When I started my firm in 1990 I signed up for an employee leasing program.
It was the cheapest way for me to get health insurance.
Basically, I became an employee of the employee leasing firm, for payroll purposes, and they provided all of my benefits. As I added staff, they became employees of the leasing firm as well.
As an employee of the leasing firm I was eligible for benefits purchased by the leasing firm for many, many employees. They had greater negotiating power than I would have had on my own. In fact, at that time, it was almost impossible for me to buy health insurance as a solo.
Each month I paid the leasing firm a fee amounting to my payroll amount plus applicable taxes and fees plus the cost of the health insurance. They wrote the paychecks.
All was good until, without much notice, they filed for bankruptcy.
I didn’t lose any money in the deal but had to scramble to obtain health insurance.
Fast forward 19 years -
Now I get my benefits from ADP Total Source. They call themselves a “Professional Employer Organization” (PEO). They provide me and my employeess with health, dental, life and disability insurance. They manage our 401(k), H.S.A. and F.S.A. They handle our form 5500. They deal with the worker’s compensation audits. They deal with the direct deposits, C.O.B.R.A. and the unemployment issues. They advise us on human resources issues. They create our personnel policies and all the H.R. forms. They provide training and deal with our payroll and a host of other concerns. They answer all the employee questions about benefits. It’s great.
Our role? We make sure the payroll funds are in our account each month for them to draft. They do the rest. It’s very nice.
ADP Total Source is just like the employee leasing firm back in 1990 with updated services and updated, online, delivery mechanisms.
So what’s the downside to this arrangement?
Well, I’m pretty happy with the situation overall. It does, however, create a situation where it’s tough to disconnect from ADP Total Source. If we wanted to leave we’d have to find someone to deal with health insurance, payroll, 401(k), worker’s compensation insurance and several other issues all at once. It would be time consuming and complicated.
Before ADP Total Source we could easily make an adjustment (like a switch from Paychecks to ADP) without upsetting our overall operation. Once your in with a PEO you’re really tied in with them.
Also, and this is kind of scary, I have to wonder about their financial stability given my prior experience. They tell me they’re solid and that the industry learned the lessons of the last go round. I hope so, but, bottom line, while the last bankruptcy was annoying it didn’t cost me anything so I try not to worry about it.
But, if they did disappear overnight, we might be out our payroll taxes, 401(k) contributions and who knows what else. It could be costly.
There are many competitors in the PEO arena. Administaff is a big player in the arena and there are others. This is an option worth considering. It allows you more time to build and manage your practice. It truly is the easiest way to manage employee benefits.
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Lee Rosen has practiced family law for more than twenty years. With three offices, 