HR outsourcing: A step-by-step guide to professional employer organizations (PEOs)

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Susanna Wiggins
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1 HR outsourcing: A step-by-step guide to professional employer organizations (PEOs)

2 TABLE OF CONTENTS The unique HR challenges of small businesses The power of PEOs How a PEO can benefit your business How PEOs work Finding the right fit Insperity Workforce Optimization

3 The unique HR challenges of small businesses Companies of all sizes struggle with growth. But as a small business, to stay competitive, you re constantly forced to do more with less. Not only do small businesses have fewer resources to deal with daily HR responsibilities, they also face many of the same regulatory burdens that their larger competitors face. The good news is, despite your size, you can still come out ahead of the pack. Outsourcing even a portion of your HR tasks can afford you the freedom to focus on core activities that help you grow your business. HR outsourcing HR outsourcing can take many forms, from basic payroll processing and timekeeping to complex regulatory compliance and benefits administration. The most comprehensive solution is a professional employer organization (PEO), which offers a full slate of HR services to its clients. DID YOU KNOW? There are more than 780 PEOs in operation today in the United States, and 156, ,000 businesses use them Source: National Association of Professional Employer Organizations (NAPEO) HR outsourcing: A step-by-step guide to PEOs 3

4 A PEO provides your company with access to these key resources: Better benefits for employees Workers compensation plan coverage and claim resolution assistance Professionals well-versed in employee recruitment, retention and management Precise, timely payroll and tax reporting Comprehensive employer liability management that lessens employment-related risk Relief from administrative duties that drain your valuable time and attention What you ll get in this e-book Our in-depth descriptions and real-world examples will give you a clear picture of how partnering with a PEO can help your business gain a competitive edge despite its size. In this e-book, you ll learn how to gauge your needs, vet service providers and quantify results. HR outsourcing: A step-by-step guide to PEOs 4

The power of PEOs Unlike the types of HR outsourcing companies that provide only one or two specific services, PEOs can handle the bulk of your business s HR tasks.

5 The power of PEOs Unlike the types of HR outsourcing companies that provide only one or two specific services, PEOs can handle the bulk of your business s HR tasks. As a PEO client, you won t have to devote your valuable time to manual data entry across multiple systems or negotiating rates with benefit providers. You also won t have to hire additional staff to manage these responsibilities for you. DID YOU KNOW? Businesses in PEO arrangements grow faster, have lower employee turnover, and have a significantly higher rate of business survival than businesses that don t use PEOs. National Association of Professional Employer Organizations (NAPEO) 5

6 How a PEO can benefit your business Outsourcing all or even a portion of your HR duties can provide the following: 1 Access to comprehensive, cost-effective benefits for your employees Improve the overall cost and predictability of employee benefits, while maintaining the quality, options and features you want to offer. Health care coverage: medical, dental and vision Health care Flexible Spending Account (FSA) plan Life insurance and personal accident insurance Short-term and long-term disability insurance Adoption and educational assistance Commuter benefits 2 Reduced payroll and administration burdens By contracting with a PEO, you stand to benefit from a decrease in the time associated with payroll processing and maintaining wage records. You ll also receive reliable assistance with tasks such as: Payroll processing Tax reporting and deposits Paycheck/paystub preparation and delivery Garnishments At Insperity, 99% of first payrolls are run without a defect, and 99.8% accuracy is achieved on subsequent payrolls. 3 Assistance with federal and state employer-related laws and regulations A PEO should be able to: Administer payroll in accordance with federal and state laws, and properly report federal, state and local taxes Administer unemployment claims Respond to employment verifications Comply with federal laws affecting PEO-sponsored benefits (e.g., COBRA, HIPAA and ERISA) Assist with health care reform compliance HR outsourcing: A step-by-step guide to PEOs 6

7 4 5 6 Reduced liability PEOs have a vested interest in helping keep your business compliant with HR-related laws and will assist you with a variety of HR tasks, including: Employee handbooks Workers compensation claims support Interface with certain agencies Access to seasoned HR professionals PEOs employ knowledgeable professionals who specialize in HR and can be trusted to handle issues in a timely and thorough manner, including: Employee relations support Employee liability awareness training EEOC claim investigation and mediation Freedom to focus on core business issues Your time is valuable and better spent attending to tasks related to growth and profitability. The structure and design of Insperity s Group Health Plan helps us keep costs low while providing value to employees. The compound annual cost increase for group health insurance and related benefits paid by Insperity over the 10-year period from was 4.45%.* *The percentage reported is primarily based on the overall experience of the Insperity Group Health Plan and is not reflective of past changes or a guarantee of future changes to a client s comprehensive service fee. HR outsourcing: A step-by-step guide to PEOs 7

8 How PEOs work PEOs exist through a relationship called co-employment. Simply put, your employees work for both your company and the PEO. You maintain control of business decisions and operations, while the PEO manages most of your personnel-related functions (wage and benefits administration, I-9s, W-2s, etc.). Common misconceptions Although the PEO industry is more than 30 years old, some common misconceptions persist. Loss of control PEOs provide access to seasoned HR professionals, whose guidance and advice you can solicit when you need assistance. They assist you with the employee-related aspects of your company, but you maintain control of all business and operational decisions. Employees may not embrace the relationship There is minimal, if any, disruption to employees when you work with a PEO. They will see that they are being paid by the PEO and not your company, but will likely appreciate the greater depth and breadth of benefits offered as a result. Your Company SERVICE AGREEMENT EMPLOYEE RELATIONSHIP EMPLOYEES Existing HR staff will become obsolete PEOs often align with your company s existing HR department to provide much-needed expertise. External resources can prove invaluable when you are faced with high-risk HR situations. PEO Helpful tip: PEOs do not supply a workforce; they supply HR services and benefits to your company and its existing workforce. HR outsourcing: A step-by-step guide to PEOs 8

9 PEOs provide access to more HR services at a cost that is almost $450 lower per employee, compared to companies that manage their HR services in-house. Source: National Association of Professional Employer Organizations, 2016 Key Findings

10 Finding the right fit If you ve decided to partner with a PEO, here are 10 points to consider before making your selection: The financial strength and security of the PEO Verify that each company s financial statements are independently audited by a CPA; their risk management practices have been independently certified; and their operational, financial and ethical practices have been independently accredited. At Insperity, we re highly transparent with our financial information. Our clients feel secure knowing we have the capital to back our commitments. Established: 1986 Whether or not they re a certified professional 2016 revenues: $2.9 billion employer organization (CPEO) Publicly traded company In accordance with the Small Business Efficiency (NYSE: NSP) Act, the IRS now offers CPEO classification to PEOs Certified PEO that meet certain requirements. Partnering with a CPEO can provide you with significant benefits beyond those available through a non-certified PEO, particularly in the area of payroll tax reporting and remittance. Learn more about CPEOs. The breadth of their benefit plan options A PEO whose health plan centers around a state-specific provider won t work if you have employees in other states or plan to expand your business. A good PEO will provide your employees with access to a range of benefit packages from a variety of well-known, national medical insurance carriers. The technology and resources they provide Good PEOs also provide comprehensive HR technology, such as a human resource information system (HRIS) or a human capital management system (HCM), and offer full-service implementation to help you start benefiting from it right away. As a small business, you d likely find it difficult to acquire this type of feature-rich, all-in-one system without a PEO. Their client and professional references Ask for referrals from other businesses in your industry and/or geographic location. HR outsourcing: A step-by-step guide to PEOs 10

11 Their commitment to customer service Meet the people who will be serving you. Some PEOs charge extra to speak with a live representative, while others use call centers and expect you to speak with a different person each time you need help. A dedicated service team can be priceless. Their service and cost structure Many variables affect the cost of partnering with a PEO. Your company s size, overall workers compensation risk, and the benefits package offered to employees, will all play a part. Most PEOs bill based on a percentage of gross payroll or total number of employees. The Insperity service team averages 12+ years of experience in their respective fields. Our contact center resolves 95% of worksite employees concerns in under 6 minutes. The PEO s administrative expertise and competence What experience and depth does their internal staff have? Are they familiar with the employment laws applicable to employers in your state? Their staff support ratio A PEO that provides one service team member for every 100 client employees will likely have a faster response time than a PEO that provides one service team member for every 1,000 client employees. This ratio can help you compare the level of service you might expect from one PEO to another. The fine print Are the respective parties responsibilities and liabilities clearly laid out? What provisions permit you or the PEO to terminate the contract? Does the PEO carry employment practices liability insurance (EPLI)? What business coverage (if any) will you gain? Helpful tip: PEOs that aren t publicly traded are not required to share their financial information with you. HR outsourcing: A step-by-step guide to PEOs 11

12 PEOs give small businesses access to big-business benefits and help them address the issues they consistently report as their top concerns: healthcare, taxes and regulation. Source: National Association of Professional Employer Organizations, 2016 Key Findings

13 Give your business a boost with Insperity s PEO service With the Insperity Workforce Optimization PEO service, you ll receive all of the following: Fortune 500-level health insurance and benefits Choose from a range of benefit packages with a variety of insurance carriers. Precise payroll and HR administration Produce timely payroll (for your approval) and employment tax reports. We ll also handle much of your employee-related paperwork and other HR tasks. HR-related compliance Help limit employer-related liability by letting us take care of much of your HR-related issues and unemployment claims management. We ll also assist you in interfacing with certain agencies dealing with employee issues, as well as wage claims and I-9 audits. Billing transparency and reconciliation Know exactly what you re going to pay from start to finish. Our billed amounts are reported in detail, so you don t have to worry about unexpected costs. A professional HR service team not a call center Get a team of onshore, professional HR specialists ready to help with your day-to-day HR duties and provide tried-and-true, personalized guidance whenever you need it. Advanced software that streamlines your HR processes Enjoy the convenience and simplicity of a fully integrated HR technology platform. Our software automates administrative processes through a single system and provides detailed reporting. Spend less time on daily HR to-dos and more time growing your business. Contact us today to learn how our unmatched HR services and support can help. Call or visit insperity.com 13

14 ABOUT INSPERITY The American dream lives among those who start, staff and grow good businesses. These are the people Insperity serves. Running a business at speed requires HR mastery. That s the value we provide. Unlike the automated data processors, only Insperity follows through on the promise of a true HR partner. With our comprehensive co-employment, payroll, and HR software solutions, we cover all the details. Let us show you why we believe Insperity can be the best decision for every American dreamer now and forever. YEAR ESTABLISHED 1986 CLIENTS/EMPLOYEES Insperity serves 100,000+ businesses with more than 2 million employees. We serve businesses with employees from 5 to 5,000 Publicly traded on NYSE under ticker symbol NSP 2016 REVENUES $2.9 BILLION 61 offices across the United States with 2,600+ corporate employees CPEO Insperity has been designated a certified professional employer organization (CPEO) by the IRS* * The IRS does not endorse any particular certified professional employer organization. For more information on certified employer organizations go to Want to learn exactly how your business can benefit with Insperity? Call or visit insperity.com DM-W

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