A professional employer organization (PEO) offers your business a brighter future. The co-employment relationship promises small and medium sized businesses a new employee infrastructure, one that benefits from economies of scale in purchasing group insurance benefits and workers compensation insurance. There are at least five dynamic business benefits from partnering with a PEO.
1. Core Business: A PEO will take over and manage burdensome tasks allowing you to drive the business your way:
2. Human Resources:
- Wage and hour administration
- Payroll processing and paycheck distribution
- Quarterly tax filings
- Payrolls deductions and garnishments
- W-2 filings
A PEO has the expertise and experience to administer Human Resources functions and monitor compliance with applicable laws and regulations.
3. Increase Profits:
- Process, track, and archive forms and files
- Meet and communicate legal and regulatory requirements
- Oversee compensation structure
- Hire, fire, and provide counseling
A business increases its profit when it lowers its costs. According to a report developed for the SBA
, “Small businesses . . . bear the largest burden of federal regulations. [They] face an annual regulatory cost of $10,585 per employee, which is 36 percent higher than the regulatory cost facing large firms.”
- Economies of scale access competitively priced insurance products and services
- Co-employment reduces Human Resources staffing
- PEOs effectively leverage an array of business partnerships
- Some PEOs are equipped to assume some or all training responsibilities
4. Employer of Record: As the PEO becomes the employer-of-record for tax purposes, it also makes your business an employer of choice. Having used its economies of scale and business partnerships to secure cost-effective insurance benefits, the co-employment relationship secures employee retention. Employees can vote with their feet, and they will not walk away from employers offering a buffet of insurance benefits, retirement plans, flexible spending accounts, and more.
5. Proprietary Security: A PEO provides the business owner with a level of comfort in personnel management, legal compliance, risk management, safety training, claims processing, and more. Indirect costs of uncertain HR management, poor risk management, inadequate training and claims processing present themselves as litigation. Fraudulent claims, frequent claims, and uncontested unemployment claims all present financial risk. And, some PEOs provide additional protection with an employment practices liability insurance policy to cover workplace torts.
Security takes many shapes. You find it in language, policy, and practice. But, there are cost savings when you can secure your business on several levels at one time in a co-employment relationship with a professional employer organization. A PEO is a true partner, sharing and supporting your security concerns. Peace of mind is a valuable benefit of any relationship. But, these five dynamic ways your business benefits from a PEO reinforce that primary value so that you can run and grow your enterprise the way you intended.
On the most fundamental level, employees want a decent wage for a decent day's work. Unfortunately, this simplification does not always translate to the workplace as managers and employees have radically different ideas of what the statement means. Still, the responsibility rests on management to make the workplace productive. With that fact in mind, here are examples of what employees are really looking for beyond the mere payment of money:
Respect – It is an indisputable fact that many employees feel intimidated and somewhat powerless when in the presence of their managers. While most managers recognize this, it is sometimes less obvious that the reverse is also true. Managers and executives must understand that there is a reciprocal relationship and that “what you give is what you get.”
Inclusion – Everyone likes to belong so it is imperative that management not does not create nor encourage cliques. In particular, no group of subordinates should receive knowledge of company policy or news ahead of another comparable group. This sort of discrimination is readily apparent and breeds discontent from almost every member of the group left out.
Opportunity – At some level, all employees want to succeed. Their hopes and aspirations may not match the observations of management but all employees must be given the opportunity to develop their skills and advance their careers. This is a relatively simple commitment and should be observed for both ethical and legal reasons.
Leadership – Work is simply more satisfying when it seems like you are getting the job done and not just running around in circles. Competent leadership is the crux of this process. There is little in the business world more demoralizing than a ship without a rudder. With a poor leader, everyone is at fault for a job not done and yet no one is really responsible. To the contrary, a superior leader instills trust and shows competence. Things get done and in a timely manner.
Impact – At some point, if you are doing your job right, your employees will come up with some fine ideas on how to improve things. Don't be afraid of this for you have created the beast and it is truly a good thing. One of the most motivational aspects of a job is empowerment. Pay attention to engaged employees and do not disregard their input. While it may not always be the right advice, it demonstrates superior involvement and you should treat is as the gold it is.
One Last Thought
Successful managers observe these protocols almost without thinking while inferior ones just think they do. The point is that you should examine your own behaviors and ensure that you are allowing your subordinates to support you as much as possible. There's no need to be a tyrant when leading by example will gain better results.
Many professional employer organizations offer management and employee development programs. You can quickly compare their services here.
The United States preeminent space agency, NASA, using the best and brightest in our country, sent men to the moon and back over four decades ago. In the ensuing years, NASA has continued to provide incalculable benefits to both the businesses and people of the United States of America.
Not surprisingly, most people consider NASA to be composed of only scientists, engineers and other “deep” thinkers. This misconception overlooks the very real contributions of the administrative and support staffs of NASA. While the “rocket scientists” are busy doing their things, the bureaucrats are busy finding astronauts, technicians and other support personnel who, like the astronauts, must also have the Right Stuff.
The HR staff at NASA is tasked with a simultaneously difficult and easy task; find the best of the best. While this task may seem easy as NASA is inundated with resumes from some of the most accomplished people on the planet, it is also particularly difficult to discriminate between these exemplary candidates.
In many cases, the decision becomes a singularly human one and is based on some simple questions. The questions may seem trite but they are important. Can the candidate work well with others? Are they good under stress? Will their egos get in the way? Another question for the top NASA administrators is how best to make these decisions. Heady questions for the people at NASA but also ones that are prudent for any business person to consider.
Read More about how NASA finds and develops their workforce here...
What to Do about E-Cigarettes in the Workplace
While the FDA has not made a formal decision as to the status of e-cigarettes, it seems that anti-smoking advocates have already laid claim to the moral high ground claiming – without any conclusive proof - that e-cigarettes are potentially just as harmful as traditional cigarettes. This leaves an employer with a quandary...
What position should they take on allowing the smoking of e-cigarettes in the workplace?What are E-Cigarettes?
Developed as a “smokeless” alternative to regular cigarettes, the electronic varieties pride the same physical sensations without the hazardous, carcinogenic smoke. While the e-cigarettes are available in a wide variety of nicotine-free flavors, there are also many laden with the addictive chemical. Since no smoke is emitted into the atmosphere, advocates contend that this eliminates the many “second-hand smoke” problems. Opponents disagree but one thing is for sure, both are actively lobbying their point of view to the FDA and the American Medical Association. The Legal Issues
Without clear direction from a governing regulatory agency – for example, the state of New Jersey has already banned e-cigs in the workplace – an employer should examine their own handbooks and determine if there is a conflict. If they do choose to allow “vaping,” it should be clearly delineated as a separate activity from smoking. Then, a clearly defined policy should be explained to all employees with the caveat that it is subject to change with further regulatory guidance. What to Do Now?
It seems that caution would dictate banning e-cigarettes but this strategy opens up a company to charges of discrimination. In addition, many use the e-cig as a smoking cessation tool and what employer wants to dissuade their employees from quitting an admittedly dangerous habit. Another benefit of e-cigs is the boon to productivity. Instead of heading downstairs or outside to have a smoke in a designated area, smokers can meet their craving while still seated at their desks. A Final Thought
This is one of those situations where a Professional Employer Organization can prove to be invaluable. The law is quite malleable at the moment but could become “set in stone” and legally binding at any time. Most business owners and managers do not have the time to stay abreast of these changes and make timely decisions about them.
PEOs, on the other hand, are dedicated to just this sort of activity. Not only can they aid you on this particular issue, but also provide a wide range of human capital management
services from simple payroll through recruiting and hiring to strategic redeployment of personnel. Consider one before your business goes up in smoke.
The Patient Protection and Affordable Care Act (PPACA) tasks employers with 50 full-time workers or more to offer at least minimum value health insurance at an affordable price. That plan must cover employee children up to the age of 26. Of course, employers can always offer more generous plans.
While, according to Forbes, “Only 0.2 percent of the businesses in the U.S. with more than 50 employees do not already provide healthcare insurance to full-time employees,” employers who do not comply will face financial penalties. The deadline for mandatory compliance has been extended to January 1, 2015. But, this delay should not encourage employers to bide their time. Rather, it offers the opportunity to act now to communicate the shared responsibility at the center of the ACA. There is nothing gained by waiting to comply, no common sense in thinking that the ACA will be repealed before the mandate.
Reprieve Not Reversal
It is smarter to treat the delay as a reprieve not as a reversal. There is much to do and much to put in place before compliance. For example, employers need systems to track and report hours and calculate benefit expenses as a percentage of wages. The affordability benchmark is 9.5% of an employee’s household income. If an employee’s insurance premium exceeds that 9.5%, the employer faces an annual penalty of $3,000 per full-time employee who secures coverage through an insurance exchange.
Time to Communicate Engagement
This reprieve in mandated compliance creates a window for aggressive and assertive communication on the employer’s plan and position. It allows the employer – with the help of a PEO or broker and insurer – to educate employees as customers. It presents the chance to sell and re-sell the value of the employer’s contribution to this hidden payroll item.
Introducing employees to new programs, benefits, and costs at a strategic incremental pace while inviting employee interaction will engage and aid in employee buy-in. A significant aspect of the Affordable Care Act is the decision-making burden it shifts to employees, and employers benefit by engaging employees in the process. Making employees work with new information and tools to select and modify their health insurance programs increases their individual accountability.
Employee as Consumer
When employers take charge of their spending, they own the decisions they make for themselves and their families. It follows that, having empowered employees to determine their costs, employer costs decline.
In addition, new tools, such as the Flexible Spending Account (FSA), Health Savings Account (HSA), and the consumer-directed health plan (CDHP), empower employees to juggle and assemble options for their respective needs. For example, the CDHP has a high deductible that may not be attractive to some but very attractive to others depending on their obligations to dependents, need to reduce monthly premiums, or serve their youth and single status. The CDHP in combination with an HSA lets employees budget money for health costs, use it or roll it over to accumulate it into retirement if not used.
Employee as Medical Adviser
Employers have long recommended and/or underwritten the cost of health and wellness programs. The hope is that improved health experience will reduce the cost of benefits. Participation has not been high, but when employees see the direct connection between health and wellness and reduced premium, participation will increase.
In addition, the ACA increases this incentive for employer and employee. It raises the permitted wellness incentive to 30% of the cost of insurance and 50% for tobacco cessation programs. Employee good health also means improved employee productivity.
Employee Training to Engagement
In the face of the confusion presented by ACA options, employee education empowers them to make coherent and individual decisions that respect their individual needs. By placing the tools for decision-making into employee hands, employers enable and encourage decisions that are ultimately in the employer’s interest. The postponement in mandated compliance allows employers the time to educate and build value. It allows employees the time to learn, to shop and shape decisions for which they remain accountable. This makes the strategy work in everyone’s interest.
Check out the article on Forbes in it's entirity, Is The Affordable Care Act Really Bad For Business?
You may also be interested in downloading our newest white paper, The 3 "Rs" of Managing Healthcare Reform
The Patient Protection and Affordable Care Act (PPACA) often referred to as Healthcare Reform or ACA, was designed to increase access to health insurance for Americans. This legislation greatly impacts the business sector and provides unique challenges for employers as they must comply with new regulations or face penalties. Healthcare Reform compliance rules can be very confusing and complex for businesses. By partnering with a Professional Employer Organization (PEO), your business can take advantage of expert guidance and administrative relief as it navigates the complexities of Healthcare Reform.
Administrative Support for Increased Requirements
There is a much larger administrative burden now on employers to handle issues such as meeting reporting requirements, preparing and delivering employee communications, and calculating and paying taxes. For example, the “Shared Responsibility” provision of the ACA requires employers to keep thorough records of employee hours so they can determine part-time or full time status every month. A PEO can make ACA compliance easier and more efficient for businesses by assisting with the tracking of data and helping to automate time-consuming administrative processes.
New laws also require employers to provide employees with various notifications, including summary of benefits and coverage notifications, public exchange notifications, and W-2 reporting. Employers must also evaluate Medical Loss Ratio Rebates, determine what to do with the rebate dollars attributable to employee contributions and administer these rebates. PEOs are in a unique position to support businesses in complying with these requirements, as they are already managing payroll data, benefits plan information and employer tax withholding as part of the PEO relationship.
Deciding on the Best Coverage Option
Employers will need to evaluate the total cost of providing health insurance to their employees and determine how these new regulations will impact their businesses. Insurance issued in the small group market will be subject to Adjusted Community Rating. In the past, insurers were allowed to charge higher rates to people based on gender, health status, medical claim history or other factors. However, as of January 1, 2014, insurers can only set rates based on a limited set of factors such as age, geographic area and tobacco use, and only limited variations will be permitted within these factors.
Groups with younger, healthier people may see significant increases, while groups who had previously higher rates could see a decrease. Working with a PEO can give your company the ability to offer your employees a large group plan that is not subjected to the Adjusted Community Rating. A PEO can also help your company decide on the healthcare plan that works best based on your business strategy. There are many different options with different levels of costs and other burdens that need to be evaluated.
Employers need to know that PEOs can relieve businesses of the administrative and compliance requirements for medical benefits, employee communications and government requirements associated with the Affordable Care Act. Your business can take advantage of the expertise and support needed to evaluate your options and comply with the latest requirements.
Department of Labor - Affordable Care Act Website
Internal Revenue Service - Form W-2 Reporting of Employer Sponsored Health Coverage
This post provided courtesy of Oasis Outsourcing.
The National Association of Professional Employer Organizations (NAPEO) reports a “decidedly negative” turn in the PEO Index for the Frist Quarter. The PEO Index
studies the bi-weekly status of payroll feeds on 160,000 employees at 8,000 worksites. The Index concludes that the dip in participation is due to the extreme winter endured throughout large parts of the country and the further delay in the Affordable Care Act mandate. Theory is that these conditions reduced the urgency for businesses to contract with PEOs.
However, other issues are squeezing small businesses from several directions and, at the very least, distracting them from rational analysis of PEO opportunities.1. Healthcare
The Affordable Care Act is the law of the land, and it will likely continue through the next generation. Every serious and unbiased analysis indicates that premiums paid by employers will increase and the uninsured will be driven by the marketplace into employer plans where available. Small business employers have anticipated the change, budgeted for the increases, or planned to drop employee healthcare benefits.
The huge snafu during PPACA enrollment rollout and the subsequent postponement in the mandated enrollment date left businesses confused, sent them back to their budgets, and reduced their immediate concern around increased insurance costs. Small businesses pressed by their real time costs are in no burry to incur new expenses.2. Uncertainty
Political and economic inertia remain the government’s only certainty. The stock market has reached new record highs in fits and starts. The private sector has added a significant number of jobs. Housing starts and the GDP have steadily increased. However, no event has had enough spark to increase significantly consumer or business confidence. So, small business budgets, growth, and investment remain as sluggish as Washington’s inclination to raise taxes, manage spending cuts, and control the debt ceiling. Sequestors, freezes, or whatever they are called radically affect small businesses.3. Minimum wage
The increase in the federal minimum wage, implemented as progressively, should not affect small businesses acutely. Implementation occurs over enough time for owners to adapt and adjust. However, it does mean an increase in labor burden that owners have to weigh when making decisions on benefits.
Seattle’s recent increase in minimum wage to $15/hour can prove more difficult. Even with a layered implementation, the increase is intimidating. It will drive businesses to reconfigure their organizational structure, re-think future hires, or lay off employees.4. Capital
Lenders control more capital than ever, but the financial crisis of the last decade was solved partially by requiring lenders to tighten restrictions. Thus, small businesses find it harder than ever to secure the capital needed to sustain or grow their business.
Restricted financing keeps employers from making new hires, let alone entering co-employment agreements. It reduces the business ability to make capital investment in the technology to remain current, competitive, and secure from cyber-attacks. 5. Taxes
According to Forbes
, “tax compliance places a large burden on small businesses, both in the aggregate and relative to large businesses. The Internal Revenue Service estimates that businesses with less than $1 million in revenue bear almost two-thirds of business compliance costs.” It is not surprising then, states Donald Marron
, that “small business are more likely to underpay their taxes.” Most of this is unintentional because of the complexity of the IRS code, but the press of unresolved tax issues worries business owners into reserving funds.
PEOs offer solutions to all these concerns. However, contracting with a professional employer organization comes at a cost. Any PEO vendor and small business owner, given the chance to sit with all their cards on the table, can structure an agreement that is realistic and cost-effective. However, all these concerns present significant distractions that get in the way of such sane and sober agreements.
It's the nightmare of any small business owner or manager. He watches as a new employee – one he doesn't even recognize – completely fail at representing his company properly. Even if the new hire is well-intentioned, he is either not knowledgeable or lacks the necessary customer service skills and a customer is lost or even angered.
The owner will then react in a somewhat predictable way and either fire or severely reprimand the employee and bring in somebody new. While this “turn and burn” attitude towards their employees – especially the lowest paid ones – is common among managers, other, savvier ones realize that the fault lies with the company's business practices. In fact, the better managers understand that the rate of employee turnover has a significant effect on their business in more ways than one. Just consider these three:Company Budget
– You may think that it is cost-effective to run through new hires as fast as possible to find that one “gem” of an employee. Not so fast. Good employees are made not discovered. It takes time, energy and a good training regimen to mold even the best-intentioned people into model employees. On the other hand, expending that time and energy – not to mention the aggravation involved – in training people who will leave in a month or two is costly. Simply put, you cannot afford to hire and train three people for every available position. Employee Morale
– Hiring a “warm body” solves an immediate problem but it is only a stopgap measure if the new hire proves to be less than satisfactory. In addition to making obvious mistakes, they are also a drag on your other employee's morale as the new hires do not pull their weight and make the other, better employees compensate for their shortcomings. It is a simple fact that most people will take responsibility for their own actions but do not want to clean up other people's messes. This problem is especially problematic if the new hire is in a position of some responsibility and subordinates are doing the real work. Customer Service
– Even more important than your employees' satisfaction is that of your customers. In general, your employees will give you another chance but you are extremely lucky if a dissatisfied customer returns. For this reason, new hires should not be allowed to interact with customers until fully and properly trained. This goal can be accomplished through classes, on the job training or even “shadowing,” but it must be completed before any real customer interaction takes place. It should be obvious that a high turnover rate makes this process problematic to say the least. An Affordable Solution – Professional Employer Organizations
Poorly trained employees are the number one reason that customers are dissatisfied with a company whether it is for lack of knowledge, lack of people skills or simply being new to the job. Customers are willing to forgive many things but incompetency and rudeness are not among them. The problem is that most companies would rather concentrate on their core business and often give training the short stick.
Professional Employer Organizations are geared towards human capital management. Their competencies encompass recruiting, hiring and training as well as some of the more mundane aspects of the human resource world. Consider one the next time you see one of your new hires “drop the ball” and understand how much an inadequately trained workforce is really costing your company.
For tips on attracting and retaining top talent check out our white paper, Hiring the Best...
Small and mid-size businesses see the logic and plain good sense of pairing with a professional employer organization (PEO). Increasing regulations, direct and indirect pressures from the Affordable Care Act, and workers’ compensation insurance costs are making the move even more attractive and cost effective.
Perhaps more important, a new study by McBassi and Associates
. . . the evidence on employment growth suggests that PEOs are making it possible for their clients to grow more quickly than their peers
. This can be attributed to a variety of PEO-related factors discussed . . . PEO clients have access to a broader array of HR-related benefits and services
. Yet they spend less on HR administration than similarly sized peers, freeing up money that can be reinvested in the business
. Some of the benefits PEO clients are disproportionately able to offer – such as employer-sponsored retirement plans – play a major role in helping business attract and retain their employees. This too can have a tangible impact on business success: it is easier to keep key-value employees, while turnover-related costs are reduced
. Finally, freed from many HR administrative burdens, executives and managers of PEO clients can focus more of their time on strategy and growth
. These factors all combine to yield faster growth of PEO clients relative to other businesses. Needs to Consider:
Before you line up to meet PEO providers, prepare a checklist to confirm your due diligence:
- Certification: Membership in the NAPEO and certification by the Employer Services Association Corporation (ESAC) can indicate organizations serious about their present and future. NAPEO keeps them current on professional ethics and standards, and ESAC provides bonding for financial commitments. PEOs can also elect to have their financial statements reviewed by independent auditors.
- Compliance: As PEOs have multiplied and come to do business in more states, they have multiplied their compliance challenges. They must comply with the various state taxing authorities and labor regulations as well as frequently changing federal requirements. In addition, some states are just addressing co-employment as a regulatory issue, and PEOs must meet those changing expectations. Employers need formal evidence of compliance with these issues.
- Transparency: A provider of choice will readily provide extensive financials on their condition and performance. In a co-employment relationship, their numbers become yours – so to speak. You cannot afford the risk of partnering with a company with any evidence of financial insecurity, nor can you commit without passing those financials on to your financial advisors for approval.
- Customer Service: Almost every problem you can visualize is a picture of crisis scenario. When anything goes wrong, the first effects will appear in employee relations. And, anticipating that there is stress in and resistance to all change, you want assurance that you have immediate and first-person contact to customer support service. You will want live call centers, dedicated relationship support, and demonstration of ability to handle call volume.
- Employee Access: The ability of the PEO to relieve Human Resources of its administrative load is a deal maker. But, if the employee cannot access the system with ease and convenience, it is counterproductive. Employees need easily navigated and secure access to their payroll, HR data, and benefits information. You may want to recruit employees into the bidding process to test their reaction.
There are, of course, other concerns you want to investigate: testimonials, administrative fees, service agreement provisions, and risk management experience. And, chief among your concerns should be whether the professional employer organization meets your specifically assessed needs. In any case, there is pressure to move towards a PEO relationship, but move methodically and with deliberation.
Without a doubt, the hiring of suitable employees is one of the most important activities that will engage a growing company. It is not a task that should be taken lightly as hiring unsuitable candidates can create an entire maelstrom of problems from lowered morale through poor customer service to lengthy and entangled legal proceedings. Here are a few reasons why your hiring process many be broken and how to fix it:
You Hire Under Stress
This is probably the most overdone – and accurate - sayings in business today yet many business owners fail to heed it. In short, the worst time to hire is when you are in desperate straits and any “warm body” will help to stem the tide.
Instead, the more prudent business owner is always on the lookout for talent since they know that turnover is a given. Being proactive in this regard may seem somewhat callous since you anticipate the loss of less than satisfactory employees but it is essential to keep a business running at its best.
You Do Not Delegate Hiring to your BEST Subordinates
Your employees are the bedrock of your business and a lack of attention in hiring acumen will eventually manifest itself as a problem elsewhere in your business. In short, you need to put your best people, if not yourself, in this position. At the very least, you must be evaluating the hiring decisions made by your subordinates.
Most small businesses fail in their hiring practices because they do not specifically designate a human resource manager. While this act may seem trivial, it can have tremendous repercussions throughout your organization especially if you are growing at a rapid pace. Again, find the right person for this job, allow them the leeway to hire properly and support them in all their HR initiatives.
You Forget to Train, Train, Train
Nothing is more disheartening for a new employee than to be thrown into an unfamiliar situation and then be expected to perform up to par. It's simply a lose-lose situation. Instead, spend the time to adequately train people so that they feel good about their performance. It will result in happier trainees, less aggravated senior employees and happier customers.
Training starts on day one with orientation. Just letting the new people know “who is who” and “what is what” can go a long way towards relieving a lot of the jitters that make new employees nervous and old employees anxious. In the end, for a relatively small investment in training, your entire organization and, more importantly, your clients will benefit.
You Ignore Your Current Employees
One of the best sources for new employees is your old employees. For whatever reason, the best employees seem to congregate with like-minded individuals. In other words, ask your best employees for recommendations on who you should hire. While you must still complete your due diligence to ensure that the new employee has the necessary qualifications, an endorsement from a solid, existing employee is a great first step in finding the best and the brightest.
Making the best of this situation is not a trivial matter. You must actively engage your current workforce to help find new employees. And, not for nothing, this means offering real rewards to the existing employee who brings in a new hire. Consider such things as simple bonuses, days off with pay and even contests with substantial prizes.
You Forget the Real Need
While the old adage that “nothing is more important than your people” is obviously true, it is not always easy to follow this tenet in a day-to-day practical manner. On the contrary, many managers and business owners must be reminded on a regular basis that hiring is an ongoing process. Simply put, attention must constantly be paid to this task and it should always be high on any manager's priority list.
The bottom line? Make sure that hiring is a priority and that your in-house people and systems are supporting it. Otherwise, you may find yourself surrounded by a team of mediocre employees who are incapable of being fired as they do a reasonable job but also cannot help hire the real team that would make for a truly spectacular business.
An Alternate Solution
Professional employment organizations have the people and the resources to handle the hiring process for your company. In fact, human capital management is their core capability and letting a PEO handle your hiring and other HR functions will allow you to concentrate on your core competencies and build your business.
For more on hiring the best, download our white paper, Top Tips for Attracting & Retaining Top Talent.