Ask YC: using PEO for a startup, good or bad? (HR hack)

[gleb]

We are considering using PEO for our company. Anybody has any experience, positive of negative with this setup?

PEO basically employs everybody in your organization, and leases them back to your company. That way the employees get larger group insurance, payroll, etc. It sounds good in principle, but who knows how it actually works.

http://en.wikipedia.org/wiki/Professional_employer_organization

The most well marketed one is Administaff

[secorp]

We are using ADP TotalSource for payroll and PEO functions. Though it is nice to have everything in more or less one place, the response time and customer service is extra-medium. By that I mean that most of the time if there is a problem with health care coverage, I end up personally having to call the provider, ADP merely provides a phone number. On the positive side, the prices are reasonable and the variety of plan offerings is good too. They just started up their west coast operations last year.

We looked at Administaff as well and the main reason for going with ADP was a pre-existing relationship via payroll.

[goofygrin]

I worked for a startup that used Administaff.

Administaff basically sucks. They are expensive from a company perspective. The benefits (in Texas at least) are fairly poor and expensive.

Also, with noone on staff responsible for HR functions, there was a LOT of frustration when HR type questions and issues came up.

[SwellJoe]

I've heard lots of bad things about Administaff from an employee perspective...I don't know whether it makes up for it on the employer side. But I think keeping employees happy is pretty important, so it's probably worthwhile to figure out how to solve the problems without bringing in a known-to-be-ornery third party. We're going to have to solve those problems soon, as well, and I'm still completely at a loss on how to do so. So, I sympathize.

[dzohrob]

I would definitely like to hear about this as well; right now we're outsourcing our payroll using PayCycle (http://paycycle.com). We're bringing on our first employee soon and definitely want to focus on our core business (ie, making cool stuff) and not administrative tasks.

[cch]

I use TriNet at my company, and the cost is about made up for by the savings in the health care plans alone. Factor in the benefits of someone else handling the work, and it is a no brainer for us. Note that the avg wage of TriNet companies is over $100k, whereas Administaff is around $60k. I think Administaff has a much broader base of client companies, but TriNet is higher end. TriNet's only weakness is not having an integrated 401k, but it is not too hard to link Fidelity to it.

[cch]

One more element to consider.....if you hire mostly young male engineers, then health benefits are not a big draw, and a PEO may therefore not be a good option.

[youmon]

PEOs tend to be expensive but will allow you to offer much better benefits that otherwise possible. I've used TriNet and they were good. But pricey.

[jamesmhall]

The last three startups I have been a part of, all used ADP. I was not part of the decision making, but I thought it was worth noting.