Administaff disappoints

By | November 18, 2008

A little less than a year ago, my employer, Tamale Software (since acquired by Advent Software, in what I would happily classify as the fourth successful acquisition of the five in which I’ve been involved), decided to outsource its human resources function to the Professional Employer Organization (PEO) Administaff (note: Tamale used Administaff, but Advent doesn’t, so I am no longer a current client of Administaff).

Administaff uses a “co-employment” model, wherein the employees of Administaff’s clients become employees of Administaff as well, and Administaff handles health insurance, payroll, recruiting, performance management, etc.  Administaff clients don’t necessarily use all of Administaff’s services; it’s a menu from which they choose what they want.  The biggest reason for a company to use Administaff is probably to reduce the cost of health insurance.  Administaff can bargain with the insurance industry for lower rates than a small or medium-sized business can on its own, since they have a far larger employee pool.

Tamale has always had awesome benefits, including great health insurance with 100% of the premiums paid by the company.  But the company and its employees got a little older and more mature (read “got married and/or started having babies;” I must confess that I’m a major contributor to this!), and at the same time the cost of health insurance skyrocketed across the board.  It’s therefore not surprising that Tamale went looking for a way to reduce its costs, and perhaps switching to Administaff was a necessary evil.

Nonetheless, from the point of view of the employees, it was not a positive change.  We went from having all of our HR needs seen to directly by an extremely competent, friendly Tamale employee in our office, to dealing over the phone or internet with nameless, faceless Administaff employees cut out of the “barely adequate customer service representative” mold.

Of course, the Administaff sales people sang the praises of their service team and spoke glowingly about how painless the transition would be.  I’m sure it will come as no surprise that the reality did not live up to the hype.  There were problems from the start, and the problems continued throughout our time with Administaff.  A few examples:

  1. When we filled out the HMO enrolment paperwork, we were given the option of specifying primary care physicians (PCPs) on the forms and told that they would be entered into the system with our initial enrolment.  Many of us took the time to look up PCP ID numbers and include them on the form.  Administaff did not bother to enter anyone’s PCPs into the system.
  2. When our HR manager contacted Administaff about the fact that they had completely ignored everyone’s PCP designations, rather than immediately admitting the error and agreeing to rectify it, they told her that we would all have to call the insurance company directly to take care of it.  Needless to say, she pushed back until they agreed to solve the problem.
  3. With their commuter pass program, it was impossible to know from one month to the next which paycheck the cost of the pass would be deducted from.  Some months it was the first paycheck, some months it was the second, and some months they completely forgot and had to deduct from both paychecks in the following month.
  4. They charge a $2 fee per month for the commuter pass program.  No employer I have ever worked for in my entire life has charged a fee for participating in a commuter program.
  5. One month they simply failed to process the commuter passes on time, and we didn’t get them until after the beginning of the next month.  We received a letter notifying us that our passes were going to be late and instructing us to buy “day passes” for the intervening days (what about people who live out in yachupitzville where nobody sells T passes?) and then to send in a form to be reimbursed for them.  Wow, what a great time-saver!
  6. It sometimes took Administaff as long as a week and a half to deposit 401k money withheld from paychecks into people’s 401k accounts.  Yes, that means that Administaff was making money off of the float in the interim.
  7. When we terminated our relationship with Administaff after the acquisition, I applied to have my Health-care Flexible Spending Account (FSA) continue under COBRA, because there was a lot of money remaining in the account and I needed more time to spend it.  Two weeks after sending the premium check to Administaff to continue the FSA coverage, the check still hadn’t been cashed and the FSA provider still had my account marked closed and therefore was refusing to accept new claims.

Everybody makes mistakes, and occasional mistakes can and should be forgiven.  But when there’s a pattern of mistakes, as in the odd-numbered items above, that a sign not only of a lack of quality, but of not caring about quality.  And as for the even-numbered items above, they represent much more than simple mistakes; they represent conscious decisions that are detrimental to the customer.

I did a little research about Administaff and discovered that in addition to the “little” problems (not so little, really!) described above, they’ve had their share of Big Problems as well:

  1. In October 2007, an Administaff laptop containing unecrypted personal data on 159,000 current and former employees managed by Administaff was stolen.  Adam Breindel has a great takeon just what this incident says about Administaff (and it isn’t good).
  2. Back in 2003, Administaff attempted to intimidate people out of saying negative things on their Yahoo! Finance message board by suing Yahoo! and demanding that they reveal the identities of the people making the comments.  More information at The Center for Internet and Society at Stanford.

I understand that small and medium-sized businesses face incredible pressure to lower costs any way they can, and for some of them, going with a PEO like Administaff might be inevitable.  But I urge any business considering such a move to evaluate carefully the impact on employee morale and the time employees will waste dealing problems like the ones described above, and I urge such businesses to evaluate not merely cost, but also quality of service when choosing which PEO to utilize.

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16 thoughts on “Administaff disappoints

  1. Howard K

    Insperity (fka Administaff) has been for the last 3-4 years a nightmare to work with. I used them to handle HR/payroll/benefits for two of my companies. They are a firm that seems to be run by lawyers and have no concern other than to protect themselves from liability at the expense of their partners and clients. I do not have the time or space to list all the simply moronic, thick-headed, narrow-minded, and selfish things they have done. Their employees are rude and uncooperative. I operated my company in spite of them, not because of them. They are not in the business of providing HR services. They are in the business of collecting money from their partners/clients and protecting themselves from liability. I finally had enough and pulled the plug on them, and am now bringing all HR functions in house. Best decision I ever made.

    I think they changed their name to escape their well-earned but bad reputation. Whether they call themselves Insperity or Administaff or something else, look for other options before using them.

  2. James

    I can sympathize w/ all the Administaff frustration stated herein. I was recently laid off by my company of 5 yrs. as a result of “corporate restructuring” (which is code for having “no good reason but need space to hire a relative”). About a year and a half ago this former employer decided to contract w/ Administaff to limit liability and overhead. I was weary of the whole deal at the time, but at the behest of my employer I had little choice but to accept Administaff as my new “Co-Employer” (official Administaff terminology which wreaks of shady legal term). Anyway, things were never great w/ Administaff but nothing bad enough to where I felt I had to shout from the rooftops. Well, now that things have gone from bad to worse, Im pissed off. Administaff has done nothing but convolute an already difficult situation through this separation. They cause confusion and frustration to the point where most people just give up. I can go on about how they’re attempting to screw me out of $25k in unpaid wages, but I’ll save that for another time. What’s worse is how they manage their COBRA benefits. Federal law states that I’m entitled to continue my existing healthcare coverage with UHC (another shiite company) through my former employers group plan and benefit from their discounted group rate (not to exceed 102% of employers cost). Well, after I received the COBRA paperwork (a week after my benefits were expired with my wife and my prescription meds already running low) I was a little taken aback. First off, I was not given the COBRA paperwork until after my severance and benefits had expired. What’s more, administaff is gouging us for over $1100/mos. for the same healthcare coverage that I know for a fact my employer was paying less than $500 for. This seemed absurd and illegal, but after speaking with Administaff it appears to only be bending the law. What they’ve done is structure and catagorize their cobra plan to combat the negative impacts they suffered in 08/09. “The $1100/ mos cost is 102% of Administaff’s cost to insure COBRA beneficiaries and is catagorized seperately from the rest of the group plan members. Keep in mind that this is only for myself and my spouse and we’re both healthy young adults, and are primarily paying these ransom insurance rates as a precaution. The reason for Administaff gouging the COBRA benefiicaries is insurance companies raise their group rates as COBRA to Employee beneficiary ratio goes up. So, the group rate for the +/- 100,000 employees managed by Administaff is x including up to 5% being part of a Cobra program, but should they incur major layoffs (i.e. recession) and the percentage go up to 7% or 10% or … The rates for the entire group go up incrementally. So with unemployment rates over 9 or 10%, Administaff’s overhead increased significantly. When they attempted to pass this along to their “Client Companies” (like my former employer) they saw some of their biggest accounts leave. Administaff’s answer to all this appears to be a loose interpretation/manipulation of the law which benefits their bottom line and limits the pass through costs to their clients (the client companies who pay for their services). They really do not care about the employees of these companies, current or former, so long as the client companies aren’t upset by it. The result of this maneuver Administaff can offer Client Companies a competitive rate, Administaff maintains profitable growth and poor bastards like me have to foot the bill with what little we have saved by passing along the entire burden of marginal percentage cost increase across tens of thousands of members. Me thinks there’s some shady accounting maneuvers happening here. SEC auditors wont look for this as the money is there and is “willingly” being paid. After all, if I’m paying that much for insurance while Im unemployed there’s little likelihood that I’m going to have the time or resources to pursue legal action.
    Anyway, sorry to get political, but Administaff is just another cog in the powerhouse insurance industry wheel. A wheel which has churned out the most profitable industries in the past century. They’re not going to let Obamacare or any other legislative measure compromise this. The insurance industry is too heavily invested and engrained in the US economy to just roll over and let their money well run dry. Insurance conglomerates will always find a way to “bend” the laws. The only way to combat the conglomerate insurance industry monopoly is through a free market. Legislation only makes it difficult for new companies to start, the giants have thousands of lawyers on staff just waiting for new laws that they can manipulate into killing their competition.

    1. James

      I forgot to mention, they take their sweet ass time processing the check and reinstating benefits for COBRA beneficiaries. Meanwhile, I cant get my meds refilled or go to the DR. because UHC says my policy is cancelled. Payment is due 1st of the month and if it hasn’t been processed (cashed) by Administaff (3-5 days) and paid to UHC (2-3 days) before the 1st then they place your Health Insurance on hold. They say to pay out of pocket and I can submit to the insurer for reimbursement once benefits are reinstated but thats a whole other nightmare (6-8 wks) for reimbursement after the deny your claim and make you fill out extraneous appellate paperwork explaining when, where and why you skinned your knee.
      So, Adminisatan now has $2300 of my $ for 2 mos of Cobra health insurance which has yet to be active for even a single day.

  3. about to be let go

    has anyone tried to file a UI claim after being let go? Was it a fight? Thanks!

    1. James

      They didnt dispute UI claim, but I was legitimately laid off (not fired). It probably depends on what your employer instructs Administaff to do. Good Luck!

  4. bill

    the mega PEOs often have the issue of being “impersonal” and not handling customer service as important. my way of saying it is that it is like dealing with the post office or a govt agency. that is why the PEO i invested in is taking a different approach. like it is “less efficient”, but we really do stress customer service and low internal employee turnover.

  5. Chris Poole

    If you are an employer and would like to find a more qualified business model that works for you, I can help. Let us provide you with an RFP.

  6. PEOSPectrum

    Disgruntled ASF clients, you’re not alone in your concerns. Don’t let their bad practices put a bad taste in your mouth for the entire industry. At PEO Spectrum, we’ve literally helped dozens of Administaff clients find other PEOs that do deliver on their services, and if you’re interested, we would gladly put you in touch with them. Check out our website at Also, check out the latest ASF concern

  7. TT

    I have so much bad experience with Administaff that I hate that company. Frequent errors with their pay accounting and constant issues with benefits. They even send a lot of e-mail spams to promote their money-making, they call, Administaff benefits. Lately (12/31/2009), they failed to deposit employee pay to banks which caused so much inconvenience to their customers. A lot of employees were on holiday vacation during that period.
    Direct deposit is something that should never fail. Administaff is incompetent and I hope that my employer get rid of them.

  8. CP

    Administaff has been a complete disappointment. They make one “error” after another after another…..I really do not want to deal with them for 401K, healthcare, etc.

    There comes a time when there are too many mistakes, which are very suspicious, and one starts to think that they are terribly inadequate/incompetent or they are deliberately deceitful.

  9. latecomer

    A friend of mine has Administaff in their company and explained that the representative that was in charge of their account had left due to stress. This was not the first that I had heard of that kind of situation with them. Employees are over worked, pressured and some claim ‘brainwashed’ into thinking that without Administaff their lives will deteriorate. I think that the problems which you are experiencing are because the company has a bad internal culture. The articles say that it is a good place to work but if you talk to people that have left the company, it is a completely different story.

  10. Pingback: The Human Resource » Disappointed by your PEO or Employee Leasing Company?

  11. Mark

    If you are a “co-employee” of Administaff and work on computers please contact my attorney to discuss a case we have against them regarding overtime pay. They have employees classified as salary-exempt when they are supposed to be non exempt and payed overtime. The email address is

  12. Seth Gordon

    I think my problems with the commuter pass were more likely the fault of the MBTA than with Wageworks (the folks running the pass program on behalf of Administaff on behalf of my “real” employer). I haven’t had any problem with them for a while.

  13. Jen

    Yeah, what Seth said. And I have to say absolutely, absolutely stay away from the UHC FSA option. And Seth’s had all manner of problems with his commuter pass stuff –though reimbursements do come promptly– causing him to spend a fair amount of time on the phone to get that dealt with. And we were among those who received a letter about the stolen laptop. There was something they were supposed to do to ensure we’d be ok on the id theft possibility, but I don’t remember them doing it.

  14. Seth Gordon

    My employer also uses Adminstaff. If the chief reason small businesses go through Administaff is to save money on health insurance, then health insurance reform can’t be passed soon enough.

    UnitedHealthcare, the company managing the Administaff FSA, seemed to automatically reject half of all the claims that we sent in for some spurious reason. We finally decided that we would rather pay tax on our out-of-pocket medical expenses than spend the time and postage arguing with each denial.


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