Tag Archives: ASO

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.

Entrepreneur online onboard with PEO and HR outsourcing

Good article in Entrepreneur online that discusses HR outsourcing and PEO and touches on ASO.

I disagree with the “control” issue.  How is a business owner in “control” when they have 7 different vendors for 10 different HR functions?

Anyway, here is the article:

http://www.entrepreneur.com/humanresources/managingemployees/article205124.html

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

 

 

Timing is everything for HR outsourcing…

…and yet it is nothing.

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.

Sometimes

Does HR Outsourcing save Money?

A better question would be, is time = money?
 

If you recognize that time is money, then a company that engages a PEO or ASO or other HR outsourcing solutions will definitely save money.  In particular, there are areas where a company employs staff to handle time consuming hr functions.  This time can be freed up with a PEO or ASO, allowing more time on strategic functions or revenue generating areas of the business.
 

A PEO or ASO will save a company time by writing employment policies and producing employee handbooks, researching medical insurance plans, implementing a loss control program, providing HR and compliance training for managers and supervisors, benefits administration, vacation and sick leave tracking, responding to unemployment claims, records administration, and many other hr functions.
 

In addition, you will possibly see hard dollar savings by consolidating your current hr functions to one provider.  For instance, instead of separate payroll provider, 401(k) administrator, workers’ compensation and unemployment claims management, Section 125 administration, insurance plans, COBRA administration, etc., and paying fees for these services as a small business to multiple vendors, with a PEO or ASO, you are paying one vendor.  Thus, eliminating margins to various vendors and saving money. 

Industry specific providers of HR outsourcing

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.

 

The main purpose of hr outsourcing…saving money

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.

 

 

 

W-2 v. 1099…will HR outsourcing services delineate?

Be careful when you are talking about employees versus sub-contractors (aka 1099’s).  Although a lot of business owners like the flexibility of having contracted out some core business functions to sub-contractors, if your State’s department of labor finds out that these sub-contractors are really employees, then you will have lots of legal fees and fines to sort through. 

So, can an HR outsourcing provider handle a W-2 (employee) as well as a 1099 (sub-contractor)?  Depending on the provider, sure.  All you have to do is ask your current provider, or if interviewing a payroll company or other hr outsourcing provider, such as an ASO (administrative service organization) or PEO (professional employer organization).

The payroll provider or ASO should be a no-brainer.  The PEO is a little tricky.  By definition, if you contract with a PEO, you do not have employees, thus the PEO would need to take over payroll and workers compensation insurance for all persons that are defined as employees.  They do not want the risk of having sub-contractors that are not covered by workers compensation insurance, attempting to file a claim.  Some PEO’s will reject potential clients that use 1099’s as they do not feel the risk is worth the reward.