Or worse, would your represent yourself? Of course not. You would hire a lawyer.
Well, first you would ask friends, family and other business associates for their recommendations. Then you would meet with a handful of these recommendations. Make a decision based on their expertise and your specific needs and away you go. Right?
Why not take the same steps when thinking about your company’s human resources? Most likely, if you are a small business, the idea of hiring a certified HR professional is daunting. The labor cost for that individual is prohibitive.
Your employees are most likely your most valuable asset, but they can turn on you. That is why a professional employer organization (PEO) is the most cost-effective way to keep your employees happy. And trained.
The PEO’s and HR outsourcing service providers that will survive a major shift in healthcare are the ones that have continuously met and exceeded all expectations of their clients on the service side of PEO.
Once the arbitrage advantage of the health is taken out of the equation, sure there will be less margin for PEO to play with, and their will always be clients that look to change as they see the admin fees charged by PEO’s as accessive. We were going to lose them sooner or later due to their insistance that their labor costs are based entirely on gross payroll plus benefits plus taxes.
…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.
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.
We just started working with a new “industry-specific” PEO. Great niche, too. Churches. Yep, churches. And non-profits. There is a great market for PEO and hr outsourcing for this industry.
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.
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%.
Who knows the market better than a professional? By working with an HR outsourcing consultant, you get fast-tracked to the front of the line. HR services providers are increasing relying upon outside consultants and sales personnel to assist them in bringing in new business. Because the outside consultant has moved the client from lead to certified prospect, the provider is more willing to price on smaller accounts. In addition, since hr outsourcing consultants are considered big producers by the vendor, their clients are often given preferred pricing.