The Real Truth on Large Payroll Vendors & the One Point of Contact/Low-Cost Sales Pitch

I am writing this not to bash any company, idea, or concept but to help employers considering working with large payroll vendors know the real facts.

The Reality

The reality is, most large payroll vendors push a one-size-fits-all model on all prospective clients. It’s the co-employer/PEO arrangement. For certain clients, these co-employer / PEO arrangements make perfect sense, but they’re by no means a one-size-fits-all model.

Believe it or not, there are some clients we have come across and helped that don’t even realize they’re in a PEO. If you’re a business owner reading this article, the reason this co-employer PEO model is so heavily pushed is this is where they make all their money. The FEES.

The Pitch

Sales reps from these large payroll vendors pitch a one-point of contact solution for all the client’s needs and the best low-cost benefits available. If you’re sitting with or receive a call from one of these vendor
sales reps and hear this, hopefully, your antennas will go up. The first question to ask would be, are you pitching me a co-employer / PEO arrangement? If so, be mindful that some of the processes are glossed
over to obtain the sale.

The Setup

The setup process is long and complex and can be equally as complex to dissolve should you decide to terminate in the future. I then recommend a deep dive into fees with the sales rep.

The Fees

From what we have seen, an average 20-30 person company, the fees can range from 30k – 60K per year. At that rate, any savings an employer would have seen on the benefits side is quickly evaporated.

By the way, these fees are 100% negotiable as we’ve seen clients attempt to terminate the relationship with the payroll vendor, these vendors drastically slashing the fees to try and retain the business.

The Point of Contact

Now on to the 1 point of contact solution. This isn’t entirely false, as they’re correct — your 1 point of contact will be the large payroll vendor.

However, it won’t be the high-energy salesperson that sold you the dream. That individual will be onto the next prospective client as they’re not compensated to service, only close new deals. Instead, your service issues and inquiries will be directed to another department where you’ll get average service at best.

The Bottom Line

In closing, for clients wanting to outsource their HR, have a co-employer relationship between the payroll vendor, themselves, and their employees, then this could be a good fit. The bottom line is: do your homework, compare the numbers, and know what you’re getting into.

For expert insurance advice in Northern New Jersey, call (973) 500-4034.