Fifth Third Offers PEO Services To Small Business
The two companies expect the additional service will offer small business owners some relief from their administrative burdens, as well as give them an opportunity to upgrade their employee benefits.
The target for the new service is the small business with anywhere from 10 to 500 employees. Typically, the most common client for the PEO product is the small business with 100 employees or less, said Axios CEO Dan Barcheski.
A lot of small businesses don’t have a human resource department, so it’s either an officer manager or perhaps the owner who’s dealing with a lot of the employment-related issues and the human resource functions day-to-day.
And the burden of HR work has been growing, thanks to numerous federal mandates regarding employment.
According to Axios, the services of a PEO can help free up an estimated one day a week for many small business owners. “That’s why the model is usually so strong,” Barcheski said.
“If you take a lot of those tasks that they’re accustomed to having to do and remove them from their daily task list, they’re allowed to focus more on the strategy of running their company, dealing with the competition and growing the business.”
Fifth Third began marketing the PEO services on a pilot basis last summer and then to all its West Michigan business customers a few months ago, said Larry Magnesen, director of marketing for Fifth Third, West Michigan.
The services include:
- Enhanced benefits/retirement packages
- Payroll management
- Human resource consultation
- Policy and procedures manuals
- Worker’s compensation risk management.
The Axois-Fifth Third relationship is exclusive in West Michigan, and though it’s not unheard of in the banking industry, it’s still a relatively new concept, Magnesen noted.
The former Old Kent Financial Corp. began looking into potential new products and services for its small business customers two years ago, he said. Through some focus group discussions, small business owners revealed that one of their biggest problems related to staffing and human resource functions. Barcheski was among the business owners who participated.
That revelation was music to Barcheski’s ears because he was beginning to branch off from the staffing business and moving into the PEO area and into providing outsourced human recources for small businesses, Magnesen recalled. At the time, Old Kent had relationships with nearly 40 percent of all the small businesses in Grand Rapids.
Axios, formerly The Staffing Group, was renamed and reconfigured in May into a provider of human and organizational performance services. A PEO serves businesses by becoming its workers’ employer of record.
“It just made sense that we continue talking together,” Barcheski said. “Our organization banks with Fifth Third so that’s an opportunity for them to grow as we grow. It was a way for us to help each other grow our businesses.”
Fifth Third does not share in the revenue Axios generates from selling the services. For Fifth Third, it’s an opportunity to deepen its relationship with small business customers and maybe cultivate some customer loyalty in the process.
Magnesen said the PEO offerings include some Fifth Third products and services, so even though the bank doesn’t share in the PEO revenue per se, when companies sign up for the PEO there are optional pieces available to them, such as offering free checking as an employee benefit.
“We make those things available to Dan and we think we probably end up getting a higher penetration of our own customers for trust and services, because Dan, in essence, becomes an extra sales person for us,” Magnesen remarked.
“The other thing is, if we can help our customers be more successful and elevate some of the headaches they have associated with running their business, we can be a more valuable partner to them. As their business grows they do expansions, take out additional loans, keep higher balances etc.”
The alliance with Fifth Third automatically expands the Axios customer base and gives the company an opportunity to sell some of its other services to clients who might need them.
In addition to its Professional Employer division, which offers the PEO services, Axios has four other divisions: Lean Enterprise, which offers lean manufacturing consulting; Flexforce Strategies, staffing services for manufacturing, entertainment and sports venues; Office Specialists, which provides highly skilled clerical and administrative staff; and Professional Recruitment, which places professionals.
Axios has 1,300 clients and employs more than 25,000 annually.
Since the roll-out, Axios has been securing new business week by week, Barcheski said. The PEO industry typically sees a lot of its business deals close towards late in the calendar year, so he expects the lion’s share of business is ahead in the fourth quarter.
The cost of administrative and human resource services is generally around 3 percent of payroll, but could be more or less depending on the size of the company, the complexity of the issues involved and how much service the company requests of the PEO, Barcheski said.