Tag Archives: benefits administration

Advantages of Professional Employer Organizations (PEO)

One of the immediate advantages of PEO or employee leasing is that management’s time that was previously spent on personnel management and accounting can now be directed toward activities that effect earnings and profit.

In addition, a company that arranges with a PEO will find immediate economies of scale in providing benefits, especially healthcare. Other benefits, such as cafeteria plans, life insurance, disability insurance and 401k plans, are not often offered by smaller companies, but through a PEO, they are all available at no additional costs.

Lastly, a PEO or employee leasing firm provides assistance in defining personnel policies and compiling employee handbooks as well as compiling and recording employee files.

HR outsourcing versus offshoring

A common misconception is that HR outsourcing will take over jobs and move the offshore.

A search for outsourcing leads to this article:

http://employeeleasing.blogetery.com/2010/01/03/how-to-outsource-their-tasks-most-feared-small-business/

Totally different concept.  What we (HROplus) is talking about is lowering your overall labor costs by more efficiently handling non-revenue generating operations within a small business (payroll, workers compensation, risk management, benefits administration, labor law compliance) and saving client companies thousands in administrative and hard-dollar costs thanks to immediate economies of scale.

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. 

Free HR Services for Manufacturing companies

I just completed a conference call with a manufacturing company with more than 400 employees.  The savings from the PEO on the workers comp and benefits pay for the hr services…payroll, benefits admin, hr consulting, compliance. 

I am amazed sometimes at why more companies, especially those with high mod’s (modifier rating) do not explore this opportunity for their companies. 

My calculation, and this is hard dollar savings, is more than $300,000 annually.  That is more than $700 per employee per year.  Every year.  That does not include the savings of having a separate 401k and other benefits.