Needs Assessment. Company Characteristics

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2 Needs Assessment Professional Employer Organizations (PEOs) have enjoyed a surge of popularity in recent years. The National Association of Professional Employer Organizations (NAPEO) reports that in 2008, the industry s gross revenue increased by $5 billion to reach a total of $68 billion. Today, owners of small to medium-sized businesses are increasingly contracting with PEOs to free themselves from daily human resource (HR) tasks so they can focus their attention on core activities. PEOs are staffed by HR professionals who not only have the expertise to handle standard employee-related tasks, but can also be trusted to stay abreast of legal and regulatory requirements unique to the businesses they serve. In becoming a PEO client, companies gain reliable assistance with compliance-related reporting tasks, unemployment claims, workers compensation claims, hiring and firing, safety training and more. PEOs generally establish fee scales based on the size of a company s workforce or a percentage of its total payroll. Considering the time and resources involved in managing a full spectrum of HR tasks, partnering with a PEO is often a cost-effective choice. Some business owners, however, are hesitant to work with a PEO because they fear they will lose control of their company. But many experts agree that with the right PEO, there is no basis for this concern. Business owners may have to learn to adjust to a PEO s procedures, but these practices only serve to help solidify processes and allow the company to function more efficiently as a whole. A PEO may also be more involved in some employee-related activities, such as safety and government compliance requirements, but again, this is only to protect the business from falling victim to litigation or fraud. For many business owners, there aren t enough hours in the day to get everything done. PEOs focus on taking pressure off small and medium-sized businesses in multiple ways. Company Characteristics There is no single industry or company size that benefits most from working with a PEO, but there are typically three distinct characteristics that make businesses a good match for a PEO relationship: 1. They see their employees as critical to driving revenue, productivity or effectiveness. 2. They say that reducing employer liabilities is important to them. 3. They place a high value on their time. 02

3 Common Pain Points For many business owners, there aren t enough hours in the day to get everything done. PEOs focus on taking pressure off small and medium-sized businesses in multiple ways, especially those experiencing difficulties in the following areas: Administrative overload. According to the Small Business Administration (SBA), small business owners spend, on average, up to 25 percent of their time processing employee-related paperwork. Tasks like payroll processing, writing job descriptions and coordinating benefit packages regularly require undivided attention. Meanwhile, other critical tasks pertaining to the management and development of the business are put on hold. For this reason, many small businesses find that handling all administrative duties in-house comes at the expense of overall growth and development. Access to affordable benefits. Benefits such as health insurance and retirement plans are a major incentive for employees. Unfortunately, it can be difficult for small businesses to find affordable coverage because it s not profitable for providers. Roughly 20 percent of small businesses offer a 401(k) retirement plan, says Milan Yager, former president of NAPEO. While it may save them some overhead in the long run, it makes the company less competitive, making it difficult for them to hold on to their employees. Yager says attracting and retaining workers requires providing benefits. Without benefits you re going to lose people to turnover, which kills a business, Yager says. Small businesses that don t offer benefits have a hard time competing with bigger companies, and are often left with less-desirable candidates for employment. Safety and HR concerns. Whether it s firing an employee or addressing a sexual harassment claim, handling employeerelated situations requires expertise and tact. One wrong move can result in a lawsuit that could ultimately destroy a business. Most small business owners don t know what they don t know, says Yager. Because of this lack of knowledge, many companies don t take the proper steps to ensure their employees safety and comfort in the workplace. One of the complaints often cited by employees leaving small companies is a lack of communication and written procedures, according to Yager. By not taking the steps necessary to set up rules that protect workers and core operations, there is a greater chance that business owners will find themselves in hot water. 03

4 Compliance with government regulations. Employers are obligated to comply with both federal and state labor rules and regulations. The Fair Labor Standards Act (FLSA), Family and Medical Leave Act (FMLA) and Health Insurance Portability and Accountability Act (HIPAA) are just a few of the government regulations that businesses must adhere to. According to the SBA, between 1980 and 2000, the number of labor laws and regulations grew by almost two-thirds. Employers are required to learn the ins and outs of these regulations and remain in compliance as they evolve and change. Failure to do so can result in considerable legal headaches. Recruiting and retaining quality employees. Maintaining a positive, healthy work environment is essential to attracting top talent. A worker that isn t satisfied, even for the most trivial reason, isn t giving the greatest service, says Yager. Small businesses often have trouble competing with larger firms in terms of employee benefits and other perks. It can also be difficult to establish procedures and policies to support employees daily work. Small businesses don t put value on policies and handbooks, says Yager. Because of this, many workers lack the guidance and support they need to be successful at their job. Frustrated employees will quickly look elsewhere for employment. As word spreads, the company s tarnished reputation may make new employees harder to come by. Budget Expectations The cost of partnering with a PEO varies greatly based on factors such as company size and industry. Business owners should contact several different PEOs and ask them for itemized quotes to ensure they are receiving the highest level of service at a price point they can afford. It is also important to consider the amount of time and company resources that are currently being devoted to tasks the PEO would assume. In many cases, outsourcing may end up benefitting the businesses bottom line. There s no greater opportunity for achieving [economies of scale] than using a PEO, which gives you greater efficiencies in risk management, workers compensation and human resources, Yager says. A PEO is able to offer each of these core competencies more efficiently than a standard business could achieve on its own. 04

5 To find out more or learn how Insperity can help your company, call us at Visit us at Insperity.com About Insperity Insperity TM, a trusted advisor to America s best businesses for more than 25 years, provides an array of human resource and business solutions designed to help improve business performance. Insperity Business Performance Advisors offer the most comprehensive Workforce Optimization TM solution in the marketplace that delivers administrative relief, better benefits, reduced liabilities and a systematic way to improve productivity. Additional offerings include MidMarket Solutions TM, Performance Management, Expense Management, Time and Attendance, Organizational Planning, Recruiting Services, Employment Screening, Retirement Services and Insurance Services. The information contained in this document is for general, informational purposes only and is not intended to be legal advice. This information is not a substitute for the guidance of a professional and should not be relied upon in reference to any specific situation without first seeking the advice of a qualified HR professional and/or legal counsel regarding applicable federal, state or local laws. Insperity and its employees make no warranties, express or implied, and make no judgments regarding the accuracy of this content and/or its applicability to a specific situation. A reference or link to another website is not an endorsement of that site or service. 05 MKT-W