Clutch spoke with Brent Feldman, owner of Matchbox Design Group, to gather his insights into PEOs and payroll software.
Joining a PEO
Why did you decide to join a PEO versus using the solution part of ADP's software by itself?
We initially joined Insperity. The decision was driven by the need to obtain affordable healthcare coverage for our business. We used the company for two years and enjoyed the comprehensive nature of their services, including everything from workers' compensation insurance to HR and insurance benefits. All of these made our offering to employees more robust and comprehensive.
Unfortunately, Insperity wasn't very transparent on its fee structure, and I happened to have a friend working on the sales team for ADP TotalSource. He gave me a cost-comparison sheet as well as a breakdown structure of what we'd be receiving from TotalSource compared to Insperity. It was the reason for making the move and has saved us more than 15% per year in costs.
Do you have recommendations for what types of companies should consider PEOs? It would make sense for a smaller company to join a PEO, for example, but there may be certain revenue considerations involved.
I wish I had a simple answer to this question. We neglected to enter a PEO for a long time, strictly due to cost aspects. It's still expensive if we look at the overall price, but there are many things bundled into the fee, and there is a shared liability assumed by the PEO company by co-employing the staff of its clients. There are also taxes rolled into this, including the ones paid by a business for its employees. (401)k administration was separate in Insperity's case, but it's actually rolled into ADP's solution.
As a whole, I would say that the time management aspect matters most at the end of the day. As a business owner, I'm not great at handling payrolls and understanding my risks in certain situations, including HR, liabilities, and workers' comp. I definitely felt that the offering of having a company provide those services (including legal support, if it was ever necessary) and figuring out our healthcare in a broader package would make our business seem bigger than it was.
The cost is something to be reckoned with, but if someone can see their company growing and coming to need these solutions in order to compete in the marketplace, a PEO can be great from a time-saving aspect by simply providing these services.
Does your PEO offer any "softer" HR services like professional development or consulting on employee issues, or do you simply use the service for technical financial aspects?
We're generally not taking full advantage of everything offered by the PEO, but they do offer mediation and counseling lines for employees. In terms of general HR, ADP offers recruiting services, which are dramatically less expensive than using a recruiting firm. They offer online training as well, in the form of courses and videos on various skills like accounting software, Photoshop, and general management. We also subscribe to LinkedIn Learning Solutions, which we use as an ongoing education solution. There are quite a few services as our disposal.
A huge benefit is that, if we're looking for an employee handbook for general terms, ADP can offer a lot of stock material which can make our business look bigger and more regimented. It's certainly helpful to have in case of any policy disputes.
Choosing a Payroll Software
In terms of general advice for searching for a payroll service, what do you think people should be looking for?
It depends on the business stage and what is currently happening. Electing a PEO is a big cost decision, but our company has grown and needed to obtain good talent. Potential employees are certainly looking at other companies with competitive benefits, so having a PEO solution with a lot of backing has enabled us to appear larger. For payroll services in general, especially in the case of smaller companies, there's not usually a reason to get a PEO. Most organizations won't even take very small clients. Insperity will take on companies of any size, but ADP's has a minimum threshold of seven insured people.
We've had a past experience with ADP's RUN payroll solution. Unfortunately, they shifted their support overseas, and there were some language barriers that arose from this. It's important to get the process done in a timely manner, so any communication barriers can hinder progress. We were slightly disenchanted with their support, but I've heard that ADP moved the team back stateside.
How would you try to balance between prioritizing the technical superiority of a payroll software versus its customer support reps?
We initially picked Insperity because of how up-to-date and user-friendly its web solution was. It was simple to find the things we needed, not just in the case of employees but also for owners. Customer service was still a key component of that. There will always be a question about tax implications or employee discipline. If we make an assumption and edit the system to accommodate a particular payroll change, any misstep will become harder to rectify later.
What are your thoughts in terms of keeping the payroll software in-house versus outsourcing it to an accounting firm or a PEO?
It comes down to cost versus benefit. From a simple payroll aspect, I don't know if there would be any real benefits (depending on the size of the business) to keeping the process in-house. My business partner and I didn't assign ourselves salaries initially, which made it easier to pay taxes at the end of the year. When it actually came to requiring payroll services, it's much easier to have someone handle those on a regular basis. They can categorize different elements and produce reports that are easy to give to an accountant. It would be hard for me to suggest doing the work internally. I don't think that the time expenditure required for keeping up with different rules and regulations would be justified.
Are there any particular HR issues that can affect small-to-medium-sized businesses more? Do you have any insights into how those can affect companies?
Providing clarity is important, especially when dealing with day-to-day business tasks and trying to stay profitable. Sometimes, the last thing on our mind will be a regulation change and how we can accommodate it. The time-saving factors for the business owner, in terms of easy-to-navigate systems and easily understood platform or policy updates, are almost all we look for from a company. Just as we're providing web design and development services at a professional level, we need experts to do great things for us.