PEO vs. Insurance Broker: Understanding Their Roles and Benefits

September 22, 2023
PEO vs. Insurance Broker: Understanding Their Roles and Benefits

If you're a small business that's ready to choose and administer employee benefits, it's important to know the full extent of your options. You could do your own research and go it alone, but that's a time-consuming endeavor. It also could be counterproductive. You could, instead, turn to an insurance broker or a professional employer organization (PEO). They are very different but can be complementary. In this article, we'll look at the distinct roles of a PEO vs. insurance broker and what to consider for your business.

What Is a Professional Employer Organization?

A PEO provides human resources outsourcing services to clients. The PEO and client enter into a co-employment relationship. The PEO and client’s responsibilities are expressly described in a service agreement between the PEO and the client. The client maintains the control over daily operations, including hiring, job roles, and business decisions. The co-employment model allows businesses to outsource certain HR-related administrative burdens and responsibilities to the PEO.

By leveraging the PEO's scale and expertise, businesses can enhance what they offer to employees, keep up to date with employment-related compliance and focus on their core business functions. In summary, a PEO offers comprehensive HR solutions to help businesses with their HR tasks and mitigate certain risks.

What Is an Insurance Broker?

An insurance broker is a professional intermediary who helps clients find and purchase insurance policies. They have a deep understanding of the insurance market and the nuances of different policies. By assessing a client's specific risks and needs, brokers may recommend the appropriate coverages, including health insurance coverage. Their role involves comparing policies from multiple insurance providers, helping clients receive the best coverages, terms and rates.

Brokers may also assist in clarifying policy terms, conditions, and costs, making the complex world of insurance more accessible. Moreover, when a client needs to make a claim, brokers can provide guidance. In essence, an insurance broker can act as a trusted advisor and advocate for clients. They help navigate the intricacies of health insurance options, offer tailored solutions, and provide a peace of mind.

What Are the Essential Differences?

Both aim to simplify a business access to benefits for employees, PEOs and insurance brokers serve distinct roles. A PEO offers a holistic suite of HR and payroll services and is in a co-employment relationship with the client. On the other hand, insurance brokers focus solely on the insurance realm, acting as intermediaries between clients and insurers. Here's a simplified breakdown:

PEO

Function:

● Provides comprehensive HR solutions to businesses.

● Offers benefits and payroll administration, HR consulting, and compliance support.

Cost Model:

Typically charges a flat fee per employee or a percentage of the total payroll. The fee includes the broad range of services provided.

Benefits:

● Can offer access to a broad range of employee benefits.

● Provides expertise in HR and compliance matters.

● Can help with administrative HR tasks, helping to reduce certain overhead costs for businesses.

Insurance Broker

Function:

A broker helps businesses find the best insurance policies tailored to their needs. They provide a variety of insurance options such as health insurance, workers' compensation, and general liability.

Cost Model:

  • Earns commission from insurance companies for policies sold.
  • Some might charge additional fees for services or consultations.
  • Modern brokers might use a flat fee or fee-for-service model.

Benefits:

  • Provides expertise in the insurance market.
  • Can help businesses navigate complex health coverage and insurance choices.
  • May help businesses get higher-quality, tailored insurance coverage at competitive rates.

How Insurance Brokers Collaborate with PEOs

PEOs and insurance brokers can collaborate to provide comprehensive HR solutions for businesses. A business might have an established relationship with an insurance broker but may want the expand services to a PEO.

Size, Scale, and Budget Considerations

When evaluating whether to engage with a PEO or an insurance broker, your company's size and scale may be major factors. Small businesses with limited in-house HR capabilities might gravitate toward PEOs. PEOs can offer access to competitive benefit packages typically reserved for larger corporations.

Conversely, massive enterprises with a huge workforce might opt for insurance brokers to craft insurance solutions that cater to their unique needs.

Budget costs are also a key element. With a PEO, a business may commit to monthly payments. A broker is paid a commission by the insurance company that the business chooses. To decide between the two, business leaders need to project their long-term needs, the value of the different levels of service, the specific costs for each service, and the potential return in investment for each solution. The well-being of their employees and their satisfaction with the insurance choices also must be considered.

PEO vs. Insurance Broker: Choosing What's Right for You

PEOs like TriNet offer an integrated approach, covering a gamut of HR functions, benefits administration, and risk management. Fortunately, TriNet works with many insurance brokers, so small business owners can get expertise in all areas — all bundled into one.

Small and medium-sized businesses seeking a holistic solution that helps to alleviate administrative burdens, helps with compliance concerns, and offers access to premium benefits can find that and more at TriNet. Our comprehensive suite of HR services makes it a leader for businesses looking toward growth and stability.

This communication is for informational purposes only, is not legal, tax or accounting advice, and is not an offer to sell, buy or procure insurance.

This article may contain hyperlinks to websites operated by parties other than TriNet. Such hyperlinks are provided for reference only. TriNet does not control such web sites and is not responsible for their content. Inclusion of such hyperlinks on TriNet.com does not necessarily imply any endorsement of the material on such websites or association with their operators.

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A TriNet subsidiary is classified as a Certified Professional Employer Organization by the IRS.