PEOs grow: as professional employer organizations mature, they're adding more services, larger clients.

• Author: Mayer, Kathy
• Position: Employee Benefits - Co-employers with small client companies growing

As professional employer organizations grow, like adults they're taking on more responsibilities and branching into new areas.

Popularly known as PEOs, professional employer organizations emerged in the mid-1980s as co-employers with small client companies and as suppliers of benefit packages. Today's PEO industry is becoming more of a human-resources outsourcing business, representatives of Indiana PEO companies report. They're now offering traditional co-employment services to a broader and larger-size client base and delivering an array of add-on products, from employee assessment and training to full-service human-resources-department functions.

Many--such as WorkSmart Systems Inc. in Indianapolis, which serves 1,300 white-collar work-site employees--also are finding that business is good in boom and bust times alike.

"As the economy has gone in the tank, our business has really boomed. And we were doing well in the high cycle before the economy started crashing, too," says Matt Thomas, president of WorkSmart, a 10-employee company he founded five years ago. "I think we're kind of recession-proof, because we have two avenues to success," he says.

"In a booming economy, people are willing to go out and spend money for expertise in these areas. In a tightening economy, they look at streamlining, so they outsource some of their infrastructure," he says. "And with the buying power in the group benefits market, we can help them save money on these items as well."

Serving a broader base of employers and companies of greater size is by design, Thomas says. "Most of us have tried to go up-market. That is part of the evolution of the PEG industry."

"The industry is becoming more broadly appealing to a lot of different businesses," agrees Mark Elwood, president of Strategic HR Group Inc. in Columbus. Typical companies range from service to manufacturing industries and include both profit and not-for-profit clients, he notes.

Other than motels and restaurants--which traditionally offer low pay and no benefits--just about every other industry is eyed as a potential PEO client, says Harlan Schafir, president of Professional Staff Management Inc., with offices in Richmond and Garmel. "We have clients in manufacturing, physicians' offices, medical services, CPA firms, information-technology companies and retail."

Historically, the average-size company turning to a PEO would employ about 17 or 18, says Brent Tilson, who owns Tilson HR in Greenwood. In business since 1995 today Tilson employs 20 and brings in $66 million in annual revenues He believes the industry is moving toward serving companies that employ from 100 to 500. And that's not because small clients are growing tc become larger companies.

"We are starting to talk to more and more of those size companies about our services, and those mid-market companies are going to begin to entertain HR outsourcing,"...