Transcript
Jason Randall:
You’ve probably heard the term PEO, or at least some names in the PEO industry, like Justworks, TriNet, ADP, Insperity, or Questco.
But it’s not always clear what a PEO really does. And surprisingly, sometimes it’s not even clear to companies that use a PEO.
Some might think it means outsourcing payroll, handing off HR, getting a better deal on benefits, or, for some folks, just tuning out because they’re scarred by HR problems in the past and want someone else to deal with it.
We want to change some of those misconceptions and illuminate what a PEO actually does, what changes when a business uses one, and how to tell whether it’s the right fit or the wrong one.
With me today is Brandon Hartsaw.
Brandon, welcome to the conversation.
Brandon Hartsaw:
Thanks, Jason. I’m glad to be here.
Jason Randall:
Absolutely. Could you tell us a little bit about yourself and your background? I’m interested in the perspective you’re bringing to this conversation.
Brandon Hartsaw:
Absolutely. I’d love to.
I’ve been serving the PEO industry for a little over 21 years now.
My start was probably not like most in this space. I had the fortunate opportunity of starting out in the early days working in the mailroom at Administaff. Over the course of my tenure at Administaff, also known as Insperity, I had the opportunity to work inside just about every single department, either with folks in that department or in that department directly.
I had the privilege of learning PEO from the ground up inside one of arguably the greatest PEOs to ever grace our industry. Being able to operate and learn inside that organization gave me significant insight into what clients want, what their needs are, and what a PEO can provide.
It also taught me some of the things a PEO should not be providing.
That was very insightful for my career and my journey there, which eventually led me to meet you, Jason. You and I had the fortunate opportunity of getting to work together there for quite some time.
When you moved over to Questco, you were able to bring me along too. I was super excited about joining the organization here, learning more, growing more, and providing more impact to a larger set of clients in a different way.
My background has given me the opportunity to learn just about every aspect of PEO. That is what has brought me to where I am today and helped me understand what clients want and what we can provide.
Jason Randall:
And of course, now you’ve served in senior leadership at Questco for quite some time, getting close to a decade at this point.
I can’t think of a better person to answer the most fundamental, simple question.
What is a PEO?
Brandon Hartsaw:
That’s an easier question to answer than most people think.
I’ll provide two responses. I’ll give you the technical response, and then I’ll give you the simple response.
The technical response is that a PEO is a Professional Employer Organization. When a company or business decides to join a PEO, they enter into a co-employment relationship.
What the PEO provides is the services and support that allow the PEO to be the employer of record for tax and insurance purposes.
That means we can take the employees from that client and pool them with thousands of other employees to negotiate better benefit rates. We then take on compliance responsibilities. We handle the administrative back office and many of the components required of being an employer.
But at the same time, even though we’re handling that back-office component, the client still gets to be the boss.
They are still running their business. They get to hire, fire, set salaries, manage performance, and define the culture. We just handle the infrastructure.
That’s the technical answer.
The simple answer is that, as a PEO, we come in and serve as a partner to the client. We take over the administrative burden that comes with their employees so that the client owner can focus on growing the business.
That’s what a PEO is.
We help small to medium-sized businesses focus on what’s most important: growing and expanding their business.
Jason Randall:
I think that’s something a lot of folks may be missing: the holistic answer, the simple answer you just gave.
Of course, it’s often not that simple to actually deliver, but it’s a focusing conversation. That is what makes the model so powerful.
Let’s unpack that a little bit.
In practical terms, what does it mean to partner with a PEO within your small business? What do we actually do?
Brandon Hartsaw:
Every employee needs to be paid. Every employee wants to make sure their benefits are in place. Every employee wants to make sure they have a voice when they have an area of concern.
Every employer and every business owner wants to grow their business. They want to bring a product to the marketplace that they are excited to deliver. They want to carve out their piece of the pie, not only to grow their business, but also to provide a runway for their employees to have a good life.
So what we do as a PEO is step in and take over that payroll function. We provide the mechanism and the expertise to ensure they are compliant with payroll laws and regulations.
We also step in and provide benefits administration and support to ensure they have access to the best benefits possible, and that we are able to administer them and take care of their employees.
That means taking care of their employees while working with the client to make sure they understand the options available to them and can make the best selections for their needs and their employees’ needs.
We also bring 401(k) and other services to help them put together a benefits package that helps them attract and retain the best talent in their business sector.
One of the things we want to do more than anything is help an employer focus on what they do best: growing their business.
No one has ever entered business and said, “I want to get into the business of X because I love employment law,” or “I want to get into the business of X because I want to deal with HR struggles and employee-related struggles.”
No. They get into business because they have a passion and drive to deliver something better to the market than what is already there.
When you partner with a PEO like us, we help relieve you of that administrative burden so you can maximize the output of your employees.
The human resource portion of every business is probably its greatest asset. But oftentimes, business owners lose sight of that asset because they get focused on other things or do not understand the complications that come along with being an employer.
That’s where we come in.
We help shoulder that burden. We help smooth out the wrinkles of compliance. We help take care of taxes, payroll, and benefits so the business can get the maximum output from its employees, build the culture it wants, help employees thrive, and continue to evolve and grow the business it is proud of.
Jason Randall:
I want to unpack a few things you said in a moment, but I have a more fundamental question first.
A lot of times, what we do as a PEO gets swept into a conversation with other alternatives. Understandably so.
A company might be considering a software-only solution, an HR outsourcing company, or an insurance broker to provide the benefits piece.
What gets confused between those capable service providers and what a PEO does?
Brandon Hartsaw:
That’s a great question.
There are a couple of technical components, and then there is the holistic piece.
The technical component is that when you partner with a PEO, it is a contractual arrangement where we are the co-employer. We are responsible for payroll taxes. We are responsible for benefit compliance. We are responsible for a number of things that remove that compliance-related burden from the employer.
When you partner with someone that provides payroll-only or HR-only services, you as the employer still bear 100% of those compliance and risk-related matters.
When you partner with a PEO, the PEO stands shoulder to shoulder with you to help bear the burden of those compliance-related matters. We take that over. We support it.
That is one of the most important components. The relationship you enter into is a legal construct that allows us to shoulder a significant portion of that burden.
That is the technical component.
The other piece people often do not understand with a multi-vendor relationship is that they are wasting a lot of time trying to manage all of those relationships.
They do not always understand the time required to pull together a benefits broker, a workers’ compensation broker, a 401(k) broker if they’re going down that path, benefits compliance, payroll compliance, taxation, employment laws, HR burdens, handbooks, and all the rest.
All of that becomes fragmented. The employer has to figure out all the different partners and relationships required to deliver best-in-class support.
When you partner with a PEO like Questco, every single person in our discipline areas, including payroll, benefits, 401(k), and HR, is part of one organization. They are licensed experts.
You are not talking with someone who is just supporting software or someone who has taken a class on how to process a benefits claim. You are talking with certified experts who are experts in that discipline. We support that work all day, every day.
So when an employer partners with a PEO, there is the legal construct that allows them to be relieved of the burden related to payroll taxes. There is also the time burden that gets relieved.
They are able to pass off some of the most administrative tasks to a single organization that is expert in that space and can provide the best results for them in the fastest way and, quite frankly, often in the most cost-effective fashion possible.
Jason Randall:
That’s a great opportunity to unpack further what changes when a business uses a PEO.
You’re doing a wonderful job of showing both the substance and the benefit of that substance. I think it’s important to show both.
So when a business starts working with a PEO, what can they expect to change first?
Brandon Hartsaw:
There are a number of things that can change. The first thing they’re going to notice is time.
They’re going to get a lot of time back.
Oftentimes when we sell PEO, we talk about relieving clients of administrative burden. But what’s often not talked about, and what I want to make sure we share, is that there is a lift on the front end to get everything in place.
Sometimes when the PEO gets sold to a prospect and they realize there is a lot of lifting to do on the front end, they may say, “I thought you were going to help me with my administrative burden, but all you’re doing is asking me for documents and information and support.”
In order for us to take over all of that administrative burden, we have to get everything set up properly.
We have to extract the data. All the employee-related information, census data, and other information resides within that employer’s database or system. So there is a bit of a lift to extract that data.
But once that information is extracted, things are set up, and they are fully implemented and onboarded, the first thing they are going to realize is the amount of time they get back.
They no longer have to manage employee onboarding. They no longer have to worry about educating employees on their benefits or plan design. They do not have to worry about plan selection, claims management, where someone’s benefits card is, or whether an employee can go to a particular doctor.
We take on all of that burden.
They do not have to worry about managing timekeeping. We provide timekeeping services. We get all of that set up. Their role is to make sure employees are enrolled and that payroll information is processed accordingly.
When payroll gets processed, they verify that it is accurate. They verify, for example, that they are in fact paying this person $42 an hour, not $24 an hour.
There are still checks and balances because we need to make sure they have an opportunity to audit and verify information for accuracy.
But the amount of time they get back is significant. Oftentimes, they cannot even calculate the benefit of that because they are no longer sitting down collecting all the time, processing payroll, verifying enrollments, making sure I-9s are checked, and making sure documents are squared away.
We do all of that.
Jason Randall:
People-related investments show very high on the P&L. They are a major investment.
That requires focus. It cannot be ignored, and it should not be ignored.
But at the same time, it often is not what the owner-operator of a small business is set up to address. It can be perceived as a divided function or it gets delegated. It ends up by default in a place where perhaps it should not, with resources that are already stretched within a small organization.
This holistic concept of focus you are describing is powerful. It is more than the sum of the parts. This focusing ability is what makes the model so strong.
Brandon Hartsaw:
You’re absolutely right, Jason.
It’s a benefit in two ways.
It’s a benefit to the employer because they are relieved of burden and can focus on what is most important.
There is also a benefit to the employee. The worksite employee now has access to experts. They have a team they can go to when they have claims issues.
The employer no longer has to be the bottleneck and answer all of those questions because we are fully staffed to take care of both the employer and the employees.
It’s a win-win for the client. Both the employer and the employees receive something better than they had before.
Jason Randall:
You’ve touched on connectedness.
Part of what we do is provide connective tissue among payroll, benefits, HR support, and compliance.
How do these get more connected under the PEO model as opposed to a multi-vendor situation?
Brandon Hartsaw:
Multi-vendor is just that. You have different organizations providing different functionality to your business.
You have different contacts. Different contracts. Different pay scales. Different structures. Each one is different.
If you need someone to help with recruiting, you have to find a recruiting partner. If you need someone to provide payroll, you have to find a payroll partner. If you need time and attendance, you have to find a time and attendance solution. If you need workers’ compensation, you have to find a workers’ compensation partner.
All of these things are disconnected. They do not talk to each other. They do not work together. They are all there for their own independent purpose.
When you partner with a PEO, we bring all of that together.
All of those disciplines operate underneath one roof. Each discipline works together. The payroll division works with the HR division. The HR division works with the benefits division. All of them work with the workers’ compensation division.
Everyone knows the client. Every team member assigned to that client works together collectively to ensure the client’s needs are taken care of regardless of discipline.
It is a fully connected web of certified experts who not only know their discipline, but know your business.
They are all connected, and they all work together.
It’s a thing of beauty.
Jason Randall:
You’ve been doing this for a long time, with decades of interacting with clients, hearing their needs, and understanding their experiences, including their early experience within a PEO environment.
Where does a new small business client generally feel the biggest relief first? Is it administrative relief? Compliance? The burden on their people? Risk mitigation?
What comes across to you as a senior leader in a PEO?
Brandon Hartsaw:
One thing I learned a long time ago when I was working with sales teams in various organizations is that you have to understand the pain.
Every business owner has pain in different areas.
Maybe they are expanding and bringing in employees in different states, which brings a significant amount of complication. Maybe they have reached a size where they are looking to stand up a benefits program for the first time. Maybe they only have a handful of employees but are looking to expand quickly.
Each employer and business owner has a different set of pain.
When you partner with a PEO, our expertise in all of those areas helps eliminate that pain.
If you are expanding nationally for the first time and are concerned about payroll laws, regulations, PTO requirements, and so on, we have you covered.
If you are growing quickly and have the administrative burden of bringing on new employees and getting them set up in the system, that burden goes away.
If you are standing up a benefits program for the first time and have no idea where to turn, what to do, what options are available, what your contribution strategy should be, or what competitors in your space are offering, we have you covered.
It does not matter what your pain point is. We are going to cover it.
Every employer is going to feel something different. But the first thing that is pretty common across all of them is the relief of the administrative burden.
They do not have to do that anymore. They can now focus on something else.
What that translates to is what I mentioned earlier: they get time back. They get time to focus on what is most important.
Jason Randall:
Support is central to what we do.
It shows up in individualized expertise, domain expertise, and overall relationship support. But some business owners can perceive another side to that coin, which is control, or a lack thereof.
Just as business owners often did not get into business to administer HR, oftentimes they also did not get into business to relinquish control.
I think that is often a misnomer or focused in the wrong direction.
Could you walk us through what businesses often misunderstand about the level of control they keep?
Brandon Hartsaw:
That’s a great question.
You’re absolutely right. For employers newly entering the PEO space, there is often a concern about control. We hear that a lot.
The first thing I would say is: this is your business.
You are responsible for it. You have to run it.
In the co-employment relationship, we relieve you of administrative burden, tax burden, and a number of other burdens. But we cannot relieve you of the responsibility to make decisions about who to hire, who to fire, how much to pay people, what their job functions will be, how you are going to operate, what those functional roles are going to look like, and how many positions you need.
It is your business to run. It is your company to build.
We are not here to come in and force a particular efficiency program or culture program. We are here to take over and provide administrative relief for HR-related burdens.
What we do not do is take over your full HR and payroll focus completely. We are an outsourced partner that relieves you of the administrative burden of getting those things processed and done.
From an HR standpoint, we provide guidance and direction to ensure you are compliant with HR rules and regulations. But you still have to own it.
Oftentimes, we see the reverse concern as well. Clients come in thinking they are concerned about how much control they are going to lose. But we also see the opposite, where clients come in and say, “I’m going to give you all of it. You take it all. I want you to hire my employees, fire my employees. I want you to do it all.”
We do not do that either.
There is a fine line between what we can do, what we cannot do, and what the employer must do. We try to keep that line really clear.
It is your business to operate. You have to hire and fire. We will provide guidance and direction. We will relieve you of the administrative burden required to get these things done. But it is your business to operate, not ours.
Jason Randall:
We’ve hit on a lot of the benefits of the model in an abstract sense for an abstract small business. But I’d like to go a little deeper into who actually benefits from a PEO.
What kinds of businesses tend to be the best fit for a PEO service model?
Brandon Hartsaw:
This is a question we get all the time.
What is the right fit?
It all depends on the employer. The client has to fit into a couple of key categories.
Most importantly, they have to understand the value of partnership and bringing in third parties to assist them in growing their business. If they are completely dead set against bringing in a partner or outsourced provider to help grow the business, it is not going to be a good fit.
There are a couple of other items.
Size matters here.
There is too small, and there is too large. There is an upper scale, and a lot of PEOs have been trying to push the top end of that.
We see clients all the way down to one employee. We also see clients all the way up to several thousand employees. But there is a sweet spot.
What I would suggest is that anyone above five employees with a growth agenda who is looking to expand and grow their business absolutely needs to consider a PEO.
Once clients start getting into a couple hundred worksite employees, they may be reaching a breaking point where sometimes bringing things in-house is as good a model, if not better, than having a PEO partner.
It is hard to say exactly where that cutoff is. It all depends on the employer.
But at the end of the day, if you understand the PEO model, have a small business, and are looking to grow it, you absolutely need to consider having a PEO in your corner.
You are going to run better. It is going to help you focus on the things that are most important, so you can grow at a rapid rate and achieve your goals faster than before.
At the core of it, the right-fit client is anyone who has a getting-better agenda, is looking to grow the business, improve, and evolve to a place where they want to be but are not today, and values the relationship of a third-party expert to help them do it.
Jason Randall:
I think those are great thoughts.
I’d add that if the leadership of the business is feeling proportionally under-supported in this area, they do not quite know what to do or who to listen to, or they just do not have enough time and capacity, those are great reasons to at least engage a PEO in a conversation about how it might help.
Along those lines, what are some signs you have seen that tell you whatever a company is doing before a PEO relationship is no longer working?
What signals show they have outgrown their current setup?
Brandon Hartsaw:
When an employer is asking, “How do I get this done? I don’t know how to do this,” or finding themselves frustrated with the burden of their current program, that is a sign.
Whether they do not have the time to manage benefits anymore, or they do not know how to grow into a new state where they are looking to expand, any time an employer finds themselves questioning their business and how they are going to get it from here to there, that is the perfect time to call a PEO.
If you are not certain how you are going to make this next turn, this next change, or grow into this next phase, whatever it might be, and you are asking yourself those questions without knowing the answers, that is when you need to bring in a PEO.
That is when you know your current model is not working: when you do not have all the answers and do not have a clear path for getting there.
Jason Randall:
If I am asking myself those questions as a small business owner, I might be considering adding a software tool or making one incremental hire.
When would a PEO make more sense compared with those kinds of decisions?
Brandon Hartsaw:
If you are reaching a place where you need to bring in a payroll person, or you want to bring in a technology, that is only going to get an employer so far.
As I mentioned earlier, when you partner with a PEO, every discipline gives you access to licensed experts.
One misunderstanding is that a PEO is really expensive.
Yes, there is cost associated with partnering with a PEO. But when you look at what it offsets, including risks, compliance matters, expertise gaps, product gaps, time, energy, failures, breakpoints, management strain, and leadership capability gaps, it becomes a no-brainer that a PEO may be the right support solution.
As a small business owner, if you are reaching a place where you think, “I need to hire someone to do X,” or “I need to bring in technology to do X,” I would encourage you to also look at a PEO.
Look at partnering with someone that brings all of those functional areas and all of those components of expertise to help you reach your goals faster.
Once you bring in one person, there is going to be another domino, and another domino, and another domino. Once you reach that place where you need to bring in someone, that is exactly the point to take a look at a PEO.
Jason Randall:
On the flip side, a PEO is not for everyone.
Who have you found is not a fit, broadly speaking, for this model?
Brandon Hartsaw:
It is almost the inverse of what we were talking about earlier.
Obviously, once a client reaches a very large size, it can become difficult, and in some cases cost-prohibitive, to provide the services they need. There is a point where a client is better served by bringing things in-house and creating their own in-house expertise.
There is a size component.
Clients who do not value a third-party partner are not a fit.
Clients who do not have a getting-better agenda are not a fit.
Clients who do not want to be compliant with laws and regulations are not a fit.
They are out there. There are some clients that want to create an organization and run it in a way where they do not care about compliance and regulatory components. Those are not good fits.
We want clients who understand the value and importance of building an organization they are trying to evolve. They are trying to grow a positive, better culture, and they are looking to do so in a manner that is compliant and meets regulatory requirements.
Clients who are not looking to operate within a realm of compliance, who want to run at their own pace, do their own thing, and not take or heed expert advice, are not good clients.
Jason Randall:
Those are some red-light situations.
I will throw in a yellow light.
When a business has a very hyper-specific focus need, like they are solely interested in saving money on medical insurance, or they are only focused on cutting-edge HR technology and do not really want anything else, that is almost by definition what a point solution is for.
We can see tension sometimes when a client comes to us with a more limited view, and then we explain that this is about broad-based support and comprehensive service.
There can be a philosophical mismatch for a well-run business that just has a more specific need than we were designed to address.
Brandon Hartsaw:
You nailed it, Jason.
We see it all the time where a client has a well-run organization and all they want is a low-cost payroll option.
There are plenty of options out there for them to do that. They may already have a benefits relationship in place. They may already have certain things established.
They are interested in some outsourcing, but they are looking for a much lower-cost option. That exists. You are absolutely right.
Jason Randall:
The good news is that there are so many situations where skill and scale, both things that we bring to the table, come into play.
There are so many businesses that want, need, and value a partner to stand shoulder to shoulder with them. That is what our industry was designed to do.
I wanted to turn that into one of the final questions for today.
What are you most proud of in terms of client relationships?
Maybe it is a quick story of a client that has really been helped by the service. I am an admirer of yours because of the very high customer satisfaction your organizations have generated.
What matters to you? What stands out as a great client story about how a PEO added value?
Brandon Hartsaw:
We have a ton of positive client stories.
For me, what is most important is building strong relationships of trust.
Anyone can enter business, deliver a product, and generate a profit. But for me, what is most important is that we build relationships of trust.
I do not think there is anything greater we can do as humans than connect with another human, deliver something valuable, and do so in a manner that builds trust and camaraderie.
At the end of the day, that is what it is all about. It is about helping people reach their goals: clients and employees. And doing so in a manner where you are able to rest well at night.
Some of the greatest stories I have are with clients that have left us.
I have had a number of clients that have outgrown Questco. We call that the success penalty.
They come in. We help get their infrastructure in place. They grow and grow and grow. We have seen clients get emotional about the fact that they have reached a place, an inflection point, where they have to move on.
The relationships they developed with their service providers and payroll folks matter. They are not going to get to work with them every day like they had in the past.
But those relationships continue. The friendships continue.
For me, that is what is most important.
We live in a communal world. If we are able to create relationships of trust and camaraderie that extend beyond work, then we have done well.
Even if they are still here, or if they have gone away and grown to do something different, and we are able to stay connected and have real relationships, then we won.
Jason Randall:
That is very well put.
You are certainly a widely respected leader within our organization and within the larger industry that we are thrilled to participate in.
Where can listeners go to follow your work, your thoughts, or to stay connected with you?
Brandon Hartsaw:
I am on LinkedIn. I do not post a lot on social media. That is not my area of expertise. But I welcome everyone to reach out.
I would be glad to connect and swap stories. Just know that if you send me a connection request or a note, I might not see it immediately.
You can also go to the Questco website. We have tons of wonderful information there as an organization.
But to connect with me personally, LinkedIn is probably the best place.
I do have a Facebook page, but I stood it up simply so my children could send me cars when they were in the car-shopping stage. That was the only way I could access Marketplace.
So you can reach out to me on Facebook. There is a real good chance I might not see it for months on end, unless my wife tells me.
Jason Randall:
If nothing else, you are a great hang in person, so people can aspire to that as well.
Thank you, Brandon. I appreciate your thoughts today.
And to you, our audience, thank you for tuning in to this episode of Up In Your Business.
If this conversation helped you understand what a PEO actually does and whether it might fit your business, share it with a leader who has heard the term but never gotten a straight answer.
You can find more resources and more episodes in the show notes, and we’ll see you next time.
