A lot of the calls we get are from companies looking for some sort of HR outsourcing solution…but they don’t want to give up payroll, they don’t want to “outsource” that. Funny thing is that when asked…most confess that they use an outsourced payroll service already. And, we know they don’t self-insure on benefits or workers compensation insurance. Therefore, they are already outsourcing 3 of the 5 legs of the HR department anyway.
Why not roll them up, get some economies of scale, tell Betty-Sue Badbenefits and Roy Shakeyriskmanagement to work in a department within the company that actually pulls in some revenue?
Risk management, aka, workers compensation insurance will ultimately be based upon your experience.
So, what is the “soft cost” of human resources? There have been many studies and questionnaires floating around to make a case for HR outsourcing services. What we see is that most companies do not buy into the concept of “soft costs” until they become “hard costs.” Meaning, we do not get a business owners attention until after the fact. And those facts are turnover and non-compliance issues (fines) and workers compensation modifiers that give owners nose bleeds.
Our goal should be to take all aspects of a company’s human resources department into account when proposing a solution. Line-by-line, department-by-department.
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.
We come across startup companies all the time and have found that the PEO relationship is the best solution, as it allows the business owners to focus on their core business and let the PEO do its human resources thing. The time and money saved with a PEO can make or break a startup.
Consider this…if you are a startup, or consulting to a startup company, then the best way to insure success is to focus on your core competencies, and not HR. Your PEO will handle most functions…with the main exception of deciding upon your staff. Otherwise, payroll, benefits (including health, dental, vision, 401k, and various supplementary insurances), workers compensation and risk management, payroll taxes, etc. are all responsibilities that are passed along to the PEO. Imagine the time savings!
In order to obtain a quote from a PEO for services, a startup will need to supply some basic projections on head count and gross payroll, as well as job risk description, so the PEO can place the employees in the proper workers compensation code. The PEO will do its due diligence and research the background of the principles of the startup, but that’s about it.
If you are a startup, and are looking towards outsourcing your HR, then PEO may be for you.
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.
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.
This is a topic or question we hear quite often. Usually it is the client company posing the question.
The easy answer is that the employees of a PEO have access to the benefits package normally only seen at a Fortune 500 company. That is, major medical, dental, vision, 401k and various other insurance products. The economies of scale that the PEO enables for its client companies allows the employees to save quite a bit on the cost of benefits.
The longer answer is that the PEO has the human resources expertise to be sure that its shared employees are taken care of from a risk management standpoint as well. We often have business referred to us from employees of companies that were in a co-employment arrangement at a previous employer and have seen the benefits first hand.