Category Archives: General

How many HR Professionals does it take to change a light bulb? Less with PEO or BPO or ASO.

We all know the old jokes about <insert profession here>.  Lawyers, doctors, politicians and yes, HR professionals.  Which leads me to the greater question:  How many HR professionals does a company need on staff? 

The old rule of thumb, as I was taught, was for every 50 employees, you need an HR pro on staff.  But, of course, that ratio becomes skewed as the company becomes larger.  In other words, a company with 2,000 employees certainly can do without 40 HR pro’s (imagine that labor costs…at an average salary of $50,000, plus taxes, benefits, etc…you are in the range of $2,500,000).  Jaw-dropping, I know.

More reasonable would be about 15 for a 2,000 employee group.  But how can a company get that number down further?  Outsourcing functions to a PEO (professional employer organization), ASO (administrative service organization) or BPO (business process outsourcing) can drastically reduce a company’s overhead in the HR department.  We have worked with companies that have anywhere from two to 5,000 employees and have been able to cut their HR department in half, or better, thus saving an average of $62,500 per employee, and set them up with a solution that costs substantially less.  Include in the savings an  industry leading HR software solution that integrates with critical core business software, and now we are talking about a savings in the millions of dollars. 

Sounds great, right?  You can save your 2,000 person company $1,000,000 annually with this type of solution.  Who’s against it?  Why HR pro’s, of course.  This means cutting down their little fifedom.  Any department within a company does not like to see its numbers erased.  But who better to be erased than a non-revenue generating unit like human resources. 

The answer to the question: How many HR professionals does it take to change a light bulb? 

  1. One to write up a job description
  2. One to hire the individual to change the bulb
  3. One to explain the benefits the new employee is entitled
  4. One to act as risk manager to be sure that all OSHA rules and regulations are followed and reported
  5. One to write up the performance evaluation
  6. One to lay off the employee
  7. One to inform the employee of their ongoing benefits and access to COBRA, et cetera
  8. One to manage the unemployment claims

Did I miss anything?

That’s eight (8), and that is only if everything goes right and the employee does not get injured in the process and you need to have another HR manager handle the workers comp claim and another to manage the “back-to-work” program.

Am I outsourcing my Human Resources already?

Most likely you are…You just don’t realize it. Here’s a quick test to see if you are hr outsourcing.
If you answer false to any of these questions, then you outsource HR.

1. My company is self-funded for workers compensation
2. I handle all aspects of payroll internally, from collecting the hours to cutting the checks to quarterly and annual tax payments to w-2’s to setting up direct deposit for my employees
3. I do not offer any benefits to my employees

Not as easy as you think, is it?

Let’s start with number 1…workers compensation. The common misconception is that workers compensation insurance is a burdensome tax to business owners and that it is only in place to protect employees…quite the contrary. Workers compensation insurance is in place to protect owners’ businesses in the event of a work-related injury to an employee. A second misconception is that if all of the employees are 1099’ed, sub-contractors, then the business owner is held harmless. That is fine and well until a sub hires a sub and they end up with an injured employee. Who then is going to be the responsible party? Trust me, that stuff flows uphill. Bottom line…workers comp…gotta have it. If you don’t you’ll be paying off the lawyers and injured with the proceeds from the sale of your business.

Which takes us to number two, outsourcing your payroll. Everyone should be using this service. Your time is money and your money is money…don’t waste either by doing this function in-house. Plus, the related fines if you flog it up.

And then you have employee benefits. Who is managing that? Your office manager? That’s great, that’s a money saver, because they work for free, right? Again, you’re wasting their time, plus opening yourself up to labor law infractions as I’m sure your office manager/client service rep/admin assistant is up to speed on all federal and state regulatory labor laws. Here’s a quick test of that employee’s knowledge of human resources. Ask them what C.O.B.R.A. stands for…and how long an employee must be retained on your company’s healthcare plan once they leave your employ. (Answers: Consolidated Omnibus Budget Reconciliation Act…and 18 months.)

Article on the cost of payroll-only services

This is a pretty concise overview on the cost of payroll services for small businesses. 

http://www.choicevendor.com/blog/2010/03/how-much-does-payroll-cost-we-compare-4-top-providers/comment-page-1/#comment-1129

Of course, if you bundle in additional HR services like software, benefits, compliance and workers comp, there are greater savings to be seen.  That is why for small businesses, we recommend PEO and other total HR outsourcing solutions to gain economies of scale so the payroll is basically free.

How to manage unemployment claims…from BusinessWeek

Here is a few good pointers from one of the leading HR outsourcing providers in the country…outlined in BusinessWeek online.

http://www.businessweek.com/smallbiz/tips/archives/2010/02/manage_your_ris.html

An easier, more cost-effective way to handle unemployment claims and keeping your unemployment rate down is to hire a PEO, but you already knew that.

Firing someone the right way

Here is a good article that highlights the proper way a company should let go of an unsatisfactory employee.  It focuses on one of our solution providers, TriNet, but all of our solutions, whether it be PEO, ASO or other HR outsourcing, have the expertise to properly handle this situation.

http://www.forbes.com/2010/01/14/firing-george-clooney-entrepreneurs-human-relations-goldfield.html

What happens when my HR outsourcing provider gets bought?

HR outsourcing solution providers (PEO, ASO, HRIS, payroll) are no different from other business entities.  Acquisitions happen.  So what are you to do when this happens? 

First question is…who is buying who?  I would be more leery of your provider being bought, then the other way around. 

If your provider is the smaller fish…then maybe it is time to re-assess your HR outsourcing needs and solicit quotes from other providers.  Your current provider may say all the right things about how their current portfolio is going to be unaffected…and a “smooth transition” is expected.  But after having lived through various b2b acquisitions, there is never a clean transition. 

So, re-assess…the door has been opened for you to see what is out there.  Maybe an upgrade to a PEO or ASO solution is right for you.  Change is inevitable, and often makes your business that much more efficient in the long run.

PEO v. HRIS

Found a great (older) article on HR outsourcing…basically, it indicates that smaller businesses are better off going with an HR outsourcing model, such as PEO or ASO, which offers a free HRIS, then buying their own and piece-mealing it all together. 

Here is the link…

http://www.inc.com/criticalnews/articles/200503/hroutsourcing.html

 

 

PEO’s for startups

We come across startup companies all the time and have found that the PEO relationship is the best solution, as it allows the business owners to focus on their core business and let the PEO do its human resources thing.  The time and money saved with a PEO can make or break a startup.

Consider this…if you are a startup, or consulting to a startup company, then the best way to insure success is to focus on your core competencies, and not HR.  Your PEO will handle most functions…with the main exception of deciding upon your staff.  Otherwise, payroll, benefits (including health, dental, vision, 401k, and various supplementary insurances), workers compensation and risk management, payroll taxes, etc. are all responsibilities that are passed along to the PEO.  Imagine the time savings!

In order to obtain a quote from a PEO for services, a startup will need to supply some basic projections on head count and gross payroll, as well as job risk description, so the PEO can place the employees in the proper workers compensation code.  The PEO will do its due diligence and research the background of the principles of the startup, but that’s about it. 

If you are a startup, and are looking towards outsourcing your HR, then PEO may be for you.