In this current economic downturn, every dollar becomes vital for small and medium sized businesses. As insurance and administrative costs continue to rise, it becomes increasingly difficult for business owners and managers to find the savings that often make the difference at the end of their year. Many small and medium sized businesses (SMB’s) utilize a payroll service and have an additional relationship with an insurance broker. But many of the decision makers do not realize the benefits of coupling these two processes into a single provider.aso services
In the last twenty years a specific industry has developed that recognized this available cost savings when targeting SMB’s. The industry created a strategy known as co-employment where they were able to save clients substantial amounts of money on their health plans by aggregating the risk across a larger pool of employees. This process, known as Employee Leasing or Professional Employer program’s did create cost savings, but it also created unrest with the co-employment relationship. Rather than a manager having control over payroll, reporting and their company, they have handed their employees over to someone else.
There is another fatal flaw to the PEO and it lies in the structure of the agreement. The lower insurance costs are achieved by creating a large pool of employees made up of the PEO client employees. By aggregating all of their clients employees, PEO’s effectively create a larger workforce and policy. The issue that PEO’s must face is what happens when there are one or two large claims on this policy? The only answer is that the insurance rates for all clients increases.It is clear to see that not all managers will jump at this opportunity. But, the creative business minds of our day have taken this strategy one step further.
In order to create a service that is appealing to the masses, a new breed of single providers has developed known as Administrative Service Organizations (ASO). Unlike their predecessors (PEO & Employee Leasing Programs), ASO’s are able to offer specific Group Health Insurance plans, bundled with payroll, tax and report processing. This new industry is able to meet the needs of all types of clients because they are not at risk of a single large claim affecting all clients. This company specific approach offers the best possible service, and many times offers more competitive pricing than the large PEO’s and Payroll Processors. With our current economic situation, tightening lending standards and increasing costs on everything from printer paper to electric bills, why not look into an ASO for your payroll and benefits administration? The only thing to risk is saving money.