When Should You Bring in a Pro, Bro?

What’s the most important asset of your business?  How about its biggest potential liability?  The answer to both questions, for most business owners, is “people.”

How can you protect your most important asset?  What can you do to attract, qualify, train, energize, and retain the best people?  While you’re doing that, how will you be sure you’re checking all the boxes and filing all the forms that the government wants, much less the stuff that your lawyer and your accountant “recommend?”  Oh, and how will you provide your employees with the information and access to the resources that they’ll need to administer their pay and benefits?  Equally or more importantly, where will you find the time to do all this, bro?

According to a recent Business News Daily report, “A Guide to PEOs and Employee Leasing” (February 27, 2018), over 150,000 small businesses have turned to a “pro” for help with these tasks – a professional employer organization (the acronym commonly used is “PEO”).  The article says that there are over 800 PEOs operating in the U.S.

If you’ve considered outsourcing payroll and employment compliance, you may already have encountered the acronym “PEO,” and chances are that the message you received wasn’t positive.  You may have heard that a PEO “wants to get its hooks” into your business by taking over your payroll and compliance.  Some found it difficult to untangle from the PEO when they weren’t satisfied.  You may also have heard that a PEO will get in the way of your hiring and firing decisions.  Like most outsourcing situations, finding the right provider is probably the most important factor that will affect whether it’s a good solution for you.

The typical PEO serves as the “co-employer” alongside your company.  This means that the PEO acts as the employer of record to process your company’s payroll, cut your employees’ checks, withhold taxes and report them, pay insurance premiums, handle garnishments, and do other administrative tasks.  You and your staff may not like doing these things and you may not be very good at doing them.  By using a PEO to handle these tasks, your company takes advantage of the efficiencies of scale the PEO develops by handling these tasks for your employees along with the hundreds or thousands of employees of the PEO’s other clients.

I asked my friend Knight Hinman of the human resources outsourcing company BBSI what a business owner might look for when considering outsourcing the human resources function.  Knight suggests that an outsourcing solution should, at a minimum, give a business owner time. The solution should let you get out of the boiler room to spend more time at the helm of the ship.  A human resource outsourcing solution should take the compliance headaches off your desk and assure you that your business is meeting its obligations to its employees and the government.

In addition to payroll and reporting services, some providers also help you create safety programs, offer human resources advice and direction, ensure legal compliance, and even write and update employee handbooks.  The right provider may even help you offer your employees better benefits and choices than you might be able to find by yourself.  You’ll probably get better workers’ compensation coverage, lower premiums, and better human resources protection too.

According to Knight, there are other, not-so-obvious ways that an outsourcing solution creates time for the business owner.  For example, a typical workers’ compensation policy requires a periodic payroll audit.  If the outsourcing solution offers a “pay-as-you go” workers’ compensation program, you’ll pay the premium – based on a percentage of payroll – at the same time you pay your employees.  You’ll never suffer through another audit or see another bill for a supplemental premium.  Chances are that your premiums will also be below those offered by a traditional insurance carrier.

Even better, if the outsourcer is self-insured then it’s not subject to rules of the National Council on Compensation Insurance.  This means it can assign occupational descriptions to your employees in ways that make sense.  For example, if you employ a project manager whose job involves occasionally climbing a ladder or stepping on a roof, she won’t be assigned to the same category as a full-time roof installer.  And if the project manager does, unfortunately, suffer an injury and the outsourcer is self-insured, the resulting claim won’t mean that you’ll pay a deductible or that your premium will go up.

So… no more forms and paperwork, no more cutting checks, fewer audits, and lower cost?!  Great!  What else can you ask for?  Many PEOs stop there, but the author of the Business News Daily report I referred to above recommends searching for a provider that also offers a team of subject matter experts to handle your human resources, payroll, benefits, and risk questions.  Knight also suggests looking for a comprehensive human resources solution that includes consultations with subject matter experts who can give you one-on-one support when you need it.

Knight refers to this kind of service provider as a human resources outsourcer (and with the more user-friendly acronym “HRO.”)  An HRO offers help, for example, with the interview process or, as will undoubtedly happen, what to do when you need to let someone go.  Wouldn’t it be nice if you could pick up the phone and ask an expert for help with handling these situations?

An HRO can also advocate for you if the Department of Labor, the Occupational Safety and Health Administration, or the IRS has questions about your employment practices or wants to perform the dreaded audit.  An HRO can offer employment practices, insurance coverage and consultation about best practices to help keep you out of trouble.  Ultimately, the HRO’s goal should be to keep you out of these kinds of disputes in the first place.  But if you find yourself embroiled in one of these fights, the HRO should be there to help you get through it.

An HRO solution at this level might also provide supervisor and organizational development, coaching and mentoring, and help with implementing processes and systems for your employees.  An HRO that advocates for you and partners with you to help you run a better business and protect you from the pitfalls of being an employer provides great value, by helping you see the storms and chart a course to deep, smooth water – sort of like human resources “GPS.”

Lastly, and perhaps the most important point Knight shared with me, the HRO should maintain its own staffing levels to ensure that you continue to get timely, personal service as the HRO adds more clients.  Few companies can promise that your service team won’t change over time, but you should look for a provider’s commitment to client service that won’t deteriorate.

The right HRO can help reduce the risks you face running your business, increase employee productivity, and improve your company’s culture.  Like your other trusted advisors, it provides business guidance to help you identify and achieve your long-term goals.

If you’d like to meet Knight, or if you’d like some more ideas about how an HRO might help you, please feel free to call me at 303-831-1411.