20 Years in PEO

In April 1997, I left the U.S. Department of Justice to enter an exciting new world – Professional Employer Organization (PEO) also know as Staff Leasing.  I have never been disappointed.

In 1997, the world of PEO looked very different from today, both in the players but also in the approach to interacting with clients.

Despite the growth of the industry in Texas and Florida, the birth of the PEO industry came about in California.  Initially, the industry was used by doctors to maximize their retirement savings by using “employee leasing” to separate themselves from their employees.  While the IRS forced the industry out of this model, a few companies still exist using this model –  an old employee leasing model if you will.

Twenty years ago the big players were Staff Leasing; Vincam; Administaff; Employee Soltions (ESI); Simplified Employment Services (SES); Team America; TriNet and Employer’s Resource Management.  Only the last two continue to operate under their same names 20 years later.  Vincam was purchased by ADP.  Staff Leasing became Gevity and was ultimately purchased by TriNet.  Administaff became Insperity.  The remaining three went out of business.

Twenty years ago the biggest issue facing the industry was whether the PEO was a “single employer” or a “co-employer.”  Some PEOs of the 90’s made the claim that they were the sole employer and this allowed for advantageous treatment of 401k savings for owners.  Again, the IRS came along and ruled that a PEO must do discrimination testing on a client-by-client basis.  But the view of PEO’s is that it is a co-employment relationship.

The Key to a great PEO relationship continues to be finding one that matches your culture.  Some PEOs are simply a workers compensation play.  Or maybe they simply payroll their client employees.  A full-service PEO will not only provide you with workers compensation, benefits, 401k, an HRIS and more.  But the PEO will provide you with quality Subject Matter Experts to help you grow your business.

In recent years, the IRS has worked with the PEO industry to establish standards.  However, when I am meeting with business owners, I still hear the phrase “employee leasing.”  I think, “Well what does that mean to you, because over the past 20 years that phrase and the whole industry has changed.”

Working with Business Owners for over Thirty Years

Kirk M. Flagg

For the past 20 years, I have been working with business owners helping them solve problems like dramatically rising medical costs under the Affordable Care Act (ACA); streamlining internal processes; preparing for dramatic growth; preparing for pending sale; increasing employee benefits without increasing costs, and many other reasons.  My varied background allows me to help business owners in numerous ways.

  • 2007 to Present, Consultant on PEO industry for business owners
  • 2000 to 2007, COO for PEO division of Kelly Services
  • 1997 to 2000, VP of Human Resources and Compliance for PEO
  • 1987 to 1997, Senior Trial Attorney, U.S. Department of Justice, Civil Rights Division