The Department of Labor (DOL) has submitted its fiscal year 2011 budget to Congress. One of its main objectives is to penalize employers who misclassify employees as independent contractors.
Another reason for small businesses to outsource their human resources to a solution like PEO (professional employer organization). Once the DOL finds a company that has classification errors, the liability for back wages and overtime pay, as well as to DOL penalties, will start adding up and potentially put them out of business.
Here is a link to an article in Entrepreneur Magazine that is at the heart of why small and mid-sized businesses should be outsourcing their HR, in particular, PEO is mentioned as a more cost-effective way of doing business.
I have found another, third-party, website that talks about the true cost of labor. This link below will take you there. It delves a little deeper into the issue of unproductive work time, but you’ll get the drift.
With a PEO or other HR outsourcing model, you can expect your labor costs to be drastically lower than the 44% that this site highlights.
With all the labor regulation that is a major cost and time loss to business, especially in the restaurant and hospitality, PEO is a great way to cost-effectively remain compliant.
Here is an article in Fast Casual by the president of NAPEO (National Association of PEO), that outlines some key points and considerations for businesses in the restaurant industry considering hr outsourcing in general, and PEO in particular.
For small businesses, outsource HR to a professional employer organization (PEO) or other HR outsourcing solution. Leave the strategic HR to upper management and the day-to-day, time-loss stuff to your provider.
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.
I always get a chuckle out of small business owners who will not make a change to PEO or other HR outsourcing solutions because they say that their accountant does their payroll and they are the only ones they trust to do it.
News Flash: Most accountants don’t do the payroll themselves. They farm it out to a clerk in their office…or more often they have ADP or Paychex do it, then pass if off as their own work and up-charge their clients for their “expertise.”
So, instead of saving money using PEO, a small business is paying, on average, $100/hour to their account for a service that only costs $100 per employee per year to do.