Engaging a PEO: Reducing Employer Related Costs

The Indirect Costs of having Employees - How much does your company spend on employment administration?

According to an updated 2010 study provided by the Small Business Administration (See Page 13), the regulatory burdens on small and medium sized business are:

Type of Regulation All Firms <20 Employees 20-499 employees 500+ employees
All Federal Regulations $8,086 $10,585 $7,454 $7,755
Economic $5,153 $4,120 $4,750 $5,835
Environmental $1,523 $4,101 $1,294 $883
Tax Compliance $800 $1,584 $760 $517
OSHA and Homeland Security $610 $781 $650 $650

This study commissioned by the US Small Business Administration shows the average cost per employee per year for a firm with fewer than 20 employees is $5,704. This cost includes the impact of all Federal regulatory paperwork and tax requirements placed on a company. PEO and employee leasing programs often cost less than one third this amount.

In addition this table does not include any costs for State regulatory burdens (like state unemployment taxes or state imposed workers’ compensation insurance costs). Furthermore, these latest study numbers were calculated in 2010 BEFORE the implementation of the PPACA - health insurance regulatory changes. Business owners can be sure these costs may be significantly higher in 2013 and beyond.

Joing a PEO can help reduce federal regulatory costs to your company. These costs are often significant amounts in addition to the amounts shown here. While these costs may be "hidden" in terms of the time your staff spends managing paperwork, make no mistake, they are real. Let's look at the major cost components:

Labor Accounting and Reporting Costs

  • Building and running labor costs reports including departmental or job costing labor reports
  • Journal Entries for labor costs, tax withholding, etc.
  • Federal, State and Local Tax Filings
  • Regulatory Agency Reporting and Filings

Human Resources Administration Costs

  • I-9 Verification
  • Background Checks (optional)
  • Pre-Employment Testing (optional)
  • Recruiting, Advertising, Resume Screening, Interviewing (optional)
  • Employee Handbooks
  • Performance Appraisals
  • Rewards and Recognition Programs (optional)
  • Position Descriptions
  • Drug-Testing (optional)
  • Training (Employee and Managerial)

Payroll Administration Costs

  • Employee time collection and reporting
  • Payroll errors handling
  • Third party inquiries administration for employment confirmations
  • Employee Garnishments, Child Support and Tax Levies
  • W-4 administration
  • W-2 Printing and Reporting

Benefits Administration Costs

  • Plan Acquisition Costs
  • Plan Enrollment Reporting and Administration
  • Plan Premium Remittance to Insurance Carriers
  • Employee Plan Enrollment and Termination Reconciliation with insurance carriers
  • Annual Plan Enrollment, ERISA and HIPPA Compliance
  • Claims Management

Each of these cost categories above applies to each type of insurance your company wants to offer including:

  • Plan Acquisition Costs
  • Medical Plans
  • Dental Plans
  • Long Term Disability
  • Short Term Disability
  • Accidental Death & Dismemberment
  • Life Insurance
  • Vision Plan
  • 401(k)
  • IRA
  • Employee Assistance Programs
  • Flexible Spending Accounts
Hiring a PEO offers relief from administrative burdens. Let's find a PEO for your company.