Understanding PEO Pricing

What is included in your PEO Quote?

To fully appreciate the value being offered by any PEO quote, it is important to understand an Employer’s (your) current employment related costs. Every company with employees has financial obligations for certain employer related payroll taxes and employer administrative responsibilities such as:

  • Statutory “Pass-through” Obligations of Being an Employer

    dmDickason’s PEO quote for services will include a price that includes all normal employer-related costs; including the employer’s required contribution to FICA, FUTA and Medicare. These costs are an employer’ s obligation whether you engage dmDickason or not.

  • State Unemployment Taxes (SUTA)

    In every state, (including Texas and New Mexico) employers are required to pay state unemployment taxes. Tax amounts are calculated for each employee based on the actual wages paid to the employee and the past unemployment experience rate of the company. In a PEO / Client co-employment relationship, SUTA is calculated for all employees and paid by dmDickason since we are technically the employer of record with the state.

  • Workers’ Compensation Insurance

    Every state in the United States (except Texas) requires employers to maintain workers’ compensation insurance coverage for their employees. Again, statutory workers’ compensation coverage is a mandatory financial obligation of the employer, and legally this cost cannot be passed on to the employee.

    If your company already has an attractive workers’ compensation modifier / rate, dmDickason can “carve-out” workers’ compensation coverage from your quote. This will allow the employer to use dmDickason’s other valuable HR / payroll / risk management services, and retain workers’ compensation under your current policy.

  • Group Employee Health and Supplemental Insurance (Completely Optional)

    If your RFP (Request for Proposal) included a request on quotes for Health insurance coverage or supplemental benefits for your employees, your insurance quote will be separate and not included as part of dmDickason’s PEO quote.

  • PEO Administrative Services

    Administrative fees are charged by dmDickason to cover the cost of the Administrative Services we provide your company. These fees include payroll processing, unemployment claims handling, workers’ compensation claims administration and many other human resources services.

    The Small Business Administration reports that the business Owner or Manager spends roughly 7% to 25% of his / her time just handling employee related paperwork. According to the study in 1995, the average cost per employee, per year, for companies employing less than 500 employees is $5,000. The study included the “hidden costs” of federally mandated paperwork and tax reporting requirements, as well as the time your staff spends managing paperwork and handling routine administrative duties.

    Add it up – the “business of human resources / employment” can become very expensive, very quickly! dmDickason’s economy of scale, however, enables each client to lower employment costs and increase the business’s bottom line. By relying on dmDickason Staff Leasing Company, our clients can maintain a simple in-house Human Resource infrastructure or, none at all. They can immediately reduce staff hiring, payroll, benefits and overhead by not having to employ a management-level Human Resource Manager, Risk / Safety Manager, Payroll Manager or Unemployment Claims Coordinator (not to mention additional support staff & overhead to support them).

    Instead, the professionals at dmDickason Staff Leasing Company can provide small to large sized companies with integrated cost-effective solutions to effectively and productively manage their employees and routine paperwork. Services range from consulting to a broad range of outsourcing of the client’s HR department where dmDickason can assume major employer responsibilities and many select risks.

    Outsourcing many of the responsibilities (outlined below) to dmDickason enables our clients to regain focus on their core competencies, ultimately increasing value and competitiveness, lowering risk and overhead and ultimately raising profit potential for our client.

    dmDickason Administrative services include: Please click on choice to review.

    Human Resources Administration
    Unemployment Claims Management
    Payroll / Accounting / Tax Administration
    Workers’ Compensation Claims Administration
    Safety / Risk Management Services
    Assistance with Employee Benefits Coordination

  • Requested “A la Carte” or Enhanced Services

    Enhanced “unbundled” services like Applicant background checks, drug tests, EEO investigations, employee counseling sessions, etc., may be charged on a “per use” basis. Pricing for each will be included in your quote. Please ask your dmDickason representative for a list of those services that are not provided in our standard quote.

  • Packaged / Bundled Services

    Price quotes for dmDickason Staff Leasing (PEO) Services will generally have most services offered into one “bundled” rate. For those companies not interested in purchasing individually priced “a la carte” services, dmDickason also offers “Silver”, “Gold” and “ Platinum” level “bundled” programs of integrated services as part of the quote. If you have questions understanding dmDickason’s quote, or if a specific service (optional / enhanced) is provided in your quote, please do not hesitate to ask.

Statutory “Pass-through” Costs of an Employer

dmDickason’s quote will normally include our payroll services as part of our standard quote. Included in your quote for payroll services are statutory, payroll-related, pass-through costs that cover employer obligations such as FICA, Medicare and FUTA taxes. These costs are your company’s obligation, whether you engage dmDickason or not.

  • Federal Insurance Contributions Act (FICA): As an Employer, you are required to withhold social security taxes from the employee. It is also your obligation to match this amount as the Employer’s contribution. FICA amounts are billed (to the client) at 6.2% of wages up to a cap of $97,500 (2007) per employee. Your pass-through amount will be for only the actual amount of the employer’s requirement of FICA. This amount will be collected from the employer and remitted to the government by dmDickason.
  • Medicare: As with FICA, Medicare is a pass-through employer obligation, billed at 1.45% to both the employee and employer. Medicare, however, is not capped, and the tax amount is charged to all employee wages. Just like FICA, Medicare will be collected from the employer and remitted to the government by dmDickason.
  • Federal Unemployment Tax (FUTA): Your PEO quote will also include a pass-through charge for your company’s obligation for Federal Unemployment Taxes. This amount represents .008 or .8%. dmDickason is responsible for collecting and depositing the FUTA payments and filing the government Form 940.

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State Unemployment Tax (SUTA)

In every US state, employers are required to pay state unemployment taxes. These taxes are charged to employers, not to employees. Actual tax amounts are calculated on a percentage of the gross wages paid to the employee, and are based on the unemployment experience rate of each individual company. For new businesses in Texas and New Mexico, a default rate of 2.7% (of the employees’ wages) is established until a new business has developed their own unemployment experience rating. A maximum tax rate of 5.40% can be charged New Mexico employers, and a maximum tax rate of 6.47% can be charged Texas employers who experience an uncontrolled turnover of employees.

In a PEO co-employment relationship, SUTA is calculated and paid by dmDickason, on its tax number, since we are technically the employer of record with your state. This alleviates employers from the time-consuming and complex task (and penalties) of calculating and reporting SUTA. Just like the tax obligations above, dmDickason is responsible for collecting, paying and reporting employer contributions, quarterly, on government Form 941.

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Workers’ Compensation Insurance

Virtually every state in the USA (except Texas) requires employers to maintain Workers’ Compensation Insurance for their employees. This insurance coverage is a cost of the employer and is illegal to charge employees for the coverage.

dmDickason’s quote will include Workers’ Compensation coverage for all employers (including Texas). dmDickason’s quote will reflect workers’ compensation rates based on the risk associated with the actual type of work being performed. Coverage (rates) for high risk work, like construction, is obviously more expensive than coverage for office workers, since these jobs are more prone to accidents.

dmDickason’s quote will reflect different rates for each workers’ compensation classification code, based on a standardized list published by NCCI that specifically describes the type of work associated with each workers’ compensation classification. Workers’ compensation insurance charges are usually based on an amount per $100 of payroll (wages). For example, a $10.98 workers’ compensation rate will be charged for each $100 of payroll in that classification. As you may expect, workers’ compensation rates can dramatically climb based on the employers experience rate, which is generally calculated by both the severity and frequency of workers’ compensation claims paid over the previous 3-5 year history.

One of the advantages of working with dmDickason is that workers’ compensation costs are “pay as you go”, and the total estimated annualized workers’ compensation premium for your company will not require a 20% (or more) deposit to initiate coverage. When using dmDickason, there are no up-front deposits required to secure coverage. Workers’ compensation coverage is a part of our program.

Workers’ Compensation Loss History (Loss Runs): Information about your history of claims will be required by dmDickason in order to obtain a quote from our insurance underwriters. If you have a traditional workers’ compensation policy in place, the policy’s declarations page (DEC page) will identify your current annual costs, and should identify any discounts you may be receiving. Claims information should be readily available to you from your current insurance broker or agent. In most states, the insurance carrier is required to provide this information to you upon your request, reasonably made.

Carving-Out workers’ compensation: If your company already has an attractive workers’ compensation modifier / rate, dmDickason can “carve-out” workers’ compensation coverage from your quote. This will allow the employer to use dmDickason’s other valuable HR / payroll / risk management services, and retain workers’ compensation under your current policy.        

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Health Insurance and Employee Benefits     

Utilizing health insurance through a dmDickason health insurance provider is completely optional. dmDickason clients do not have to purchase or provide employee group health insurance and/or benefits if they do not choose to do so. However, if you want to offer health insurance to your employees, dmDickason will assist you in obtaining health insurance coverage, or, we will be happy to assist in the coordination of plan benefits* you may already have in place.

A proper analysis of the cost of employee health benefits starts with a review of your group. A document called a benefits “census” is commonly required to identify the age, gender and level requirements (employee only, employee and spouse, employee and family) of each person in the group.

In general, most insurance providers want to see at least 75% of the employees eligible in your group interested in enrolling in the plan. Having this level of participation is often required to prevent what is called “adverse selection”, where only the persons with health issues or high plan usage normally enroll.

Your company’s contribution

Most companies want to make group health insurance a part of their employee benefits package. As an employer, you will need to decide the amount of contribution your company will make to subsidize the employee’s monthly insurance premium. For example, many companies pay 100% of the employee only premium and 50% of the difference between the cost of insurance for the employee and spouse. Other dmDickason clients pay as little as 50% for the employee only premium and the employee is fully responsible for family or spouse coverage. Regardless, companies with lower contribution rates often find low participation in their plans, Obviously, establishing a higher contribution from your company normally translates into a higher participation; and in turn, sometimes provides your group with better plan alternatives and pricing.

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