Succeeding in the Recruiting and Selection Business: A guide for PEOs & ASOs

Transcription

1 Succeeding in the Recruiting and Selection Business: A guide for PEOs & ASOs

2 SECTIONS Brief history of PEOs & ASOs An industry evolves What s required to enter the space? The tools to be successful Pricing Models that work Rolling it out to customers Letter From Adam Robinson CEO of Hireology The Professional Employer Organization (PEO) and Administrative Service Organization (ASO) marketplace is changing rapidly. But you already know that. You know that because you re competing in that marketplace, every day. You know that healthcare laws are transforming the ways you can make money, and that competition is driving you to create a more differentiated offering. Your customers are telling you how they want you to change as well, pushing you into other service areas with which you might not be entirely comfortable. One of the high-growth areas in PEOs & ASOs is in recruitment and selection. Customers have said things to you such as, You re great at HR administration, payroll, and benefits... but can you help us find the right people and run a better recruiting process? Or even, Can you do the screening for us? What we know from over 15 years in the recruitment and selection business is that for PEOs & ASOs to be successful in this new line of business, you have to have the right tools. In this ebook, Hireology outlines the basic concepts and tools that you need to know before jumping into this exciting and, potentially, profitable line of business. With the right tools and technology partner, you can be wildly successful in adding recruiting and selection to your service offering. It s a pleasure to share our expertise with you. Sincerely, Adam Robinson, CEO, Hireology

3 Brief history of PEOs

4 Brief history of PEOs 4 NAPEO NAPEO The National Association of Professional Employer Organizations (NAPEO) is the largest trade association for professional employer organizations (PEOs) nationwide. NAPEO provides robust member resources, vital networking and referrals, hard-hitting education, and effective public relations and marketing support. NAPEO advocates for the interests of its PEO and ASO members at all levels of government. [1] Professional employer organizations (PEOs) are described by the National Association of Professional Employer Organization (NAPEO) as providers of comprehensive human resources solutions for small businesses. Payroll, benefits, HR, tax administration, and regulatory compliance are some of the many services PEOs provide to small and growing businesses across the country enable clients to cost-effectively outsource the management of human resources, employee benefits, payroll and workers compensation. PEO clients focus on their core competencies to maintain and grow their bottom line. Businesses today need help managing increasingly complex employee related matters such as health benefits, workers compensation claims, payroll, payroll tax compliance, and unemployment insurance claims. They contract with a PEO to assume these responsibilities and provide expertise in human resources management. This allows the PEO client to concentrate on the operational and revenue-producing side of its operations. A PEO provides integrated services to effectively manage critical human resource responsibilities and employer risks for clients, and delivers these services by establishing and maintaining an employer relationship with the employees at the client s worksite and by contractually assuming certain employer rights, responsibilities, and risk. (All content taken from NAPEO Website) [1] NAPEO Website, 2013, [2] NAPEO Website, 2013,

5 Brief history of PEOs 5 The ASO Model PEOs close relative is the ASO, which is short for administrative services organization. An ASO provides outsourced solutions to meet the administrative and HR needs of the client while the client retains all employment-related risks and liabilities. The term ASO was established by the PEO industry in the late 1990s in order to distinguish between selective administrative support and fullscale PEO services. [1] The difference between the two types of service is that, in an ASO arrangement, the employer remains the employer of record for tax purposes, not a co-employer....there is no co-employment with an ASO arrangement. ASOs are built for larger companies that need payroll, workers' compensation, health and wellness benefits and HR support & Services done for them. Generally the ASO model works well for companies over 100 employees. Although many people confuse an ASO model with a PEO model, there is no co-employment with an ASO arrangement. For the rest of this ebook we will refer to both ASOs and PEOs as PEOs since ASOs are simply a service of PEOs. [1] XcelHR Website, 2013,

6 Brief history of PEOs PEOs by the numbers 250,000 small and mid-sized businesses & 2.5 million people are part of PEO arrangements. 6 four 4-6 million people have access to healthcare provided by PEOs of small businesses in PEO relationships of US small businesses offer employee retirement plans to six million of PEO s members offer retirement plans to their small businesses. 40 % upgrade their total employee benefit offerings as a result of the PEO relationship. 27 % 95 % 40 STATES To date have adopted some form of PEO legislation and PEOs operate in all 50 states. All facts and figures taken from NAPEO Website, 2013,

7 An industry evolves

8 An industry evolves 8 TheGrowing BuRDEn of Employment Law and Regulation Case Law Common Law Case Law Common Law Davis-Bacon FICA FLSA IRC Local Law NLRA RLA State Law ADA (age) ADEA CAA Case Law CCPA CERCLA COBRA Common Law CRA CWHSSA Davis-Bacon EPA ERA ERISA FICA FLSA FUTA FWPCA IRC Local Law LMRA LMRDA MOSCA MSHA NLRA OSHA PDA RLA SDWA State Law SWDA TSCA VEVRAA ADA ADA (Age) ADAAA ADEA Adoptions Act AHERA AIR21 AJCA ARRA BLBA CAA Case Law CCPA/CPCPA CCRA/CCRRA CERCLA CHIPRA CLASS Act COBRA Common Law Copeland CRA 64 & 91 (Civil Rights) CRA (Com. Reinvest) CWHSSA Davis Bacon DFWA DOMA ECPA EGTRRA EPA EPA/NEPA EPPA ERA-EPA ERISA FCRA FDA FICA FLSA FMLA FRSA FUTA FWPCA GINA HIPAA HIRE Act HITECH HMO INA IMMACT IRC IRCA By 1900 By 1940 By 1980 Present Day ISCA JCWAA Ledbetter Act LHWCA LMRA LMRDA Local Law MHPA MHPAEA Michelle s law Miller Act MOSCA MSHA MSPA/MWPA NEPA NLRA NMHPA NTSSA OSHA OWBPA Walsh-Healy PDA PFEA PPA PPACA/HCERA PRWORA PSIA REA Reid-McConnell RLA RPA SBJPA SDWA SOX SSA STAA State Law SWDA TEFRA TIPRA TRA-1986 TRA-1997 TSCA USERRA VEVRAA WARN WRERA As companies grow and expand to other states, they need a partner who have their best interest in mind. -Patrick Cerone, EmPowerHR NAPEO estimates the PEO industry grew a very robust $8 billion in gross revenue in A relatively youthful industry, around 30 years old, PEOs have vast room to grow. The PEO industry has barely scratched the surface of the potential market, but the current projected growth rate for PEOs, coupled with their high client retention rates, supply ample evidence of an industry on the move. [2] NAPEO PEOs help their client companies manage the growing burden of employment law and regulation [1] [1] NAPEO Website, 2013, ttp:// [2] NAPEO Website, 2013,

9 An industry evolves 9 NAPEO estimated in a November, 2012 press release that, Approximately 250,000 businesses use PEOs, and PEOs provide access to healthcare coverage for as many as six million people. Through a PEO, the employees of small businesses gain access to employee benefits such as 401(k) plans; health, dental, life, and other insurance; dependent care; and other benefits typically provided by large companies. According to a recent study, 40 percent of small businesses in PEO arrangements upgrade their total employee benefit offerings as a result. [1] The Affordable Care Act (ACA) dictates that, starting in 2014, Americans must have "minimum essential coverage" or pay a tax penalty. This essential coverage could include health insurance purchased on or off an exchange, coverage under a government sponsored program, such as Medicaid, and an employersponsored plan or group plan. [2] This requirement means that thousands of small businesses will need assistance implementing a healthcare plan into their organization. Professional employer organizations (PEOs) have critical expertise on a broad array of employee benefits and human resources issues, and we look forward to working with the Obama Administration in these key policy areas, said NAPEO President and CEO Pat Cleary. PEOs are already the go-to source for small businesses looking for help in preparing for and complying with the healthcare benefits changes brought on by reform, so we feel we have an important role to play as the implementation of the ACA proceeds. [1] NAPEO Press Release, 2012, [2] Cigna Website, 2013, PEOs are already the go-to source for small businesses looking for help in preparing for and complying with the healthcare benefits changes brought on by reform, so we feel we have an important role to play as the implementation of the ACA proceeds. --NAPEO President and CEO Pat Cleary Healthcare Reform

10 An industry evolves How can a PEO gain an edge in the competitive industry? 10 Early stage and growth companies stand to benefit the most from what a good PEO can deliver. The PEO that offers simply general expertise will have a difficult time competing with those who have become experts in various HR disciplines including healthcare." -Patrick Cerone, EmPowerHR With fierce competition for customers and a changing profit opportunity due to healthcare reform, PEOs will find it harder and harder to compete with others in the field. Changing healthcare requirements and navigating the complexity of new employment laws means that more and more small businesses will be searching for a PEO to help them out. The key question: how do you get them to choose your services over your competitor s? One way is to determine what services you can offer that other PEOs don t and Hireology has found that the recruiting and talent management field is an untouched service for many PEOs. In fact, there is no information on NAPEO s website about recruiting, hiring, and interviewing nor is there an abundance of statistics about the number of PEOs who do provide such services. This gap in service coverage is a huge opportunity for PEOs looking to get ahead of the competition. The following sections will detail how to enter the recruiting space, what works, and how to successfully roll it out to customers.

11 What s required to enter the space?

12 What s required to enter the space? 12 In order to enter the recruiting and selection space, you will need to ensure you are fully prepared to handle the challenges of being in a recruitment and selection services business. Many PEOs do not make it past the stage of simple interest and end up giving up when challenged with the overhaul of information, tools, and content. The following sub-sections of this chapter outline the basic needs of a PEO interested in recruiting and hiring. Mindset Technology

13 What s required to enter the space? A different mindset 13 As a PEO you manage payroll, benefits, HR, and tax administration, which are all activities best served with a administrative mindset and close attention to detail. Part of entering the recruiting and selection space is having an understanding that your employees, who currently manage the administrative processes for clients, may not be well-suited to driving the recruiting and selection process. In order to enter the recruiting space, you will need to change your mindset from administration to sales. Fortunately, technology can greatly assist your recruiter with finding the right candidates, interviewing them, verifying them, and hiring them all through one easy process. This is due to one very simple reason: recruiting requires a sales mindset. Essentially, a recruiter is convincing a candidate to work for their client s organization and then they are convincing the employer to give the final OK to this candidate. The right employee within your orgnization will need to be both influential and determined, with strong communication skills. Above all, the resource you assign to deliver this service will need to be someone who can get candidates and customers to make a final decision.

14 What s required to enter the space? 14 Technology If you are going to enter the recruiting space, you will need technology to drive efficiency in the delivery of services. The common misconception that recruiting is simply finding the right candidate is widespread; recruiting is much more than sourcing candidates on the internet. In fact, that s the easy part. The challenge lies in setting customer expectations, selling the role to candidates, and getting both parties to agree to terms of an offer. The technology you choose must be systems driven and it must enable the seamless integration of candidate s information throughout the process. Your main goal is to not burden the customer (or your team) by having them chase down information from hiring managers like feedback on resumes or interviews. Many PEOs don t realize that integrating psychology-based selection practices into a business model is a real differentiator for this line of business, because most other providers are locked into the sending resumes model. When you invest in a selection management system, make sure it s giving you information about the behavioral characteristics of the candidates, because this information allows you to make recommendations based on more than just resume content. Once you re in the right mindset and have chosen a selection management system to help organize your hiring efforts, you are ready to take the next step into adding recruiting and selection into your service offering. If you re in the recruiting and selection space, you need solid technology. A good selection management system organizes, stores, calculates, verifies and scores your flow of candidates. A selection management system NOT just an Applicant Tracking System (ATS) which simply tracks and organizes candidates that apply for a certain position (most selection management systems have an ATS built in). Your selection system should contain all of the tools and resources you need to deliver a full range of services - yes, you need ATS functions, but you ll also want interview guides, a candidate scorecarding system, and access to skills tests, behavioral assessments, and background checks, among other things.

15 How to be successful

16 How to be successful 16 If you want to excel in recruiting and selection services, you ll need specific tools. Here s an outline of the main categories of tools you ll need to know about in order to deliver the best possible service to your customers

17 How to be successful 17 Applicant-Tracking-System Also known as an ATS, an applicant tracking system is a software application that enables the electronic handling of recruitment needs. An ATS is very similar to customer relationship management systems, but are designed for recruitment tracking purposes. An ATS is a lifesaver for recruiters who get flooded with resumes and applications and have no technology to organize them. A good ATS will provide the user with a customizable survey for applicants to take immediately after they apply - resulting in a percentage score. The hiring manager, whether it be a PEO employee or client, will be able to use that score to determine interest in interviewing.

18 How to be successful Job Boards A job board is a web-based resource that posts open positions where applicants can submit their resumes and hiring managers can submit a job. Generally job boards offer premium or sponsored plans where the hiring manager or company can pay extra to make their jobs appear at the top of the page or search. Job boards are an important part of the recruitment process as they are the third source of external hires, behind referrals and career sites. If you want an adequate pool of candidates to choose from, job boards should be the first place you post your open positions. Verification Services Background checks, personality assessments, and skills testing all fall under the verification services umbrella. In order to be successful in recruiting you must verify the new hires. Create a process of recommended tests for each new hire which should include a collection of background checks and skills testing to ensure you have the right person working for your clients. 18 Selection Management These days, it's all about selection management, not resume storage. Traditional Applicant Tracking systems are extremely limited in their ability to help managers make better hiring decisions. You ll be able to store and organize resumes, perhaps connect to a few job boards, and run some reports, but functionality typically stops there. Selection Management takes the four existing categories of hiring-related HR Technology - applicant tracking, testing and assessment, verification, and onboarding - and combines them into one integrated platform to answer the "which person should I hire?" question for you and your customers. Selection Management Systems, pioneered by Hireology, bring all of these features together without the need for multiple vendors or costly integrations. For companies looking for selection management that's easy-tobuy and easy-to-use, a Selection Management System is the way to go. Once you have your systems and technology up and running smoothly, it s time to move on to the next step of adding the recruiting process to your service offerings.

19 Pricing Models that work

20 Pricing Models that work 20 $Ready to offer your new services to clients? Before you make the jump and begin promoting your recruiting capabilities, think through the pricing structure that will best fit your organization. Structure your new recruiting services to build your business using one of the following pricing models

21 Pricing Models that work Refer The Technology Interested in recruiting and hiring services but don t want to be directly involved? Monetize your customer base by partnering with a selection management technology vendor or recruiting service provider and refer your clients to their product or service. 21 $ This model is a win-win situation for both parties involved. Value is provided to your clients when you refer them a tool that helps organize and streamline their hiring process. Value is provided to you by the company whose solution you are recommending in the form of commissions or referral fees. If you are hesitant about entering the recruiting space or maybe don t have the resources to sacrifice in order to conquer it, the referral model is the right structure for your organization.

22 Pricing Models that work PEO 22 = $ Fee-for-Services There are two ways to charge directly for recruiting services: as a percentage of a candidate s salary, and on an hourly or per-interview basis. In the percentage of salary model, also known as contingent recruiting, your clients would pay you a percentage of hired-candidate s base salary as a finder fee upon a successful placement of a candidate. The upside is a much higher fee than is the case with other pricing models. The downside is that you only get paid if you re successful. There is a real risk in this model if your customer isn t 100% committed to hiring someone, because you could end up burning hours that never produce revenue. Another option is to offer pre-screening or interviewing services on a per-candidate or hourly basis. The fact is, the pain point in recruitment is narrowing down those 100 resumes to the the 5-10 candidates that a manager actually wants to interview. Clients will pay an hourly or per-interview rate for your PEO/ASO to screen out the candidates who don t meet the qualifications. While the fees are lower, the risk of a zero-revenue situation is eliminated. It s also a much lower price point for your customers. Both models put your PEO or ASO in charge of your client s recruiting and hiring needs including sourcing, interviewing, verifying, and hiring. Your employees would handle tracking candidates, scheduling the interviews, rescheduling the interviews when a candidate cancels, and developing interview guides. Your employees would also conduct the interviews and score the candidate s answers to determine who should be hired. In either case, make sure you have the resources to manage these model successfully and efficiently. Under-staffing a recruiting offering is a sure-fire way to underwhelm your customer!

23 Pricing Models that work 23 Bundling the service As a PEO you are already familiar with the per-head fee your clients pay. In this model, your clients would pay an additional amount on top of their per-head service fee in order to secure recruiting and hiring services for their business. $ $ $ $ While this model has merit in that it s already understood by your customer, this model will not work if your customer is only hiring a limited number of people in a year. Per-head upcharges for recruiting are a good fit for lower-wage, hourly workers who are plentiful in supply and are hired in large numbers annually. An alternative arrangement is to simply add a monthly service charge to your client s monthly arrangement. Fees can range from $1500 per month to upwards of $7500 or more, depending on volume.

24 Rolling it out to customers

25 Rolling it out to customers 25 Don t forget about the most important part of this entire process, rolling it out to your clients and customers! Here s a step-by-step process to ensure success when advertising and implementing a recruiting service into your service offerings

26 Rolling it out to customers Set the right expectations. What are you planning to accomplish with a recruiting service? Add more clients, satisfy more customers, or something different? Setting expectations will align your goals and set your business up for a structured process. 2. Carve out the process. Determine the process your PEO is implementing in order to recruit and hire. Are you are conducting and rescheduling interviews? Who is your background check vendor? What pricing structure are we using? These questions should all be answered before you begin the promotion of your new offerings. 3. Start small. To build confidence in your recruiting process ask a customer if they are open to being a beta customer. Start the willing customer on a pilot, and work out the kinks in your process. You may have to give this guinea pig a break for being the first customer!

27 Rolling it out to customers When you figure it out, expand it. A well-oiled machine will produce more product. The same goes with your recruiting and hiring process; if its streamlined, organized, and successful - introduce it to your customer base and get ready to build your business. 5. Promote it. Building a great team is every small businesses goal at some point. By introducing your hiring and recruiting capabilities as an added bonus to what you already provide businesses, be ready to be bombarded with requests! Promote your services accordingly with an customer-wide , a one-pager of the capabilities, and a case-study of your beta customer.

28 28 "Hireology has given our PEO the hiring and recruiting tools we need to attract new clients, provide solutions for our current clients and gain a competitive edge over our competitors, we recommend Hireology to all of our clients if they need help picking the right person." Lonnie Kiracofe, owner of Innovative Employer Solutions. Hireology s award-winning Selection Management System helps companies organize their hiring process and leverage data to make better hiring decisions. Franchise systems, banks and financial institutions, healthcare systems, dealer networks, and other multisite operators use Hireology s web-based Selection Manager to deliver consistent and repeatable hiring decisions in the field - leading to lower turnover and increased profitability per location. For more information, please visit #1 in Talent Management