Is New Hampshire finally getting it? PEO and Employee Leasing
Posted by Kristian Svindland on June 21st, 2011
Maybe, recent turns in the State house look promising, as noted in this memo from NAPEO (National Association of Professional Employer Organizations):
Critical PEO Provisions Advance in New Hampshire
All good, but we still call it “employee leasing.” Rome wasn’t built in a day. Weirs Beach, maybe, but not Rome.
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Michigan clarifies PEO, professional employer organization, definition and co-employment
Posted by Kristian Svindland on June 17th, 2011
Here is the link to the legislature, which goes into effect July 1, 2011:
http://legislature.mi.gov/doc.aspx?mcl-338-3723-new
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How many HR Professionals does it take to change a light bulb? Less with PEO or BPO or ASO.
Posted by Kristian Svindland on June 16th, 2011
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?
- One to write up a job description
- One to hire the individual to change the bulb
- One to explain the benefits the new employee is entitled
- One to act as risk manager to be sure that all OSHA rules and regulations are followed and reported
- One to write up the performance evaluation
- One to lay off the employee
- One to inform the employee of their ongoing benefits and access to COBRA, et cetera
- 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.
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Options in HR Outsourcing (Human Resources Outsourcing) – From Payroll to PEO (Professional Employer Organizations)
Posted by Kristian Svindland on June 6th, 2011
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?
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How many employees do I need to be considered by a PEO (professional employer organization)?
Posted by Kristian Svindland on June 3rd, 2011
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.
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Definition of employee leasing, from Entrepreneur Magazine
Posted by Kristian Svindland on May 26th, 2011
Good info from Entrepreneur Magazine (short read, too.)
http://www.entrepreneur.com/encyclopedia/term/82362.html
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Can a Sole Proprietor use a PEO (professional employer organization)?
Posted by Kristian Svindland on May 25th, 2011
Yes. And, no.
If the owner/sole proprietor is willing to put themselves on payroll and continue to have a set salary. Since the PEO (professional employer organization) arrangement is derived from the employee leasing concept, the PEO becomes the employer of record.
That said, some PEO’s will not take on a client with fewer than five worksite employees and some have set minimums at ten.
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What is the “soft cost” of Human Resources? Can a PEO or HR outsourcing provider quantify?
Posted by Kristian Svindland on May 18th, 2011
Payroll is a commodity.
Benefits will cost what they cost.
Risk management, aka, workers compensation insurance will ultimately be based upon your experience.
So, what is the “soft cost” of human resources? There have been many studies and questionnaires floating around to make a case for HR outsourcing services. What we see is that most companies do not buy into the concept of “soft costs” until they become “hard costs.” Meaning, we do not get a business owners attention until after the fact. And those facts are turnover and non-compliance issues (fines) and workers compensation modifiers that give owners nose bleeds.
Our goal should be to take all aspects of a company’s human resources department into account when proposing a solution. Line-by-line, department-by-department.
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What are SUTA or SUI Cutoff’s and Does My PEO Recognize?
Posted by Kristian Svindland on May 11th, 2011
SUTA (state unemployment tax assessment) or SUI (state unemployment insurance) is charged by every State to businesses to cover unemployment claims. Every business is rated on their claims and given a base rate that they must pay to stay out of legal hot water with their State.
But, what are cutoff’s? Once you have paid a particular employee a certain amount of pay over the course of the year, the SUTA is cutoff. For example, in the State of California, once you have paid an employee $7,000 in one year, you no longer have to pay unemployment taxes on that employee. The cutoff point varies from State to State.
How does a PEO handle this? It varies from PEO to PEO. Some honor cutoffs…some ignore them entirely. Others smooth out your SUTA rate over the year. So you may see a SUTA rate billed at a fraction of what you would normally expect…but it is likely that you will continue to pay that rate for the full year.
You should check with your PEO or HR Outsourcing provider to see how they handle cutoffs.
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What happens when my HR outsourcing provider or PEO gets bought?
Posted by Kristian Svindland on May 10th, 2011
Most likely, the buying provider or PEO will have you conformed to their processes and systems within 18 months. Now would be the best time to re-evaluate that relationship to see if it is truly what you were hoping and to see if there are better options.
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