If you are a business owner, please write down your answers to the following questions:
1. Who handles your workers’ compensation insurance, claims and overall administration?
2. Who handles your benefits administration?
3. Who handles your state and federal unemployment filing?
4. Who handles your payroll?
5. Who handles your employee related issues?
6. Who do you have for your EPLI coverage?
7. Who implements training for your risk management and safety policies?
8. Who trains your staff on sexual harassment & leadership development?
9. Who stays on top of FMLA, ADA, EEOC, COBRA and all relevant employment laws?
Answer: If you had more then 1 entity for all of these answers, you are behind the curve.
All of these items listed are important functions for your business. They can affect your business in many ways, specifically asset protection and profitability and/or overall organizational value.
Solution: Unless the items listed above are your core competencies, you should get some quotes on outsourcing to a PEO, employee leasing or co-employment model. The entire purpose of these organizations is to focus on human resources, nothing else. A PEO would do a terrible job trying to run your medical office, law firm, bank or whatever other type of business you may have, but the reputable professional employer organizations’ will likely perform your HR functions better then your staff could. Think of them as a “trusted advisor,” much like your corporate attorney and/or tax accountant/CPA. Do you have an HR Trusted Advisor?
Why? Look at the items above, and give yourself a best guess estimate of how many hours your senior level leadership puts into administering any of these functions. What if you could save just 100 hours per year for one senior level employee from dealing with these items. Whether its negotiating new health insurance rates, finishing workers’ compensation audits, dealing with unemployment claims etc., think about the opportunity cost. If this single employee is worth more than $10/hour, I guarantee the outsourcing will pay for itself.
In most scenarios a professional employer organization (PEO) will charge your firm anywhere from $5/hr to $25/hr if you were going to break down their fees to the hourly level. This is a range of hard dollar cost that you will be invoiced from a PEO, think of it as getting your corporate attorney on call at all times for $5/hr. Only a PEO doesn’t just bring a “what-if” type service, they handle the day-to-day HR functions for your business to include payroll, benefits, workers’ compensation and all of HR administrative functions. In some situations, new clienst of a PEO show an instant hard dollar cost savings due to lowered rates in things like health care premiums, but if your company does not get an instant savings you should not discount the value of the service provided. Too often businesses believe they can get all of the professionalism that a PEO offers for free, as if they weren’t a real business! Be realistic, if you are going to get a company to take on risk, administer parts of or all of your human resource affairs, don’t be upset to see that you may be looking at a nominal investment similar to hiring a $7/hr FT employee.
In most scenarios, a PEO will off-set their fees through health care plan savings, workers’ compensation insurance savings, state unemployment rate savings and most importantly employee time. Every state has different guidelines for these off-sets, but it is definitely worth your time to look into.
Stop telling yourself you “Don’t Outsource.” Unless you answered all of the questions above as an “internal item your business handles,” then you are already outsourcing. Unfortunately, you have not maximized your return on outsourcing, your just one step out the door. Take the plunge and call a PEO.
Jacob Hesse
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