher than other small businesses (based on the Intuit Small Business Employment Index), and 4 percent higher than employment growth in the U.S. economy overall.”
- NAPEO, “Professional Employer Organizations: Fueling Small Business Growth”
3. Business Owners Worried About the Future
Not all business owners have growth on their minds; some are more focused on survival.
Business failure can be complicated, but here are some of the top reasons small businesses fail:
- 19% are outcompeted
- 23% don’t have the right team
- 29% run out of cash
- 42% have no market need for their product or service
- 82% experience cash flow problems
The overall business failure rate in the U.S. is approximately 8%, according to 2012 data from NAPEO. But the failure rate for companies that partner with PEOs for at least 4 quarters is approximately 4%.
Businesses that use PEOs are approximately 50 percent less likely to fail.
Even using the most conservative analytic approach, the business failure rate for businesses using a PEO is 50% lower compared to businesses overall. While a PEO can’t solve problems such as little- or no- market need for a product/ service, it can address some of the other reasons businesses fail, such as freeing up cash flow.
4. Business Owners with High Turnover Rates
No matter what industry your client is in, they likely want to find - and keep - the best and brightest. Employee turnover can cost as much as six to nine months salary when you factor in recruiting, training, and onboarding someone new.
Some calculations suggest the true cost of employee turnover to be roughly 150% of an employee’s annual salary.
The average employee turnover rate in the U.S. is approximately 42%, but for companies that use PEOs the average rate drops to 28% to 32%.
When you offer a PEO solution to your clients, you’re providing them a clear path to reducing employee turnover and saving huge amounts of money.
5. Businesses Seeking Better Benefits
Benefits such as healthcare and retirement plans can help a business attract and retain a talented workforce. In a survey conducted by the Society for Human Resource Management (SHRM), healthcare and retirement benefits were the top benefits most important to the majority of employees.
However, very few small businesses have the resources to offer these benefits.
According to research by the Employee Benefit Research Institute (EBRI), only 30% of companies with 10 - 49 employees sponsor some type of retirement plan.
A PEO partnership can help a small employer offer best in class benefits to employees. 98% of PEOs offer some type of retirement plan to small business partners. With a PEO, small business employees gain access to big-business benefits such as 401(k) plans, health, dental, life and other insurance, dependent care, and other benefits that a typical small business otherwise may not provide.
6. Businesses with High xMODS
If your client is a business owner with a higher than average xMOD rate (1.25 - 3.0), partnering them with a PEO can be a cost saving advantage that can lower their workers’ comp premiums.
When your client partners with a PEO, the PEOs xMOD rate is used for calculating premiums. And PEOs generally have average PEO ratings (1.0), which can be an instant premium reduction for your client.
Even better, PEOs create safer work environments by implementing effective safety practices such as pre-employment drug tests, loss control and safety procedures, injury claims management, safety training, back-to-work programs, and drug-free workplace programs.
Small- to mid-sized businesses often lack the time and resources to put together such a comprehensive safety program and therefore lack the ability to lower their xMOD rates on their own like they could with a PEO partnership.
7. Businesses Seeking Lower Workers’ Comp Premiums
PEOs can help companies lower workers’ comp costs, even if the business has an average (or better) xMOD rate.
PEOs experience bulk buying benefits that can get competitive pricing from top-rated carriers and instantly reducing premiums.
How much lower?
At Tailored Solutions, we have industry specific programs that can save your clients 10% to 40% of their premium.
Additionally, these costs are administered on a pay-as-you-go basis that is billed on actual wages, not estimated. When your client pays on earned workers’ comp premiums rather than estimated, it can streamline cash flow and minimize or reduce year end audits.
In other words, lower premiums, more cash, and less hassle.
8. Businesses Struggling with Workers’ Comp Management
Managing workers’ comp issues can be overwhelming for a small business with a small HR staff, particularly for a business in a high-risk industry with a larger rate of incidents and claims.
Big businesses have the resources for workers’ comp specialists who can manage:
- Developing and implementing safety programs
- Developing and implementing workers’ comp policies and procedures
- Compliance with policies and procedures
- Claims management
- Communications with carrier and legal representatives
Small- to mid-sized businesses, however, often struggle to stay on top of workers’ comp management in addition to general HR activities.
PEOs can effectively manage and resolve all aspects of workers’ comp, including comprehensive case management and Return-to-Work programs. By taking this massive workload off a small business HR department, it can benefit injured workers and the client.
A comprehensive PEO employee administration package can take a client’s overworked HR department from frazzled to highly efficient in no time.
9. Businesses in High-Risk, High-Premium Industries
Some industries are inherently risky. That’s why industries such as construction and manufacturing, to name a few, often come with higher workers’ comp premiums. So which high-risk businesses are best for a PEO?
A PEO can be the perfect solution if your client is in a difficult class code, such as
- Long haul trucking/ towing
- Construction and artisan trades
- Tree trimming or landscape
- Fuel delivery
Not only can a PEO allow you to place a high-risk client with workers’ comp insurance, you can also provide them with a variety of administrative services that can help them grow their business at the same cost as a stand-alone policy.
10. Business Owners Seeking a Competitive Advantage
PEO clients have clear advantages when it comes to decreasing employee turnover, reducing costs, and freeing executives to focus on growth. Even better, business owners with PEO partnerships have an increased chance of survival, most likely due to allowing PEOs to provide a combination of services and freeing up cash flow.
Offer Your Clients a Total Business Solution Not every business will benefit from partnering with a PEO, but as you can see from this list, there are many that can. And the PEO benefits extend to you, too.
A PEO helps you cover more clients. Even the hard-to-place ones. And PEOs pay higher commissions compared to stand-alone policies, as well. But the biggest benefit PEOs can offer you as an agent is the opportunity to build a better relationship with your clients.
With our support and PEO network, you get a happy client with lower premium rates and a better chance for business growth... who views you as a trusted business advisor.
PEOs can become the win-win solution for many of your commercial clients. Don’t lose a hard-to-place client; offer a PEO solution and become the insurance advisor they trust.