| It's the $51 billion industry you've likely never heard | | | | companies' HR departments. |
| of: PEOs. Private Employment Organizations, or PEO's | | | | When is your business ready to outsource to a PEO? |
| as they're known, were deemed the fastest growing | | | | Industry experts advise careful preparation when |
| business service during the 1990s by the Harvard | | | | deciding if your business should contract with a PEO. |
| Business Review. Currently over 700 PEO's operate in | | | | Do your homework. Here are some questions to |
| all 50 states and provide service to approximately | | | | consider (courtesy of StaffMarket.com): |
| 100,000 small to mid-sized businesses. So what | | | | Are you spending too much for workers' |
| exactly is a PEO, and how can your business benefit | | | | compensation insurance? |
| by using one? Following is an introduction to the | | | | Are your employees asking for benefits you can't |
| basics of PEOs. | | | | offer? |
| What is a PEO? A PEO is not a temp or staffing | | | | Are you paying too much for health insurance? |
| agency and it is not a payroll service. As defined by | | | | Is your company compliant with state and federal |
| the National Association of Professional Employer | | | | regulations? |
| Organizations (NAPEO), a PEO is an "organization that | | | | Is your turnover rate adversely affecting your |
| provides an integrated and cost effective approach | | | | company's performance? |
| to the management and administration of the human | | | | Is your HR department as effective or as efficient |
| resources and employer risk of its clients, by | | | | as you believe it could be? |
| contractually assuming substantial employer | | | | If the answers to these questions lead you to |
| responsibilities and risk, through the establishment and | | | | believe that a PEO is in your future, appoint a team |
| maintenance of a co-employer relationship with the | | | | to the task of conducting thorough market research, |
| client's employees." | | | | attend conferences, and read case studies about HR |
| In other words, a PEO legally hires a company's | | | | outsourcing. Utilize their findings in your PEO search. |
| employees, which makes the PEO the "employer of | | | | How do you choose a PEO? First, make sure the |
| record" for tax and insurance purposes. The | | | | PEOs you consider are accredited by the Employer |
| employees are leased back to the original employer | | | | Services Assurance Corporation (ESAC), a nonprofit |
| under a co-employment contract. The PEO is then | | | | organization which protects the interests of |
| responsible for administration of payroll, workers | | | | businesses contracted with PEOs. Accreditation |
| compensation, employee benefits, and workers | | | | means a PEO meets ESAC's ethical, financial, and |
| compensation. Numerous duties such as 401 (k) | | | | operational standards. |
| administration, risk management, employee | | | | In addition, Make sure your PEO meets state licensing |
| counseling, and training and development can fall | | | | and registration requirements. The following states |
| under these categories depending on the terms of | | | | have licensing laws: Arkansas, Florida, Illinois, Montana, |
| your contract. | | | | New Hampshire, New Mexico, Oregon, South Carolina, |
| Why use a PEO? | | | | Tennessee, Texas, Utah, and Vermont. The following |
| Being an employer can be a headache: there are over | | | | states have registration laws: Kentucky, Louisiana, |
| 60 different employment-related governmental | | | | Maine, Minnesota, Nevada, New Jersey, New York, |
| regulations with which a business must comply. The | | | | North Carolina, Ohio, Oklahoma, Rhode Island, and |
| U.S. Small Business Administration reports that owners | | | | Virginia. |
| of small or mid-sized businesses now spend up to a | | | | Here are some more guidelines provided by the |
| quarter of their time on employment-related | | | | NAPEO: |
| paperwork. By outsourcing to a PEO, employers can | | | | 1. Assess your workplace to determine your human |
| focus on operating and building their business. | | | | resource and risk management needs. |
| Employees gain improved, comprehensive benefits. | | | | 2. Make sure the PEO is capable of meeting your |
| Some other benefits to consider: | | | | goals. Meet the people who will be serving you. |
| - Improved human resource practices can increase | | | | 3. Ask for client and professional references. |
| your profitability. PEOs handle basics like employee | | | | 4. Check the firm's financial background, and ask for |
| handbooks or more delicate HR tasks such as sexual | | | | banking and credit references. Ask the PEO to |
| harassment training. | | | | demonstrate that payroll taxes and insurance |
| - Comprehensive employee benefits makes your | | | | premiums have been paid. |
| business a more attractive place to work. | | | | 5. Check to see if the company is a member of |
| - State of the art HRIS systems better serve you | | | | NAPEO, the national trade association of the PEO |
| and your employees with on-line access to payroll | | | | industry. |
| and employee information. | | | | 6. Investigate the company's administrative and risk |
| - Coverage under a PEOs master workers comp | | | | management service competence. What experience |
| policy means insurance is more affordable. PEOs | | | | and depth does their internal staff have? Do any of |
| yearly shop for the best insurance rates, and since | | | | the senior staff have professional training or |
| they have an interest in keeping claims low, they | | | | designations? Check to see if the PEO's risk |
| conduct risk management training. | | | | management services have been certified by the |
| - Progressive PEOs offer benefits such as college | | | | Certification Institute at |
| tuition reimbursement programs and travel services | | | | 7. Understand how the employee benefits are |
| Who can benefit from a PEO's services? Businesses | | | | funded. Is the PEO fully insured or partially |
| from numerous industries-medicine, automotive, | | | | self-funded? Who is the third-party administrator |
| construction, retail, manufacturing, hi-tech- outsource | | | | (TPA) or carrier? Is their TPA or carrier authorized to |
| to PEOs. According to the NAPEO, their member | | | | do business in your state? |
| PEOs average client is a small business with 17 | | | | 8. Understand how the employee benefits are |
| employees. PEO clients are small enough that they do | | | | tailored. Determine if they fit the needs of your |
| not have the need or ability to staff a human | | | | employees. |
| resource department. Even large companies with a | | | | 9. Review the service agreement carefully. Are the |
| dedicated HR department can benefit: they get | | | | respective parties' responsibilities and liabilities clearly |
| access to supplemental HR expertise, competitive | | | | laid out? What guarantees are provided? What |
| health insurance, and state of the art HR information | | | | provisions permit you or the PEO to cancel the terms |
| systems. PEOs work in cooperation with larger | | | | of the contract? |