How the US Healthcare Legislation Impacts the PEO Industry
Everybody is buzzing about the historic passing of the Obama Healthca
re reform in the United States. Whether a Republican or a Democrat, you will agree that this new US healthcare legislation will go down as a historic event for many reasons.
Many individuals, companies and industries will be impacted by this new legislation. One that we would like to look at are the possible implications to the Professional Employment Organization (PEO) Industry.
The PEO companies provide services used by small and medium sized businesses (SMB) to outsource their payroll and human resources administrative departments. PEO's are also used by large corporations to provide an outsourced form of management for independent contractor and other various recruitment activities.
The Negative
One of the biggest markets that the PEOs provide services to is the SMB Market. Many companies have utilized the PEO industry to gain greater buying power for various employee benefits and outsource the various HR "Administrivia" that SMB's don't have the time or resources to focus on.
However, now that the SMB market may have access to a healthcare alternative for their employees, or now even get a tax benefit for offering there own benefits, the PEO industry may find itself losing a large part of their market share to the National Healthcare Option. One need only to look at the PEO market in our Northern neighbor, Canada. The demographics on the PEO industry are a fraction, on a prorated basis, of the industry here in the US.
Canadian Small and Mid Size businesses do not have to rely on PEO's due to the National Healthcare system currently in place. There has been growth in the larger client size deals for the Canadian PEO Industry but, like in the US, this has primarily been to mitigate risk and improve the management of large independent contractor populations.
The Positive
With the National Healthcare option, there have been studies alleging that many full time workers will leave their corporate jobs to pursue more independent type of positions now that an alternative option is available. This may cause a larger growth in the ranks of independent contractors working in the market driving organizations to pursue the use of PEO organizations, as in Canada, to mitigate tax and co-employment risks by the centralization of these resources managed by a third party.
While definitely still to soon to tell and with many more aspects of the legislation and the PEO industry to consider, we will continue to welcome your insights and options and continue to report on this industry changing movement.
Please share your views with us. Also, take a moment to complete our Risk/Reward assessment and let us help you determine what opportunities for savings and/or potential risks you might have.