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