PEO s: Friend or Foe to HR Professionals? What is a Professional Employer Organization (PEO)? The Co-employment Model

Transcription

1 PEO s: Friend or Foe to HR Professionals? Presented by Lisa Welshhons, SPHR Division President Merit Resources, Inc. What is a Professional Employer Organization (PEO)? Business model through co-employment that enables companies to cost-effectively outsource certain human resource functions, employee benefits, payroll/payroll tax and workers' compensation. Clients of PEO s focus on their core competencies to maintain and grow their bottom line. The Co-employment Model 1

2 What is Co-employment? The PEO relationship involves a contractual allocation and sharing of employer responsibilities between the PEO and the client. As co-employers with their client companies, PEOs contractually assume substantial employer rights, responsibilities, and risk through the establishment and maintenance of an employer relationship with the workers assigned to its clients. Who Controls the Employees? The Client Company is the worksite employer, directing work, scheduling, hiring, etc. The PEO becomes employer of record for tax and benefit purposes. HR Outsourcing Payroll & Payroll Taxes Employee Benefits Human Resources & Compliance Risk Management 2

3 Typical Business Advantages Predictable cash flow/expenses Economies of scale Access to expertise that would be cost prohibitive to hire Liability shift/share Removal of many non-core, non-revenue producing activities Allows for more focus on business Identifying Business HR Needs Considerations: Number of employees now and future Level of employees Organization s short and long term goals Organization s culture/philosophy Tactical HR Necessity Driven 3

4 HR Necessary To Do s : FMLA admin and tracking Wage verifications Research Benefit billing reconciliation Unemployment responses and tracking Background checking Handbook creation and updating New hire reporting Strategic HR Bottom Line Driven HR Bottom Line Impacting To Do s Turnover strategies Employee morale building Culture development Employee training Succession Planning Compensation Analysis Business partner to executive team 4

5 Outsourcing - HR Advantages Remove many transactional functions Access to a corporate HR department Multiple areas of specialized expertise Compliance is shared by PEO Skin in the Game Employee Issues Who You Gonna Call? Attorney? Research on your own? Other HR Professionals? Take a gamble?? Outsourcing -Payroll Advantages Access to payroll/hr technology without costs of maintenance and upkeep Separation of duties (compared to in-house) More cost effective than in-house Integrated with health insurance for ease of PPACA reporting Tax liability 5

6 In-house payroll can cost as much as 3x more than outsourcing! Outsourcing - Employee Benefits Advantages Improved cash flow Bigger pool/economies of scale Rate Stabilization More Options Administration relief PPACA Bill reconciliation Eligibility tracking Adds, changes, deletes COBRA Employee Benefits Continued Shopping and negotiation with carriers Compliance shift to PEO ERISA PPACA COBRA FSA 401k/retirement plan Administration Fiduciary liability transfer Lower fees? 6

7 Outsourcing Advantages - Workers Compensation and Risk Management Improved cash flow No year end audit Bigger pool/economies of scale Claims management shifts to PEO Disadvantages Perceived job threat Perceived loss of control Input in key decisions (i.e. employee benefit vendors and plan designs) Evaluating Vendors Key Questions 1. Length of time in business? 2. Business continuity plan? 3. Service standards? 4. Average client size? 5. Average client tenure? 6. Client retention ratio? 7

8 Evaluating Vendors Other Considerations 1. Thoroughly evaluate service model, proposal and contract 2. Check References (existing and terminated clients decision maker and HR contact) 3. Certifications 4. Verify with National Association for PEO s (NAPEO) Cost Evaluation Hard Costs PEO s Administration Fee Any fee based services? Benefit premiums WC premiums Staffing? Cost Evaluation Opportunity Costs Staff time Increased productivity Increased profitability 8

9 Keys to Success Partnership between client and PEO Management buy-in and support Questions 9