In recent years there has been a significant rise in the amount of small and medium-sized businesses (SMBs) turning to outsourcing to address there HR challenges and needs.
There are numerous reasons for this increased popularity in HR outsourcing – rising HR related costs, changes to healthcare in the United States, and difficulties with employee benefit offerings just to name a few.
One kind of outsourcing solution in particular has proven to be exceptionally popular for SMBs – professional employer organizations (PEO)
While PEOs are usually a good thing for business owners, this isn’t always the case for benefits and insurance brokers. This is because many PEOs sell their services directly to SMBs, essentially taking clients (and revenue) away from brokers.
However, not all PEOs look to take business away from brokers. As a matter of fact, some PEOs, like Extensis, have a broker-only selling model. But what does this mean for brokers
and their clients? Let’s find out!
Not All PEOs Want to Take Clients Away from Brokers
In a recent article on our blog where we explored 5 myths about PEOs
, we briefly touched on the 3 common PEO selling models:
- Direct: A PEO engages and sells their solutions straight to small and medium-sized business owners
- Broker-Only: The PEO works exclusively through a broker to offer their services to a client. The broker helps introduce the PEO to the potential client and stays involved throughout the entire sales and onboarding process, and even after the partnership begins
- Hybrid: Some PEOs sell both directly to businesses and through brokers, essentially combining the two methods
The most common of these PEO models is selling direct to clients. This means that a PEO can sell their products and services to an SMB without the need of a broker.
Often, brokers can have their clients churn because they want to partner with a PEO that offers a full-suite of HR services – usually at a lower cost.
It’s also not too uncommon to come across PEOs who have a hybrid-type of business model, where they both work with brokers while also selling directly to potential clients.
This can be a risky situation for a broker, who runs the risk of potentially losing their client down the road to the same PEO they are currently working with.
How Can Brokers Benefit from a Broker-Only PEO Partnership?
Because few PEOs have a broker-only business model, some benefits and insurance brokers have come to view all PEOs as competitors who are looking to steal their clients.
And while this may be true of direct-selling and hybrid model PEOs, brokers actually stand to benefit from partnering with a PEO
that works exclusively through brokers.
Here are 5 ways a broker-only PEO can help insurance and benefit brokers:
- Win new business
- Differentiate by adding a new solution
- Earn recurring revenue
- Compete more effectively against other brokers and direct-selling PEOs
- Protect the book of business
All of these outcomes help brokers grow their business
and ultimately generate more revenue.
How Does Partnering with a Broker-Only PEO Work?
Brokers who are new to a broker-only PEO model may not know exactly how this type of partnership works.
Usually, a PEO would work with the broker throughout every step in the sales process. Here’s a brief overview of how a broker and a PEO would work together in this type of partnership:
- Identify an Opportunity: Together, the broker and PEO would review and qualify a potential client. If there is a fit, the broker would then schedule an appointment with the client for them both to attend.
- Qualify the Client: In the appointment with the client, the broker and PEO would learn more about the client’s specific needs while explaining how a PEO partnership works, and discussing potential business benefits.
- Develop a Proposal: The PEO representative would craft a proposal that contains personalized HR solutions tailored to the clients wants and needs. The PEO would review and prepare the final proposal with the broker prior to the client meeting.
- Deliver the Proposal: Next, the broker and PEO would present the proposal to the client, answer any questions or concerns the client may have, and confirm a start date for the client.
- Complete Contracting: Last, the broker and PEO would agree upon final pricing and timing with the client. They would then complete all necessary paperwork and schedule a kick-off meeting with the broker, client, and team-members from the PEO.
Additionally, PEOs employ experts in various areas that will help address any client concern or question, both during and after the sales process. HR, risk management, compliance, payroll, and finance experts are all available to clients to ensure a smooth transition prior to and after becoming a PEO client!
Partnering with the Right PEO Can Help Benefit and Insurance Brokers
Brokers today face more competition for new clients than ever before. They also have to worry about losing current clients to other brokerages and direct-selling PEOs.
However, partnering with a broker-only PEO can help benefit and insurance brokers (and financial advisors
) better compete in today’s market while protecting their book of business.
If you’re looking for more information on PEOs in general, download our eBook below to learn more about PEOs and the PEO industry!
Want to learn more about PEOs? Check out our eBook, How Well Do You Know PEO? This eBook provides an overview of the PEO industry as well as helpful information for brokers and employers!