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.
We have had a lot of success lately with setting up staffing companies with PEO. Think about it…what do staffing companies do best? They find people to fill positions at their client companies. They often put that employee on their payroll and upcharge their clients for this service.
Now the PEO steps in and takes on all employer liability. That allows the staffing company to continue to do what they do best, filling positions for their clients, and still insure that their employees are paid. In addition, the economies of scale that the PEO brings them saves 10 – 30 percent on workers comp insurance. That saved margin goes towards the admin charge of the PEO. Win. Win.
Spoke with a prospect today and came across the age-old-question, “Will I lose control of my employees with a PEO?”
The answer is, of course, no.
No PEO will take over the management of the employees to such an extent that they will fire, set rate-of-pay, or schedule hours. Those responsibilities remain with the client company. The PEO will, however, take on the responsibilities and liabilities associated with an employer for purposes of administration, payroll, taxes and benefits.
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.
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.
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.