Sector Portrait: Professional Employer Organizations
PEO Trends: Consolidation, New Markets
Florida is one of the strongest markets for PEOs, which still see a lot of potential for growth statewide.
Richard McKenzie Jr.
Co-owner - Administrative Concepts / Mckenzie joint venture
McKenzie bought the 60-year-old business from his father in 1979. Two years ago, he formed a joint venture with Administrative Concepts, the southwest Florida-based professional employer organization that his company uses. "I saw how well it works for me," he says.
McKenzie has helped Administrative Concepts, which had focused on white-collar businesses, tailor its services to the needs of the agriculture industry, from small family-owned farms to conglomerates. The joint venture has potential. Agriculture is Florida's second-largest industry with an estimated payroll of $80 million to $100 million. "Controlling costs is one advantage, but most of us in this industry want to pick up the phone and call someone who is knowledgeable on the latest issues with workers' comp or workplace safety regulations," McKenzie says. "That's the reason for using a PEO."
CEO - AlphaStaff Group
[Photo: Andrew Duany]
While most PEOs sell their services directly to businesses, AlphaStaff is the only PEO that distributes its services exclusively through insurance agents, just as Selective had done. The advantage, Gibson says, is a dedicated sales force, while the benefit to the insurance agents is commissions.
Gibson says new federal regulations such as the Hire Act and healthcare reform have made outsourcing HR functions more alluring. Small and medium businesses under intense price and regulatory pressure are leveraging his PEO's expertise and scale to proactively manage HR issues, he says. For example, he notes: "We engaged a company to design a healthcare strategy for our clients in relation to healthcare reform. That's an investment small businesses couldn't make on their own."
The last two years have been especially good for AlphaStaff. The number of worksite employees it manages has doubled to about 70,000, Gibson says, adding, "The acquisition represents only about 20% of that growth."
» Last page: Chart of PEOs in Florida.