Remember when you used to thumb through actual yellow and white pages of a phonebook to find people and services? In this episode, Toby Mathis of Anderson Advisors talks to Fred Lovingier, District Manager for Insperity, a professional employer organization (PEO). Fred has more than 15 years of management, marketing, and sales experience.
- What is a PEO? Outsourcing firm that provides services to small- and medium-sized businesses
- Why work with Insperity? Buying power and outsourcing
- What are the two main reasons why you should consider a PEO? Stabilize high volatility in healthcare costs and employee liability
- What are business owners’ top concerns? Don’t want to deal with other people
- Does Insperity offer employees access to a group health plan at the same price as other big companies? Yes, just like Walmart, Coca-Cola, and UnitedHealthcare
- What about workers’ comp benefits? Workers’ comp is based on a safety rating or mod number addressed as so much per hundred of payroll
- What’s Insperity’s rule of thumb? Vetted company that becomes a client, automatically reduces its current workers’ comp 10%; dangerous fields costs more money
- Whenever a PEO charges or consumes savings, what happens? Buying power is used to create offsets that help make the cost of doing business tolerable
- What if business owners carry health insurance? Most business people know that they’ll get a new rate, typically higher, every year
- What’s typical misconceptions about who’s liable? It’s almost impossible to get a group plan these days; but you can go in combination with a group
- Can people be fired or released? Yes, but they may maintain direction and control of their company and receive onboarding/offboarding assistance
- What’s the magic number or sweet spot for a PEO? Groups between five and 5,000
- How much does it cost? Typically, it’s less than the cost of hiring somebody, but the quality is significantly higher
- What is Insperity’s vision and mission? Give people the support and tools they need to grow and help businesses succeed for communities to prosper
- How long do Insperity’s clients stay? On average, clients stay 6.8 years, which represents an 80–85% renewal rate each year
Fred Simonds’s Office: 10845 Griffith Peak Dr., Suite 500, Las Vegas, NV 89135
Fred Simonds’s Phone: 702-470-1948
Fred Simonds’s Mobile Phone: 702-203-0063
Fred Simonds’s Fax: 866-422-1927
Family and Medical Leave Act (FMLA)
Anderson Advisors Tax and Asset Protection Event
Full Episode Transcript
Toby: Hey, guys. This is Toby Mathis with the Anderson Business Advisors. I have Fred Lovingier here. Fred, welcome.... Read Full Transcript
Fred: Hey, Toby. Thank you for having me.
Toby: Fred is an interesting individual. We’ll get into a little bit of Fred, but his company is really cool. It’s something called PEO. We’re going to go into all that here in a second. Fred, let’s get to know you a little bit. Fred, where did you grow up?
Fred: That’s great. Thank you. I grew up in sunny Portland, Oregon. I grew up there all the way through high school. After that, I was fortunate enough to go to college in Hawaii. I did a couple of years there.
Toby: That’s so not fair. You went to the University of Hawaii on Oahu?
Fred: I was actually on the North Shore, even better. After a couple of years of getting my tan perfected, I ended up finishing up with the University of Oregon so I have a […].
Toby: Oh, my god. You went from the North Shore over to…? Oh, my god.
Fred: Yes, from moss to sand, to back to moss.
Toby: I have to ask you. If you’re in Portland, did you go to Voodoo Doughnuts?
Fred: Oh, all the time.
Toby: Of course, everybody. It’s not fair. Hey, thank you for that. Will you tell us a little bit about your background? How did you end up at a PEO? Probably more importantly for our folks is what the heck is a PEO?
Fred: Sure. I initially started my career here in Las Vegas working at a startup called Yellowpages.com that eventually sold to AT&T. I was able to stay with them for about 13–14 years. They sold that division off to […] I was referred into Insperity and this PEO world. It appealed to me because I’ve owned three businesses myself in the past life so I understand how hard it can be to deal with the people part of your business and the compliance while you’re trying to turn a profit and do your main job.
Toby: I always say you get to work half the time. You just pick which 12 hours of every single day, right?
Fred: Yes. It only takes half a day. A PEO is an outsourcing firm that provides services to small- and medium-sized businesses. In the wake and the wave of outsourcing all over this country, PEO has fallen on that model. We really do just try to come in and help with the people part of the business.
Toby: You’re like an outsourced HR. I say, hey, I don’t want to do my own payroll. I don’t want to deal with doing the paid time off and dealing with the Family and Medical Leave Act. During the COVID issues, the enhanced Family and Medical Leave Act, all these different things. I don’t want to deal with that. I want to worry about doing construction. I want to worry about running my business. I can just give that to you, guys?
Fred: Yes, for a couple of reasons, but you are correct. We have never talked to a construction person per se that got into the business to fill out paperwork and deal with people. We help with that. We have a myriad of benefits that we bring to the table and the reasons why you would want to work with us. But at the end of the day, the buying power of a group and the outsourcing won.
Toby: I think that’s really important to understand. I know PEOs is but my listeners probably don’t know PEOs. Can you give me 3 or 4 of the top 10,000 foot views? What are the big benefits? If I say, “I want you guys to deal with my HR. I don’t want to deal with it,” what are the big benefits that I am getting as the business owner in my pocket or perhaps I’m getting more benefits to my employees?
Fred: The answer is there’s a little bit of both to a business. I’m glad you asked that. The person who comes to us mainly as a business owner has three main concerns. You’ve touched on one of them already. One is I don’t want to deal with other people. I don’t want to deal with the people part of this. I just want to run my business. If I can shovel that off to somebody else to do it for me, my efficiencies go up. I get to do what I’m good at. I have more free time. My company runs better, grows faster, and makes more money. To the employees, typically that buying power which we can get into is when you join a group like us you get the buying power like Costco. We have 100,000 businesses in our group which means we have amazing buying power for benefits, compliance, and things like that.
Toby: Go back over that last number just so they understand how big Insperity is.
Fred: We have 100,000 businesses we help take care of.
Toby: One hundred thousand businesses. Not just employees, but the business.
Fred: Our employees are in the millions. We have 4000 employees that work for Insperity taking care of all these companies, we’re publicly traded on The New York Stock Exchange, our revenues are knocking on $4 billion, and we are currently in 75 cities.
Toby: You’re not just a little company?
Fred: We’re getting there. We’re good. So far so good is what we say.
Toby: I think that for anybody who’s running a small business. If you have less than 10 employees, you pretty much can’t get a group health plan. You’re going to be looking at an off-label or perhaps one of the other exchanges. Not even exchange but the groups where you’re doing that faith-based group that are buying, some things like that, but I’m not going to get like a UnitedHealthcare. But if I go to Insperity, do I get access to some of the big boys and some of these big plans at the same price that other big companies pay versus what they’re going to hit me because I have five employees, or two, or one?
Fred: There are some data benefits there. The answer is yes to all. When you come into our group, you’ll get treated the same as the group. Everybody is treated the same. Speaking of UnitedHealthcare, we are their third-largest customer, which means it’s Walmart, Coca-Cola, and us. If you’re a small business of 10, 12, or 20 employees, you’re going to get the pricing of a Fortune 50 company. You’re going to be coming to the group. You’re going to get that not only with your health insurance benefits. You’re also going to get that with your workers’ comp.
Toby: That’s a big one. Go over that a little bit. I’m a little guy. I start up and I start doing payroll. I’ve always heard about this withholding stuff. You always got to do this federal withholding and then I have this old age, death, and survivors. It’s a set percentage. Some of these things, whether I’m a huge company or a small company they’re the same. But then there’s workman’s comp, there’s unemployment, there’s all this other stuff. That changes, right? That’s based on other factors, isn’t it?
Fred: Correct. Workers’ comp is based on a safety rating or a mod number. It is addressed as so much per hundred of payroll. It’s a direct reflection of payroll. Candidly, the more danger the field is or the worse the track record, the more you will pay. We have a rule of thumb to where we start. Any company we vet that comes on to become a client, we automatically reduce their current workers’ comp 10%. From there, we interview them, look at options, and we can reduce further than that, which represents a small saving to our customer.
Toby: This is what’s interesting. I say that I have experienced PEOs. I’ve actually used them. What I found is that in many cases, including mine, the cost of the PEO—you guys aren’t a non-profit, you got to make a little money on this—was offset. Sometimes we actually came out ahead by the savings of using the group plan as opposed to what we could buy. If we were going to pay $500 per employee extra for health benefits, the cost for workman’s comp and things like that, it would offset the cost of the PEO by getting that number down to 400, for example. Whenever the PEO is charging or was eaten up with that savings and it took a headache away from me, is that still the case? Is that still what happens?
Fred: Yes, that is currently the case. You are correct. We do use our buying power and our strength to create offsets. Offsets help us make the cost of doing business significantly more tolerable. In some cases, we do end up with net savings to the client. In other cases, we come in with a small investment. It just depends on each person where they are in their current situation. The other thing that I will tell you is the offsets continue over a period of time. To give you an idea—I think most business people out there that do carry health insurance know this—every year, they get a new rate. Typically, that’s higher.
Toby: It’s 13% or 14% for the small businesses out there.
Fred: If that’s the case, our 10-year compounded annual increase for our insurance is 3.65%. Even if we are showing it as a small investment and not savings on year one, we definitely represent significant deltas going forward. As those numbers change between our renewal rates and the market renewal rates, we will always beat the street.
Toby: This is the part. If you’re a small employer and you have a handful of employees, you may not even be able to get the group plan. That’s the problem. You can’t get the group plan if you’re not over 10. It’s almost impossible to get a group plan nowadays. I don’t know if you can. Now, I can go in combination with a group. My folks are basically employed by you, guys. Is that what happens?
Fred: To a degree but not really. That’s one of the big misconceptions about a PEO. We come in and we partner with you from an administrative standpoint only. There are times that the employees will be our […]. It’s a legal construct by which we can bring them into our group and offer them all our benefits, but the owners maintain full direction and control of the company. We simply come in to offer administrative relief.
Toby: I’m thinking of this from a legal standpoint. What if that employee sues me? This is a real-life story of a financial planner. He had a reception. He had a downturn in business. He started working in another state. He and his wife were moving. As he downsized his office, he let a gal go who happened to have just gotten pregnant. He didn’t know. If he did know, it was immaterial but she sued him for discrimination in California. It ended up costing about $400,000. Who’s liable into those situations?
Fred: We would be the liable party. You’ve touched already on the two main reasons someone would consider a PEO. One is the high volatility in healthcare costs to stabilize that. The other is employee liability.
Toby: You guys assume that. I imagine that someone just can’t fire somebody. Do they have to go through you guys to release? How does it work?
Fred: They can, actually. They maintain direction and control of their company. They just need to notify us and we will assist them with the onboarding. We take care of COBRA Management, all the compliance. We make sure things are done legally. We offer all the appropriate human resource support, counseling, and documentation to keep everything safe and compliant as you onboard and offboard employees.
Toby: That’s pretty big for the little guys. Have you guys worked in California?
Fred: We’re in all 50 states. Now, we have associations and friends who will take care of people in other countries.
Toby: Oh, wait. You could do other countries too?
Fred: Yeah, through our friends. We have an international PEO. For example, we have a software company with 40 employees, 35 of them are in the United States, a handful is in the Philippines, a couple in China. We take care of everybody in the United States. Our friends and our associates. The international PEO takes care of the rest of them.
Toby: What’s the magic number? I’m assuming that if I’m just a one-person company, I may not be looking at this because I’m not worried about me necessarily. What’s the sweet spot for a PEO?
Fred: For us, we like to stay with groups between 5 and 5000. If you’re in a five-person company, you fit our model well. We will make exceptions down to three employees if we know they’re on the growth mode.
Toby: If you’re somebody that you’re thinking in 2 or 3 years, that’s going to be 10 people?
Fred: Even five or seven. If we know you’re going to get there, we’d love to help you.
Toby: Here’s the burning question then. What does this type of stuff usually cost? Is it super pricey or I may as well hire somebody? What is it going to be?
Fred: Typically, it comes in less than the cost of hiring somebody. Of course, the quality is significantly higher. Our pricing, we’ve worked very hard. I can’t speak to the other PEOs but for us, we work very hard at our transparency to the point where we show you to the penny what everything costs, and we even disclose our markup. As you said, we are for-profit, but if we’re going to come in and bargain for you, we’re going to open up our books to you.
We reflect our fees as a service percentage of payroll or also known as a payroll fringe where usually either a 1%–2% savings or a 1%–3% cost the first year depending on how the financials line up. What we will do is interview a customer, see if they’re interested, go through a full vetting process where they will get the full financial debriefing, and then we can talk about if they want to become a client or not.
Toby: If I had payroll per year, let’s say $1 million, you’re telling me that I would get all the payroll benefits that you guys would handle for somewhere from a negative amount where you’re actually making money versus maybe paying up to $30,000 a year to have you handle all my employees?
Fred: Of course. It’s a case-by-case basis, but that would be a good general rule of thumb. It also depends on your current benefits because again we do those offsets. It depends on how your benefits offering is.
Toby: You might be making more than the actual cost to the customer. If I’m comparing Apples to Apples, if I have to do all the HR, I’m not doing other things. There’s a cost. If I’m in construction, I’ve got 5 employees, and I’m spending 10 hours a week dealing with HR stuff which isn’t ridiculous, I’m having to do everybody’s paycheck, I’m having to do their hours, I have to be read up on all the laws, I got to have my little posters and all that stuff, I got to run the benefits, I got to deal with all the different moving pieces, and I have to deal with my accountant. There’s a cost to that. I’m just no longer going to have to do all that stuff for the most part, right? Do you guys even do the hours or do I have to track all the hours of my people and tell you what they are?
Fred: We’ve been fortunate enough that we have a very good software system for time and attendance. Everything we offer is available through a web-based portal that could be on their phones and also on their laptops. People can punch in and out. We can even do job costing for the construction trades and even work with some unions.
Toby: All right, Fred. I think you and I are going to be talking. The payroll is annoying. I could just tell you from a company that has a few hundred employees or less than a few hundred. We’re between 200 and 300. I have two full-time people. You wouldn’t want to get rid of people. You just want to enable the company to be more efficient so they grow gingerly. If you’re a big company, if you have 100 employees or more, you’re still going to have an HR person in-house, right?
Fred: Sure. We just want to give them the support and tools that they can grow. Toby, our company vision statement and mission statement is we help businesses succeed so communities prosper. We know that when your clients succeed, the schools are better, the streets are better, crime goes down. We want to help everybody win together. If we can come, help with the people part of the business, keep you safe and compliant, and give you some efficiency, we’d love to. On the health benefits, if we can give you those Fortune 50 health benefits that allow you to attract and retain top talent, you’re going to win.
Toby: That’s huge, even as a medium-sized employer. I can tell you, I’ve literally lost people to the casinos because these casinos have a better benefits program that we just can’t touch because we’re not huge. You got 10,000 employees. You get some buying power to force some things. You guys have millions. Do you even know how many millions?
Fred: Last count, I would guess maybe three million.
Toby: That would be […]. I won’t hold you to it. But you’re a capitalist, come on. You’re not just all, ‘Hey, we want to save the world.’ You have to be very focused. I’m going to ask you a capitalist question. How long do your clients stay with you then if you’re adding value to them? Do you have nice, long retention of these people sticking with you year after year?
Fred: The average client stays with us for 6.8 years. That number is not arbitrary. We do have about an 80%–85% renewal rate year over year. Even though we have month-to-month contracts, they do renew year over year. We lose some to M&A. We lose some to venture capitalists. Frankly, we help some people succeed where they can bring out their own HR team or they absorb into another company.
Toby: There’s just attrition. Come on. At least 10% of businesses fail each year. They reject 15%. You’re going to have natural attrition. You’re not losing people. If you have 6.8, you’re keeping people.
Fred: Just a couple of quick facts. The average PEO customer receives a 79% reduction in cost over time. They reduce turnover 10%–14% of their staff and they’re 50% less likely to go out of business. That’s from the National Association of PEOs.
Toby: That last one, 50% less likely to go out of business. It’s devastating lawsuits that sometimes take you out. If you’re getting stretched too thin, that takes you out. It’s being non-competitive with the benefits that take you out. All of a sudden, you can’t compete as you’re growing and you’re losing good people in your businesses, so why not take care of your people? No, I get it 100%. I’m just shocked at some of the numbers that you said. That’s pretty flipping amazing. It doesn’t surprise me that you guys are as big as you are. Obviously, you can’t tell me any names of any big players.
Fred: We have NDAs with all our clients. However, when we vet prospects as a part of the process as we get closer, we will introduce them to our clients. We’ll make the arrangements for them to call them and interview them. We do have social events where our prospects, our clients, and our referral sources get together. We do fun things where they can rub shoulders and get to know them. We do have some transparency but we do have to honor our NDAs as well.
Toby: Do you have names that they would have heard every day? You got some big players?
Fred: Yes, we do have some large national firms.
Toby: That’s what they like to hear. This is a good size. Fred, you’ve been more than generous with your time. Any final thoughts for folks out there especially the ones that are like, I like this Fred guy?
Fred: Anybody who’s interested, we’re able to take care of all 50 states. My office’s service is in the state of Nevada but we also handle all 50 states as well. If there’s anything we could do to help you right now, we know times are interesting and changing. Our job is to be able to help you whether you’re a client or not. If there’s something we could do to help you within our means, we would love to help you. Just reach out. We’d love to support your organization. I’ve got to know Toby for a while now. We’re like-minded. If we philosophically agree, we should be able to help each other. Thank you so much, Toby.
Toby: Literally, his office is maybe three blocks away from our Downtown Summerlin office. You’re in the parking lot of the Golden Knights, that beautiful building right there across from the Red Rock Casino?
Fred: Yes, go Knights.
Toby: Go Knights, yeah. We have some people that are Caps fans. I’ll tell you that. When they were in the finals, I never got harassed so much. I admit so many people watched hockey but I got harassed a little bit. It was sad. Oh, boy. But that was not nearly as painful as San Jose last year. I’ll put up your contact information but if you want to give them a phone number or something if anybody’s interested to reach out to you?
Fred: Sure. Can I just forward that to you? I have a team of salespeople.
Toby: I’ll make it up so that we don’t kill you. We’ll put something on our website too. I’m just going to say this. I’ve worked with PEOs in the past. It should be a value-add and it should be something you can calculate. If anybody knows me, I say calculate, calculate, calculate. Look at it and see what works for you on the dollar side. Fred, if I’m reading you right, there’s going to be time savings for people because they’re no longer responsible for doing all this HR compliance stuff.
Toby: You guys have to look at everything. You guys can do everything for them?
Fred: Everything with the people part. I will tell you, the vetting process is somewhat thorough. You have to have a degree of interest. We have to vet you potentially to join our group. We’d be happy to help with all that but we do go through a lengthy vetting process. It can take anywhere from four weeks to eight weeks to become a client.
Toby: It sounds like it’d be worth it if you get through the vetting process and a business can really benefit. I’m just thinking again, of all those small businesses that are in that ‘no man’s land’ of less than 10 more than 3, you’re literally in a situation where you’re no longer the small mom-and-pop but you’re not the big player either. You’re just underserved and now it sounds like that’s a solution.
If you’re more than 10, you should be pricing it out to see whether you can avoid having to hire a full-time person or if you have a full-time person, you get him a partner to work with. If nothing else, you take the liability off your back. In this day and age, I don’t even know how to put a dollar on that just because I’ve seen it so often now where you look at them wrong and you release them. The next thing you know, they come out with 20 allegations of what you were doing to them before you let them go. It’s nice to not have to worry about those things. I just say that as an aside. Fred, is there anything else you want to throw out there?
Fred: No. We just love to help our whole communities and our communities nationwide. I agree with you completely, Toby. Everybody, do your due diligence, do what makes best for your company, and just please succeed because that’s how our country was built. Thank you for all your entrepreneurialism and your hard work.
Toby: That’s perfect. I have a feeling that some people will be calling you. I hope to be able to work with you closely as we continue to develop this relationship and bring your services to our folks. They understand exactly what these things are and what their options are. A lot of people don’t even realize that there are PEOs out there that could do this. It sounds like you’re the biggest with the most. I’d love to see what kind of benefits that people can get if they meet you. Thanks for your time, Fred. Thanks for joining me.
Fred: Thank you, Toby. I sure appreciate it.