A few days ago I had a phone conversation with a successful broker in Arizona who initially contacted bswift back in 2002, but at the time didn’t feel that his clients were ready for online enrollment. He called to let me know that he just lost a significant case (over 1,000 lives) to a payroll company that also brokered benefits. Why? The payroll company/broker brought an online enrollment solution to the table that was going to help the client reduce costs in its HR department.
Unfortunately, this is not an isolated incident. Payroll service providers have strong relationships in the “C-Suite,” and although using payroll as a bridge to cross-sell employee benefit consulting and brokerage to CEO’s and CFO’s hasn’t been the “slam dunk” many thought it would be a few years back, the tide is quickly turning. Why? Payroll companies have a new weapon: employee benefits technology.
Employee Benefits Technology: The Trojan Warrior Inside?
First Ceridian purchased Sylinq. Then in 2006, ADP purchased Employease. And recently, Paychex acquired Benetrac. This completes the top three payroll service providers’ entry into online benefit administration services for the mid market.
On the surface, these acquisitions may look like just another in a long string of “service line” additions to capture more administrative revenue from existing payroll clients. Look again. Once the payroll company installs a benefits technology system with its clients, it gets a whole lot easier to cross-sell benefits consulting and brokerage to the C-Level based on the “proof” of its employee benefits expertise and its relationship with the client’s HR/benefits staff.
Although most payroll providers today are not openly marketing themselves as benefits brokers, don’t be fooled. Payroll companies are aggressively going after your business - the PEPM on employee benefits compared that of payroll services is too sizeable to be left on the CFO’s table! As Kenneth Hurtt (CLU, RLU), an experienced Michigan broker, put it, “these payroll companies are not my friends. They’re looking at the brokers’ robust commission revenues relative to their own lower administrative fees. I wouldn’t trust them with my clients.”
Of the top three payroll providers, Paychex has been the most active in building its benefits brokerage practice, with the hiring of 95 licensed agents in different markets across the U.S. Other payroll, PEO and HR outsourcing firms, such as CheckPoint HR and ADP’s TotalSource, have been leveraging the payroll entry point for years into a broader relationship with clients, including broker services and commission dollars.
As Industry Radar founder and Employease co-founder John Nail noted in 2006, “ADP’s real focus is just becoming clear on their partnership strategy. They are going into the insurance brokerage business by hiring agents - not acquiring agencies - and leveraging the payroll relationship and services like Employease to get the insurance commissions. They can give away a lot in exchange for the Broker of Record letter and the insurance dollars. They have been in the voluntary benefits area for years competing with brokers but now it is right in their face. Stay tuned on this one it is going to shake up the less than 1,000 employee space a lot.”
The Best Offense is a Good Defense
The “Trojan Horse” payroll service may already be inside your client’s C-Suite, but the good news is that a strong defense can keep them from overtaking your relationship. Not all employee benefits systems are built equally and, perhaps even more importantly, not all service providers actually deliver what they promise. bswift has the technology, the benefits knowledge, and the customer service follow-through needed to successfully defend your client relationships against what are sure to be aggressive cross-selling campaigns. Whether you are looking for a trustworthy partner to refer to your clients or a technology partner that empowers you to deliver exceptional benefit and HR administrative services to your clients, bswift has a relationship model that will work for you.
Free Interactive Webinar
On Friday, November 16th, 2007 at 12:00 PM CST, bswift is hosting a free interactive webinar titled “Defeating the Trojan Horse: Strategies to Beat Payroll Company Competition.” To register click here.
To learn more, contact us at:
e-mail: sales@bswift.com
phone: Toll free at 877-9bswift (877-927-9438)
Author:
Ray Seaver
Senior Vice President, bswift
