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ProsperOps BizOps: Employee benefits for startups

Originally Published July, 2019 · Last Updated December, 2023

Our blog is primarily a vehicle to speak about cloud cost optimization, but occasionally we’ll delve into our experience as a startup. Your mileage may vary, but here is our experience.

The three co-founders of ProsperOps are in our 30s and 40s with young families. Healthcare was one of those items that each of us considered closely as we moved from more established companies with good benefits plans to a startup.

We looked at a couple of different paths to take when getting started:

  • kick the can down the road for a few months by staying with the COBRA from our prior employers
  • get standalone benefits through an insurance broker
  • find a combo payroll and benefits broker
  • package benefits/payroll/HR/compliance with a Professional Employer Organization (PEO)

For context, there is a difference between how insurance brokers and PEOs determine healthcare premiums. An insurance broker would look at our age, gender, and our location to determine the premium. With a PEO, we would be bundled with the other PEO members and receive the buying power of the membership base in determining the premium.

We decided that COBRA was a short term solution that wouldn’t scale as we added team members. After speaking with friends in different startups, we ruled out the insurance broker approach, in favor of something that would, at a minimum, bundle the core benefits and payroll capability.

Our first stop was Gusto who could deliver not only payroll, but was also a benefits broker, but they required four eligible employees for benefits and we were a party of three. We then narrowed down to the PEO path. We found a PEO broker, the Huldisch Group, to help us evaluate the landscape. The PEO broker is compensated by the PEO, so our cost was zero. As part of that process, we looked at TriNet, Insperity, and Justworks. We focused on providers that charged a fixed fee per employee per month versus ones that charged based on a percentage of payroll. The PEO broker process took around two weeks to organize quotes and present the findings.

We ended up selecting Justworks, the technology focused disruptor with a SaaS customer base, online delivery model, and costs lower than the traditional players (Note: we prepaid to further reduce the fixed fee per employee per month). Justworks was a good fit for us because we were looking for a SaaS solution and didn’t need the high-touch HR support that some of the other providers focused on (for a premium). So far, the customer service has been very good. The medical plans (including high-deductible options) and dental/vision plans were priced competitively. Justworks provided 401(k) options (including Roth), but allowed us to bring our own 401(k) provider, Guideline. The onboarding process was fast and we began our payroll and benefits with Justworks at the beginning of the following month.

We are interested to hear the experience of other startups… how did you address benefits



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