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6 min read

PEO Benefits Administration: A Full Guide 

Article roundup

  • A PEO can manage all aspects of a company’s employee benefits program, freeing up an HR team to focus on other strategic initiatives. 
  • Benefits administration is the process of designing, implementing, and managing employee benefits programs.
  • PEOs have a deep understanding of the ever-changing landscape of employee benefits, and they can provide a wide range of options for their clients. In addition, PEOs often have established relationships with insurance providers, which can lead to better rates. 
  • PEOs can assist companies to obtain more competitive benefits packages for their employees. These benefits include pension/401K, workers’ compensation, health insurance, life insurance, wellness plans, training and development, and annual leave.

A PEO (Professional Employer Organization) provides businesses with a comprehensive suite of HR outsourcing services. These services can include payroll processing, employee benefits administration, workers’ compensation insurance, and risk management services. In essence, a PEO acts as an extension of a company’s HR department. 

One of the most important services that a PEO provides is benefits administration. This is key because one way to attract and retain top talent is by offering competitive employee benefits: According to a study by the International Association of Certified Professional Accountants (AICPA), 80 percent of candidates would choose a job with benefits over an identical job offering 30 percent more salary, but without benefits.

However, administering employee benefits can be a complex and time-consuming task — which necessitates the demand for a PEO. A PEO can manage all aspects of a company’s employee benefits program, freeing up an HR team to focus on other strategic initiatives. 

What is Benefits Administration?

Benefits administration is the process of designing, implementing, and managing employee benefits programs. This includes tasks such as enrolling employees in health insurance and other benefit plans, processing claims, and answering employees’ questions about their benefits. Benefits administration can be a complex and time-consuming process, although PEOs have the experience and expertise to make it more seamless for businesses. 

PEO Benefits Administration: What Types of Benefits Can a PEO Administer?

Pension/401K

While each PEO will have its own specific offerings, many of them do provide 401K and pension plans. This can be a great way for small businesses to offer these types of benefits to their employees without having to set up and administer the plans themselves. In addition, PEOs often have relationships with financial institutions that can provide reduced rates for their clients. As a result, working with a PEO can be a cost-effective way to provide retirement benefits for a company’s employees.

Workers’ Compensation

A PEO can help to manage workers’ compensation claims and provide coverage for employees who are injured on the job. In addition, a PEO can help to negotiate workers’ compensation rates with insurance providers, ensuring that a company gets the best possible rate. 

In most cases, a PEO will purchase a workers’ compensation insurance policy from an insurance company and then offer coverage to its clients’ employees through that policy. Typically, the premium for this coverage is paid by the PEO’s clients and is included in the overall price of the PEO’s services. 

Health Insurance

A PEO can help to negotiate group health insurance rates and provide a variety of plan options for employees. In addition, a PEO can handle all of the paperwork and administrative tasks associated with offering health insurance, freeing up company owners to focus on other aspects of their business. 

Typically, a PEO will have relationships with multiple insurance carriers, which gives their client company more options to choose from. And because PEOs work with many businesses, a key benefit of PEO insurance is that PEOs have negotiating power to help receive better rates. 

Life Insurance 

Many PEOs also offer life insurance as part of their benefits package. This type of insurance can be a great way for small businesses to provide coverage for their employees without having to bear the full cost of the policy. Furthermore, a PEO can help to negotiate better rates on life insurance policies, making them an attractive option for businesses that want to offer this benefit to their employees.

Tax-Free Savings Accounts 

Another benefit of working with a PEO is that they can help companies to set up tax-free savings accounts for their employees. These accounts can be used to cover expenses such as medical bills, child care, and transportation costs. In addition, the funds in these accounts grow tax-free, which can help employees to save money in the long run. 

Wellness Plans 

While some employers choose to create their own wellness plans, others work with a PEO to design and implement a plan tailored to their specific needs. 

PEOs have the expertise and resources to develop comprehensive wellness programs that meet the individual needs of each business. In addition, PEOs can provide support and guidance throughout the implementation process, helping businesses to ensure that their wellness plans are successful.

Travel Assistance 

In addition to providing payroll and benefits services, many PEOs offer discounts on travel expenses — such as booking travel arrangements, obtaining visas, and dealing with travel emergencies. This can be a valuable benefit for businesses that frequently travel for conferences or meetings. 

PEOs typically have relationships with preferred vendors, which allows them to negotiate better rates on airfare, hotels, and rental cars. As a result, businesses that work with a PEO can enjoy significant savings on their travel expenses.

Training and Development 

A PEO can provide a host of training and development opportunities for employees.  By assisting businesses to assess what training an employee needs, a PEO can provide the resources to help employees receive training. This can be done through online courses, webinars, or even on-site training at the company’s facilities. 

In addition, a PEO can help to develop customized training programs that are specific to the needs of the company. These types of programs can be beneficial for companies that have specific goals or objectives that they want their employees to meet. 

Annual Leave and Sick Leave

A PEO can help to ensure that employees take the proper amount of leave and that they do not exceed their allotted time. This can help to prevent abuses of the system and ensure that employees can take the time they need to rest and recover. 

In addition, a PEO can also assist with tracking employee hours to ensure that they are paid for all the time they have worked. This can be a valuable service for employees who work overtime or on weekends.

Employee Assistance Program (EAP)

A PEO can assist with the development and implementation of the Employee Assistance Program (EAP). PEOs can also help to promote the program to employees and ensure that it is being used effectively. 

Additionally, a PEO can provide support and resources to employees who are struggling with personal or work-related issues. By providing this assistance, a PEO can help to improve employee morale and reduce turnover.

What Are The Advantages of Using a PEO for Benefits Administration?

For many small businesses, the task of benefits administration can be a daunting one. There are myriad rules and regulations to navigate, and the constant changes in tax and employment regulations can make it difficult to keep up. A PEO can take on the burden of benefits administration, freeing up the business owner to focus on other aspects of running the company. 

PEOs have a deep understanding of the ever-changing landscape of employee benefits, and they can provide a wide range of options for their clients. In addition, PEOs often have established relationships with insurance providers, which can lead to better rates. 

Because PEOs spread the risk among a large pool of clients, they are often able to offer insurance and benefits coverages at a lower cost than businesses could obtain on their own. Consequently, for small businesses that want to offer competitive benefits without breaking the bank, working with a PEO can be an attractive option.

What Are The Disadvantages of Using a PEO for Benefits Administration?

There are some potential disadvantages to using a PEO for benefits administration. First, it can be costly to outsource this function, particularly if a business has a large workforce. Secondly, a business may lose some control over its benefits program by handing it to a third party. Finally, there could be communication issues between a company’s employees and the PEO, which could lead to confusion and frustration. 

These disadvantages can typically be overcome with proper planning and communication. If business owners do their research and choose a reputable PEO, they can enjoy the many advantages of HR outsourcing without running into any major problems.

Summary

PEOs offer a turnkey solution for managing a company’s human resources, payroll, and employee benefits. By shifting these responsibilities to a PEO, business owners can save time and money while also freeing up internal resources to focus on other core competencies.

PEOs offer a comprehensive range of benefits administration services that not only save business owners time but also ensure compliance with relevant laws and regulations. 

FAQ

A PEO can help to manage employee benefits like health insurance, retirement plans, and payroll. This can take a lot of the burden off employers, as it frees up time to focus on other aspects of running a business. In addition, a PEO can often negotiate better rates on benefits than business owners could receive on their own, due to their economy of scale. 

PEO benefits administration is the process of providing employee benefits to the employees of a PEO’s client company. 

PEOs typically offer a comprehensive package of employee benefits, including health insurance, life insurance, disability insurance, and retirement plans. Additionally, PEOs often provide other services such as payroll processing and workers’ compensation insurance. 

While PEO benefits administration can save businesses money, it is important that business owners choose a reputable and experienced PEO. This helps to ensure that their employees receive the best possible benefits package.

Article By
HRIS and Remote Tech Specialist
Charlotte speaks with authority as RemotePad’s recruitment and HR tech maestro. With a background in marketing, Charlotte has worked for major brands in the industry, including leading HR software provider, FactorialHR. Originally from Manchester, UK, with a bachelor’s degree from the Manchester Metropolitan University, Charlotte currently resides in sunny Barcelona, Spain.

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