Tag Archives: professional employer organization

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.

Options in HR Outsourcing (Human Resources Outsourcing) – From Payroll to PEO (Professional Employer Organizations)

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?

How many employees do I need to be considered by a PEO (professional employer organization)?

Easy…one…but it cannot be the owner of a sole proprietorship (you can’t lease back yourself).  That said, most PEO’s are looking for 10 plus employees, and I have seen companies with more than 5,000 using PEO successfully.

If your company has less than 10 employees, the likelihood is that you will use the PEO for hr, payroll, benefits admin and safety.  However, the health plan will probably be carved out in put in your name, although the PEO should administer it for you, making necessary payroll deductions.

How PEO helps businesses gain control

We are often perplexed by companies that come to us looking for a solution and seem to be under the misguided perception that PEO (professional employer organization), sometimes referred to as employee leasing, would mean a loss of control.

On the contrary, PEO allows business owners to know exactly, to the penny, how much their total labor burden is or will be.

Currently, their payroll processing, benefits costs and risk management are in differing departments or services. With PEO, it all comes together, neat and tidy. The rates charged, plus benefits, are already pre-negotiated. In addition, the employer risk is shifted entirely to the PEO. Meaning, if there is a workers comp claim or unemployment claim or workplace tort for harrasment or wrongful termination, that responsibility all falls upon the PEO.

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.

CPA’s! Talking about PEO – are you with us or against us?

Very frustrating to have Certified Public Accountants (CPA’s) attempt to scare the business out of clients.

Recently, we had a local CPA, who lost the payroll business on a 4 man company (I estimate they were charging $200/week to process payroll…PAYROLL!!!) call the State Department of Employment Securities to let them know that they were closing their account with the State.

The DES sends a letter to the client to let them know that they no longer have an account and could face fines if they do not re-open their account ASAP.

Some CPA’s do not understand, nor do they want to take the time to understand how PEO (professional employer organizations) work.

Some CPA’s do understand, they see the overall cost and time savings their clients will receive via PEO and recommend going forward.

Anyone else have any scary CPA stories? Don’t get me going on lawyers…

Department of Labor to step up on misclassifications

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.

Read between the lines…

For small businesses, outsource HR to a professional employer organization (PEO) or other HR outsourcing solution.  Leave the strategic HR to upper management and the day-to-day, time-loss stuff to your provider.

http://www.smartmoney.com/personal-finance/employment/10-Things-Human-Resources-Wont-Tell-You/

Going Green with PEO

“Instead of doing your own payroll in-house, consider a PEO (Professional Employer Organization) to take over the administrative and legal responsibilities of managing your employees. You are not selling your employees to someone else- you are just using their service to help your small business save money while offering your staff better benefits to boot! This means, no inside human resource personnel costs, reduced legal liability for your company and better benefits packages for your staff. Look to a professional employer organization to help you save money.”

 

For the full article…
http://www.boost.crystalfrompoland.com/ways-your-business-save-money-in-this-economy/