Dr. Cargo’s practice team at the practice’s family picnic day. Dr. Cargo says that a professional employment organization can dramatically improve what you can do for your employees.
An option you may not have considered to address HR challenges.
By Jonathan Cargo, OD
April 3, 2024
When I started my practice more than 15 years ago, I wanted to not only create a company that was an exceptional provider of eyecare products and services, but also an exceptional place to come to work every day for everyone on our team.
We focused our efforts on building an awesome office culture and developing our team to their highest potential through cross training and para-optometric certifications. However, as our business grew and attracted new team members, managing our human resources (HR) responsibilities became more complex.
Accommodating a Growing Team
Early in the lifecycle of our practice we started with 3-4 employees and managed the limited amount of HR responsibilities internally. This would commonly include collecting proper tax documents during on-boarding, payroll services and W-2 creation. We wanted to take care of our team, and made it a priority to also seek and pay for health insurance for them. It was challenging to find group coverage for a small office.
The employment market has changed dramatically over the last several years. Employees are looking for more benefits from their employers. We found that if we wanted to attract and retain high-quality talent, we needed to be able to offer something as good or better than any other organization competing for our current or future team members.
Our team has now grown to two providers and more than 12 full-time team members. Managing their HR needs internally was becoming more difficult. Also, it was sometimes awkward for our team members to ask sensitive HR questions of their boss.
Opting to Use a Professional Employment Organization
Several years ago, our payroll processor, ADP, offered us access to their professional employment organization (PEO), ADP Total Source.
Editor’s Note: There are other providers who offer similar services to ADP, such as Paychex, Paycor, Dayforce and Paylocity, among many others.
A PEO is an outsourcing company that provides support to small and medium businesses. It typically includes payroll processing, worker’s compensation insurance, health benefits, retirement vehicles and other HR consulting services.
Volume-Based Advantages of PEOs
Our PEO represents hundreds of businesses, and currently manages more than 1 million lives. The size of the group allows the PEO to negotiate the best pricing for health insurance and other benefits. It also allows them to scale up features not usually afforded to smaller businesses such as mobile applications for their HR benefits including tax documents, 401K and health and dental plans.
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When you join a PEO you outsource your entire HR department to them, and all employees are essentially employees of the PEO including the owners. This transfers employment liability to the PEO.
As part of our alignment with the PEO we had to undergo a compliance review and build an customized office policy manual that is updated annually to meet regulatory requirements and reflect the culture and philosophy of our company. We are also required to fully document the on-boarding and exit process for employees through the PEO website.
Because some PEOs, like ours, also provide the worker’s compensation package, certain industries may need an onsite risk assessment for workplace hazards and OSHA compliance, however because optometry is a low workplace risk, this wasn’t necessary for my office.
An Array of Employee Benefit Options
There are numerous options on the level of benefits you can offer your team within the PEO. Each year I review our offerings with our HR representative and they compare us to the marketplace to see how competitive we are.
Currently, we offer a high deductible plan to our team and a health savings account card. We preload $300 on their HSA card so that it covers 1-2 office visits. Employees can choose to add additional funds to the HSA through payroll deductions.
Our office covers a fixed amount, usually around $400 per month, of an employees health insurance costs. This usually requires that they pay about $50 per month on their own. I want them to have buy-in so that its not an entitlement. They can add additional family members to their plan, but the added premium expense would be their responsibility. We also provide a dental plan, long-term disability and a $100,000 life insurance plan for all of our team members.
I view our 401K as the most valuable benefit we offer. All of our team members who are 21 and older, and work more than 1,000 hours in a 12-month period, are eligible. We’re a safe harbor plan which means that we’ll match dollar for dollar up to 3 percent of their paycheck and 50 cents on the dollar up to 4-5 percent of their paycheck.
That means if the employee withholds 5 percent of their paycheck, our company contributes 4 percent of that employee’s paycheck into the account. The plan also allows the employee to pick a Roth 401K (Highly recommended for anyone younger than 60 years old) or traditional 401K. They can also choose from a tremendous number of investment vehicle options.
As I onboard a new team member, I show them the path to millionaire status with our 401K, and it creates real excitement. We now offer a benefit package that rivals any other large corporation in our area.
Dedicated HR Specialists
Our PEO provides me with a dedicated human resources specialist, which helps me plan for the year, but also helps me navigate challenging staffing issues. This was a huge support during the COVID shutdown, but also just as important as we went back to work. They were instrumental in providing me with the resources I needed to inform my staff what the procedures would be and how it would affect each team member.
Recently, we had a problem with full-time team members requesting to take more time off time than we allotted them. They would choose to take unpaid time off making it difficult for us to continue to operate the office at full production.
Our policy manual didn’t directly address this issue. My PEO HR representative analyzed our situation compared it to industry norms across the healthcare industry and helped us build and implement a policy that put restrictions and set expectations on absenteeism, and if needed, the disciplinary plan to enforce the policy.
It wasn’t that our team was initially trying to hurt the business; we just didn’t set the expectations, so each time was a new decision. Now, that we’ve set the policy, we’ve had much lower absenteeism and have grown our business by being better staffed!
Resource for Asking Sensitive Questions
Using a PEO also created a resource that our team members can use to ask sensitive questions without concerns that it may affect their relationship with their employer.
Our PEO also offers an employee assistance program that provides confidential services for those who need help managing personal difficulties or life challenges. This could include marital or family problems, legal issues, financial stress and more. The goal of this program is to improve the health and wellness of the employee so they can have better productivity, provide better customer service and be more engaged in their work.
Cost: Why PEO ISN’T Necessarily a Good Fit for Every Practice
A PEO isn’t for everyone because there are costs to provide this level of benefit. The fees the PEO charges to provide its services are a percentage of your payroll. This averages about $20,000 annually for our practice.
In addition to the service fees, I have the costs associated with the employer contributions to the health insurance plans and 401K contributions. However, since the insurance is purchased for a large group, we get much better rates than what I could achieve independently. I think the time to consider a PEO is when your payroll is larger than 10 people.
ROI: Attract & Retain Talent with Better Benefits
My decision to offer a PEO isn’t only altruistic. I did it to benefit myself! Both my wife and I work for our office, and we’re both able to contribute maximally to our Roth 401K, which is $23,000 this year, and our company matches $10,000 of this amount in the traditional 401K. We also max out our HSA contributions, which allows us to add about another $10,000 tax-free saving.
Within the HSA, once you have more than $3,000 in the account, our plan allows you to invest the capital in mutual funds. I follow Adam Cmejla’s podcast, 20/20 money, and these steps are a rock-solid foundation for wealth building. We also have a large family (six kids), so having really good health and dental plans was also very important to us.
I find that we attract and retain higher quality team members because of our employment benefits, and I feel like we are taking better care of them. We’re in healthcare and our staff interacts with our patient benefits and see what other organizations offer. It makes sense that we should also provide them with access to the same level of care that we provide within our own office.
I’m a firm believer that it’s the right thing to do, and not an optional expense. Take care of your team and their families, and it will pay dividends.
Jonathan Cargo, OD, is the owner of Cargo Eye Care, a Vision Source practice in Irving, Texas. To contact him: drcargo@cargoeyecare.com
