Randy Wadle, CEO

Client Profitability  Breaking Down the P&L  Billable Services  Measuring Cost of Service  Client Scorecards

BREAKING DOWN THE P&L

P&L – Gross Revenue Administrative Fees – Target growth industry and geographic sectors Insurance Premium Billed – Play it safe or strong risk management critical? Taxes – Profit center or pass through? Surcharges – Any fees that are not a factor or payroll Cost of Goods Sold Sales & Operating Expense Net Income Net Revenue Gross Margin Net Revenue Gross Margin

Revenue Adjusters Revenue class Strategic for WC or Benefits Referrals Predictability Growth potential Complexity Easy to work with, fair and reasonable – YOU DEFINE BASED ON VALUES Is all Revenue created equal?

Adjuster Multiplier Prioritize the “adjusters” based on company goals Assign positive and negative multipliers to a limited set of scores that will be assigned to clients (1.0 being neutral) – Adjusters and their weights will be different between companies based on values

P&L - COGS Client Payrolls – Pay frequency, off cycle runs, adjustments Insurance Premiums / Losses – Important to benchmark losses/claims against expectations Taxes – Controlling unemployment important for long term profitability Commissions Gross Revenue Sales & Operating Expense Net Income

Containing COGS It All Starts In Underwriting – Set Performance Expectations and Measure Against

The Importance of Underwriting Validating / setting expectations that drive pricing – Expectations for losses, unemployment, visits, complexity, service levels, etc. should be recorded Client & Industry comparison data Risk vs. Reward

Containing COGS It All Starts In Underwriting – Set Performance Expectations and Measure Against Hands On WC Claim Management – Important for Guaranteed Cost and High Deductible Unemployment Management Benefits Reconciliation

Gross Profit per WSE

P&L – Operating Expenses Personnel Costs – Key Metric: WSE per Internal EE Administrative – Rent, insurance, technology, etc. Sales and Marketing Gross Revenue Cost of Goods Sold Net Revenue Gross Margin Net Revenue Gross Margin

Sales & Operating Expenses Client Self Service

Sales & Operating Expenses Client Self Service Efficient and Consistent Processes

Sales & Operating Expenses Client Self Service Efficient and Consistent Processes Analytics Driven Decisions Outsourcing (sales, technology, legal,etc.)

Key Profit Drivers Summary Higher Revenue per WSE – Command higher admin fee, value add services – High wage employees (depending on admin bill method) – Organic client growth Controlling COGS – Risk Management – Unemployment Management – Benefits Reconciliation Controlling Operating Expenses – Client Self Service – Efficiency / process automation – Analytics – Outsourcing

WSE per Internal Employee

Operating Income per WSE

BILLABLE SERVICES

Billable Services Billing for Services – Difficult to track and bill – Included services by Contract Type – Tracking time ClientSpace Steps – Determine Billing Method (time vs incident) – Define Bill Rates and Contract Type Service Levels – Client Statements

Case Type Configuration

Tracking Activity

User Time Management

Client Statements

MEASURING COST OF SERVICE

PEO COST OF SERVICE

Service Delivery Cost Evaluation Service Case Cost Valuation – Time tracking Setup on any dataform Requires discipline Cost Rates by Case Type or Person – Average Cost Cases by Type Other transactions use time tracker

Case Type Configuration

Recording Actual Time

Estimated Effort

Service Delivery Cost Evaluation Visit Cost Valuation – Time Tracking – Travel & Other Costs

Client Visit Costs

Workers’ Compensation Costs Cost of WC Claims – Claim administration – Guaranteed Cost: Cost = Premium Cost + (Actual Incurred Value – (ELR * Premium)) – High Deductible: Cost = Premium Cost + Incurred Value – Safety visits and programs – Software & Technology Certificates of Insurance – Cost per unit

Benefits Benefits Administration – Open enrollment, Qualifying events, Plan management, COBRA administration,Claim advocacy ACA Compliance Benefits Reconciliation – Time consuming process – Cost of billing errors – Liability of missed coverage

Other Servicing Costs Unemployment – Unemployment claim cost, Claim appeals, Paperwork administration, Systems and interfaces FMLA Time reporting systems Systems customization per client

Contract Expectations vs Actual EE Count Gross Payroll Expected Losses Unemployment Claims Complexity Visits

CLIENT SCORECARDS

Client Scorecard

Decision Driver Service Renewals – Facts vs. Emotions – Terminating clients – Adjusting fees – Incorporating a la carte fees or deductible/transaction costs into model Prioritization Team assignments Sales & underwriting bonuses/promotions