Navigating Employee Benefits: Zenefits vs Professional Employee Organizations (PEOs)

Understanding the benefits landscape and choosing the right provider can be overwhelming. Two prominent options in this space are Zenefits and Professional Employee Organizations (PEOs). This article aims to provide a clear comparison, highlighting the differences and benefits of each, allowing employers to make an informed decision.

The Role of Zenefits

Zenefits is an insurance agency that caters primarily to smaller companies, with an average group size of around 10 employees. According to their own admission, their services are most effective for entities of this size. The company is transparent in acknowledging that there are numerous other agencies that could offer more competitive benefits and service packages. This is particularly relevant for larger companies where the employee base can range from 50 to over 5000 employees.

Key Points: Primarily serves smaller companies (average 10 employees) Does not offer the same level of administrative services as PEOs No control over the cost of benefits, but no administrative fee charged

Professional Employee Organizations (PEOs) Overview

Professional Employee Organizations (PEOs) such as Ashton Benefits, provide a unique value proposition by leveraging a larger pool of enrollments across their entire client base to negotiate better premiums. In essence, the cost of benefits is directly affected through this model, making it a significant factor for many companies. Here are the key benefits to consider:

Administrative Fees: PEOs typically charge an administrative fee to manage the employee benefits and HR services. This fee is often justified for the ease of administration and the substantial savings on insurance premiums. Cost Savings: By aggregating the client base, PEOs can negotiate better rates with insurers, resulting in lower premiums for participating companies. Comprehensive Services: PEOs offer a wide array of HR services, including but not limited to payroll, benefits administration, and compliance services.

Key Differences Between Zenefits and PEOs

While both Zenefits and PEOs offer benefit administration services, their approach and impact on the employer are quite different:

1. Enrollments and Premiums

Zenefits: Zenefits acts as a broker and does not negotiate the cost of benefits. They do not charge an administrative fee, and there is no change to your tax ID as employer of record. PEOs: PEOs negotiate the cost of benefits, often providing better rates due to their larger client base. They handle the administrative aspects of the benefits but charge an administrative fee for these services.

2. Impact on Employees

Zenefits: Employees can continue to manage their benefits through Zenefits without any transition issues. The system is user-friendly, and switching to Zenefits is straightforward. PEOs: Transitioning to a PEO typically involves some level of change, as you move from a direct employer to an organization that manages your benefits alongside other clients.

Conclusion

The choice between Zenefits and a Professional Employee Organization (PEO) depends largely on the specific needs of your company and its employees. For smaller companies or those seeking a solution that does not require significant changes, Zenefits might be a suitable choice. However, for larger companies or those prioritizing substantial cost savings and comprehensive HR services, a PEO could be the better option.

Ultimately, it is essential to shop around and consider multiple providers to identify the best fit for your organization. Each provider has its strengths, and understanding these differences is crucial in making an informed decision.