We have seen it both ways. Company’s cutting jobs and/or limiting hours of employees, however, more companies are now looking at PEO as a way to save a big amount of money on labor costs. PEO allow businesses of all sizes to cut down in their labor costs by downsizing a department, human resources, that is a non-revenue generating cost center within the business.
Not too mention that PEO allows also for companies to save thousands annually in health insurance premiums and workers comp premiums.
Just got off the phone with a client that we set up with a PEO in the midwest. They could not be happier with the safety program that was implemented.
They have been with the PEO for a little over a year now and estimate that their 37-man company has saved them more than $20,000 in the past year in comp premiums. In addition, due the to safety plan that was implemented, they will likely save another $25,000 – $30,000 in the coming 12 months.
For a company to consider some HR outsourcing solutions, such as PEO (professional employer organization) or ASO (administrative services organization), there is often a breakdown within the organization from a human resources or benefits cost or risk management standpoint.
The right HR outsourcing solution can help a company weather these storms, or avoid them all together. There is often a cost, of course, but it is cheaper before than after the storm has hit.
Just got back from the NAPEO (National Association of Professional Employer Organizations, www.napeo.org) Conference in Lake Las Vegas. Great job by the NAPEO people in putting it all together.
They had some terrific speakers, primarily focused on the the sales end of the business, but I was particularly impressed with Todd Cohn, who gave a breakdown of some particular States that NAPEO is working with the various legislations to improve the climate for PEO within that State. Todd is the Assistant Director of State Government Affairs at NAPEO and has been there for about four years. Some of this legislation is vital to protect not only the PEO’s, but clients of PEO’s.
My post is more about business in general and how energizing it can be to go to your industry trade shows. I know that the economy is tough and spending money to go to Vegas or Miami or New York or New Orleans may be just out of your budget, but the connections you make there can often be priceless.
Moving to an HR outsourcing company, particularly a PEO (professional employer organization) can have tremendous benefits when dealing with workers compensation insurance as it pertains to State-sponsored funds. One major state-sponsored fund, the California State Fund, will be seeing a large increase in rates in the coming months. There is a great opportunity for all businesses to reevaluate that relationship to see if there is a better way of doing business.
How can PEO’s help these businesses? By getting you out of the fund entirely and partnering with the PEO and placing your risk (employees) on their books.
From our experience we have seen discounts on workers comp by as much as 50 percent. In addition, the comp coverage becomes a pay-as-you-go solution, freeing up your cash flow.
We have found a niche in solutions for hr outsourcing for our clients. Industry-specific solution providers. Granted most PEO’s or ASO’s would prefer a mix of clients in order to help them manage risk, both from a workers compensation and healthcare benefits standpoint, but there are solutions that make a lot of sense for specific industries.
The main advantage is the exceptional overall industry knowledge that the PEO brings to its client companies. For instance, we have a solution for trucking that not only saves our clients upwards of 20% on their workers compensation insurance, but has the industry knowledge to keep drivers safe and assist its client companies in background checks and safety management programs. Not to mention the expertise in running various payroll types for truckers. Straight pay, commissions, per diem, etc.
We also recommend construction companies (all workers comp codes) to look specifically for providers that have the industry knowledge that not only starts them out at low workers comp rates, but has the expertise to keep their job sites safe. Saving money in the long run.
One of the services that are often overlooked by companies looking at PEO is the fact that they are receiving a free HRIS (human resources information system) in a lot of instances from their provider. How can that be? Think about it. If you are a PEO and you have multiple worksite locations with multiple job codes, pay codes, pay frequency, etc…what is the most efficient way to manage all of that information? HRIS. So a PEO purchases an HRIS, then has additional modules added and layers of security so they can offer what amounts to a free web-based HRIS to their clients.
Whether you are looking for hard or soft-dollar savings…both can be found by outsourcing some or all of your HR functions.
But first, you have to want to be an employer that wants happy employees. Happy employees are productive employees. In addition, happy employees do not leave you. Thus, the huge cost of turnover, which is oftentimes, estimated as much as 50% of gross payroll due to lost management time, re-training and recruiting.
Therefore, if you have in place a benefits package that rivals those of big companies…why would your employees leave? The fact is, the will not. The hard dollar costs of benefits for employees are more than saved in hard and soft dollar savings.
Whether you go with a PEO (professional employer organization) or ASO (administrative service organization) to help you manage your human resources, for small to mid-sized companies, the economies of scale realized by these models will make your hr outsourcing a cost-effective tool that actually prop up your bottom line.
I speak to owners of small companies all day long…the question they most want to ask, but have a hard time getting the gumption to ask is…”How much is this going to cost…and how will this save me money?” When considering HR outsourcing, it is prudent to know what your current HR costs are so you can make a rational comparison versus “doing it yourself.” The quick and easy answer, from an HR professionals’ prospective, is an average of 20% on top of gross pay. If you want to add a medical plan and pay 100% of the premium of the employee…adds another 3 – 5%.
Generally speaking, PEO, or other HR outsourcing solution, can save their clients upwards of 10 to 25% on their current workers compensation insurance.
How can they do that? By better managing the risk management and billing process over a larger group. Again, this is basic economies of scale. If you are a 25 man manufacturing company, doesn’t it stand to reason that you would be better served piggy-backing on a larger company’s insurance program as they have the capacity to manage claims and cut costs?
In addition, most PEO’s, offer pay-as-you-go workers compensation insurance. So the “big deposit” and/or make-up payments at the end of your insurance year are no longer a factor. Giving smaller businesses a more flexible cash flow.