I was a controller for a large multi-location organization at the time. We had gone through four payroll providers in five years. We decided to switch from in-house payroll processing to a Professional Employment Organization (PEO) as we were “sold” on the fact we could offer better benefits, worker’s compensation, human resource services, and most importantly payroll processing. This would eliminate the need for us to run payroll, stuff checks, pay taxes, and file tax returns. While we realized the cost of the PEO would be higher than a regular payroll provider, we were willing to assume the additional cost for the services we were sold on. It sounded too good to be true. For us, it ended up being just that, too good to be true.
After our first PEO, we found we were a small fish in a very large pond. We did not get the service we were promised. When called with an HR question, we were told that there was no one to help us, to go on their website and look through their online resources; there was no “human” to serve us. After a few months, the PEO went through open enrollment and we had to switch health insurance carriers. We were not given any options; what the PEO chose was what we had to go with. With a new network, our employees found themselves having to seek new medical providers as their old providers were not in the network. On top of that, rates increased and again, we had neither options nor choices to reduce those costs.
And so, we switched to our second PEO, a smaller organization where we believed we would be a bigger fish in the pond. Yes, we did have better service, but the cost was the same, and we had the same issues with benefits. We had no choices. We also discovered that we no longer received the dividends we typically received from our worker’s compensation carrier for the excellent safety programs each of our locations had. We lost our identity as an employer with employees. While we had control of the hiring and firing of our employees, the PEO was the employer of record with the governing agencies. We even lost our excellent unemployment tax rate as we no longer were an employer in the minds of the states’ unemployment systems.
After months of cleaning up errors made by our second PEO, we made the decision to form our own company that would provide the services we were promised but not provided, have our own identity, and save the high administrative costs that PEOs charge. Our business model would not be a PEO but would be an administrative services provider that would offer payroll, benefits and worker’s compensation administration, along with offering many years of human resource knowledge and expertise, and at a more affordable price.
Our business model came to life in November 2000 and People First was born. We are a proven success as we have now been in business for over twenty years. Oh, and by the way, as we were setting up the processes, the PEO we were with closed their doors over-night; and had we not been ready to pull the plug on the PEO, we would have temporarily closed all our locations until we were able to obtain worker’s compensation elsewhere. Lesson learned. While there is a place for PEOs, People First is an affordable alternative for small businesses.