Can HR outsourcing help companies endure the recession?

When The Going Gets Tough, The Tough Call For Help

By Livia Gershon
Worcester Business Journal

“I’m so excited about this year. It’s great.”

That’s a sentiment you won’t hear from many company presidents these days. But Ultan Feighery is in an unusual position. He’s the president and founder of The Human Resources Organization in Westborough, a human resources outsourcing company. And he says HRO has seen a 25 percent jump in new business in the first two months of 2009.

To Feighery, it makes sense that companies facing shortfalls would bring HR functions to an outside vendor to save money. But others in the field say it’s far from clear that business leaders want to take the jump into outsourced HR at a time when so much else is uncertain.

Cafeteria Options

The Human Resources Organization, which Feighery founded seven years ago, offers employers a variety of services to choose from. It can manage 401(k) plans, run payroll and offer on-site or on-call support. It also acts as an insurance agent, looking for good deals for clients without being commission-driven like traditional agents. Feighery said the company can help clients not just by replacing permanent HR staff but by figuring out better ways to deliver benefits.

“In 95 percent of cases we can find significant savings,” he said.

Bob Eubank, executive director of the NorthEast Human Resources Association, said there’s no doubt HR outsourcing has established itself as a viable industry over the past decade. But he said it’s not clear whether it’s become more or less prevalent since the economy went into decline. Sometimes the outsourcing possibility costs more initially for longer-term savings, and that may not be an attractive option right now,” he said.

Sandra L. Reynolds, executive vice president of The Employer’s Resource Group at the Associated Industries of Massachusetts, said she’s heard of increases in outsourcing only among businesses that feel they need to reduce their own staff. "We’re just starting to hear about companies that are kind of facing the realities that they either might or will have to do that,” she said.

Next Best Option

Reynolds said her group, which offers its own HR products, has definitely seen an increase in the use of its hotline. “When you have fewer internal resources you use external resources at a higher level,” she said. Mike S. Lanava, business resource manager at the Worcester Regional Chamber of Commerce, said he hasn’t noticed HR staffers being replaced by outsourcing in recent months. “I haven’t been so much aware that there have been layoffs of complete departments,” he said. Still, he said he does think the long-term trend is moving toward greater use of external HR resources.

Largely because government compliance rules are becoming more complicated, Lanava said, many companies are going to HR specialists for particular needs. The companies may help them develop a sexual harassment policy and provide training videos, write up a maternity leave plan or offer customized safety training.

While some law firms and a handful of large, national companies always provided those sorts of services, Lanava said, more small players have been emerging to offer them in recent years. “What I’m seeing is more smaller local things that are tailoring their packages to the local companies,” he said.

Still, there can be a backlash against the outsourcing of HR, especially if it’s not done well. Reynolds said some large companies that once outsourced HR functions are bringing them back in-house these days. “Some of them are finding that it solves some problems but it also creates some problems,” she said. Eubank said one big problem can come if employees don’t have a particular person they can go to with job-related issues. For that reason, he said, many companies use a mix of in-house and outsourced resources.

That’s just fine with Feighery. He said his company makes sure to let potential clients send them as large or as small a chunk of their HR operation as they want. After they try the company out, he said, they often decide they want to add more services.“Last year, 85 percent of our clients added more than 30 percent to the products that they bought,” he said. “You put your toe in the water.”

From the Editor.

The story never changes. When times are good, business owners seem to think that little is broken within their organization or operations. When times become challenging and budgets tighten, many managers and executives look for innovative ways of cutting costs without sacrificing service or quality.

Send us your HR outsourcing success stories to hrsolutions@employers-Rx.com or contact us directly at (877) PEO-CURE or (877) 736-2873.

Offsite HR versus Professional Employer Organization

Published by Bruce Silver
Employers Rx LLC
September 29, 2008

Many business owners have asked me to explain the difference between an Off-Site Human Resource Organization (HRO) and a Professional Employer Organization (PEO), also referred to as employee leasing companies. While most of my clients could care less what the solution is called, so long as we resolve their problem, there are clear differences between these two classifications.

When considering whether you should select an HR outsourcing provider or contracting with a Professional Employer Organization, it is extremely important for business owners and managers to identify the weak links with their employee management and human resource administration. Ask yourself, how can we make our company more competitive? What areas of employee administration can be delivered more efficiently? Are your human resource policies and procedures up-to-date. Are you protecting yourself from frivolous lawsuits by adhering to the myriad of federal, state, and local employment rules and regulations? Are you attracting the best employees by providing a competitive benefits program at affordable rates?

There are four key areas to examine when comparing which employee management solution is best suited for your small or mid-size company. The first area looks into the vendor relationship by examining the roles and the responsibilities of each party under each contract. The second area explores the different services you can expect to receive from each solution provider. Next, we will delve into the various service models, and the different ways that services are delivered, their flexibility, and ways it "touches" your management and employees. Finally, we examine market availability, suitability, and a range of costs or savings you could expect.

We will focus in on each of these four areas in detail with a series of posts to follow. The series will offer our insights on an HR Outsourcing industry that often uses confusing and contradictory definitions and terms to describe similar services. Return often to learn about industry leaders, what sets them apart, and why. We will identify the types and levels of professional services that are best suited for your company's size and budget.

We hope you will join us.

More information is available at Employers-Rx.com

HR Outsourcing Website peo-quote.com Offers Guide to Selecting a PEO

For Immediate Release

HR Outsourcing Website peo-quote.com Offers Guide to Selecting a PEO

Free Guide Helps Business Owners Learn about “The ABC’s of PEOs”

Lake Worth, FL, November 2, 2007 – Employers Rx LLC announced a new guide designed to help business owners and executives gain a better understanding of the HR Outsourcing and Professional Employer industry. Entitled The ABC’s of PEO: How to Evaluate Professional Employer Organizations, this informative handbook is available on their website at peo-quote.com. The guide covers the brief history of the industry starting with employee leasing and the evolution leading up to the development of today’s Human Resource Outsourcing and Professional Employer Organization’s.

Professional Employer Organizations help growing companies operate more effectively, efficiently, and compete against larger, more established, companies for talented employees. Many leading PEOs offer their clients comprehensive payroll and administrative systems, affordable “Fortune 500” employee benefit plans, and (HRIS) Human Resource compliance and information systems that are either unavailable or too expensive for most small and midsized firms.

There are almost 800 HRO and PEO companies operating throughout the United States. Many business owners find it difficult to navigate the different levels of services, benefit plans, contracts and proposals from the various companies. “The reason we are making our guide available to the public is because understanding the differences when comparing Professional Employer Organizations can be extremely confusing.” said Bruce Silver, founder of Employers Rx LLC, and author of the guide,.“I believe that one of the most important decisions a business owner can make, is selecting the right PEO partner for his or her company and employees.”

Employers Rx LLC launched peo-quote.com a national B-2-B website that will showcase leading HR Outsourcing and Professional Employer Organizations nationwide. The site’s simple interface allows busy executives and business owners to easily find a HR Outsourcing or Professional Employer Organization that is “right” for their company.

Employers Rx LLC is a national HR Outsourcing consulting firm. Our focus is helping businesses find the right HR outsourcing solution for their needs. We assist companies with 5 to 500 employees to be more profitable by outsourcing their non-productive employee management functions, saving business owners time and money.

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Contact Bruce Silver
Managing Member
Employers Rx LLC
http://www.peo-quote.com
bruce@employers-Rx.com
(877) PEO-CURE

Organizations Ripe for HR Outsourcing as They Seek Standardization, Ability to Focus on Business Issues

Hewitt Survey Finds Companies that Outsource HR are Realizing Benefits

Organizations are primed for human resources (HR) outsourcing as they look to standardize HR processes and focus on business issues, according to a new survey by Hewitt Associates, a global human resources services company. Hewitt’s research shows that companies that have already outsourced HR activities are satisfied with their outsourcing arrangement and are realizing the benefits they hoped to gain.

The survey of nearly 100 large U.S. companies representing 2 million employees finds that the top three pressures facing HR executives today are attracting, retaining and growing talent (67 percent), being able to better support the business by focusing HR on core capabilities (47 percent) and supporting business changes (41 percent). Talent issues and a focus on strategic capabilities continue to be priorities for the next two years.

In a likely effort to make HR more efficient and freed up to tackle the top issues facing HR executives, 91 percent of companies surveyed have undertaken steps within the last two years to improve the internal HR function, such as HR process re-engineering or standardization. In fact, nearly six out of 10 companies surveyed believe HR processes and policies must be standardized before implementing outsourcing activities.

“Companies are realizing that they need to standardize HR processes and policies as a first step in their HR transformation,” said Mark Oshima, director of HRO strategy at Hewitt Associates. “This is often a precursor to outsourcing, since outsourcing enables both HR and line management to focus on issues vital to the business’s strategic initiatives, instead of being burdened with HR administration.”

The Motivation to Outsource

Hewitt’s research finds that organizations consider outsourcing primarily to improve service quality (ranked 4 or higher on a scale of 1 – 6 by 74 percent of respondents). Other key drivers include access to outside expertise, the opportunity for cost savings and a desire to focus resources on core business (all ranked 4 or higher by 60 percent or more of respondents).

Of those companies that have outsourced, 65 percent surveyed reported that they are satisfied or very satisfied with their current HR outsourcing arrangement. Furthermore, 70 percent of respondents say their companies have realized the benefits they hoped to gain from HR outsourcing.

Still, barriers to HR outsourcing remain. Nearly two-thirds of respondents say there are barriers to HR outsourcing at their organizations, with the top three being concerns about losing control of key processes, concerns about employee reactions to an external service provider and difficulty building a business case.

“By and large, companies that have taken the leap and outsourced their internal HR activities are realizing the results and goals they hoped to attain,” said Oshima. “Remember, though, that outsourcing is a major commitment. Companies considering HR outsourcing should identify the business issues that outsourcing is expected to address, build a solid business case, involve key decision makers, learn from the experiences of their peers and proactively manage the change from delivering services internally to partnering with an outsourcing provider. These important steps can help make the outsourcing arrangement a successful one.”

Other key research findings:

* The majority of respondents (78 percent) prefer an HR outsourcing provider with in-depth HR consulting expertise versus a broad outsourcing provider that can provide services to multiple parts of the organization.
* Forty-four percent of respondents indicated that cost savings was not one of the primary objectives they hoped to gain by outsourcing. Among those for whom cost savings was a primary objective, nearly three-quarters (73 percent) said they had achieved their cost savings objectives.
* The majority of survey respondents include service level agreements in their HR outsourcing contracts. Data delivery and transaction accuracy are the most common standards included in agreements, each cited by more than two-thirds of companies surveyed.
* The CEO is the final decision maker when considering HR outsourcing, cited by more than half (52 percent) of respondents

http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20061206005056&newsLang=en

PEOs cover ABCs of Human Resources

Akron Beacon Journal

Companies take care of hiring, payroll and benefits

For many small businesses, the administrative burdens of hiring, managing and paying employees can be overwhelming. As a result, many business owners are turning to alternative methods of hiring staff, including something called the "professional employer organization'' or "PEO''.

PEOs are companies that help businesses find and hire people, plus manage such things as health benefits, workers' compensation claims, payroll, unemployment insurance and more. As a business owner, you contract with a PEO to assume these and other responsibilities, allowing you to concentrate on the revenue-producing side of your operations. PEOs establish and maintain an employer relationship with the workers assigned to you and assume many employer responsibilities and risks.

Most small businesses are new to the ``human resources'' or ``HR'' field. One advantage of using a professional employer organization is that they already have experienced HR pros who can handle benefits, payroll, Occupational Safety and Health Administration compliance and just about everything else you will need. By bringing employees into a larger overall group, a PEO can offer your workers benefits, such as health insurance and retirement plans, that you would be hard-pressed to deliver on your own.

Pre-employment testing is another area where PEOs can help. Without a screening process, you risk placing the wrong person in the job, leading to lost productivity and costly turnover. PEOs tailor pre-employment tests to predict loyalty to you as well as success on a specific job. The tests aren't foolproof, but they can have a big impact.

Small-business owners often dread the prospect of reading stacks of resumes and conducting interviews for prospective hires. PEOs can reduce this burden and deliver candidates quickly, then handle the paperwork for the new hire. Some PEOs have entire divisions devoted to recruiting and helping small-business owners gather information to make the right hiring decisions.

Many entrepreneurs who have used PEOs credit the choice with helping grow their businesses quickly. The National Association of Professional Employer Organizations (NAPEO) is a good source of information and help. The organization's Web site at www.napeo.org describes how PEOs work, the benefits of using one and guidelines for selecting one that's right for your business.

Is It Time to Outsource Your HR?

By Layne Davlin

When the time comes to start hiring staff, a lot of entrepreneurs fail to give much thought to all the responsibilities that come with being an employer. The average small-business owner isn’t equipped with either the knowledge or the time to comply with the mountain of regulations required by the government. Fortunately, HR outsourcing--hiring a PEO to oversee your HR tasks--is a solution that not only provides help with compliance issues but can also provide assistance that’s tailored to your company’s specific needs.

A PEO, or Professional Employer Organization, can offer HR solutions tailored to small and midsized businesses in all industries. For an annual fee, usually 2 to 7 percent of the dollar value of your annual payroll, a PEO will take care of everything from recruiting and hiring to managing your health benefits. Since many smaller businesses can’t afford to hire an HR professional, PEOs can be a cost-conscious option. For instance, if a company has a $1 million payroll, a PEO can provide the equivalent of a full HR department for roughly $20,000 to $70,000 a year, considerably less than a fully staffed HR department or even one qualified executive.

Generally, a PEO will legally hire a company's current employees, thereby making the PEO the "employer of record" for taxation and insurance purposes. Having the employees of multiple businesses “on staff” allows PEOs to enjoy lower benefits’ costs because more employees mean better rates. The employees are then leased back to the original employer (now a PEO client) under a shared-employment contractual relationship, which sets out the powers, responsibilities and liabilities of the parties. This practice is also known as “employee leasing” or “staff leasing".

The PEO then assumes responsibility for all payroll obligations, workers’ compensation coverage and tax filings. Additionally, health, welfare and retirement benefits can be contracted as well as all associated administrative work. Because they take over most of the headaches of being an employer, PEOs are ideal for small businesses. In fact, most PEOs target companies that have 150 employees or less.

Many times, a PEO arrangement is the only way a small business can offer benefits like health insurance, dental and vision care, life insurance, retirement saving plans like 401(k)s, Section 125 cafeteria plans (flexible spending accounts for healthcare and childcare), job counseling, adoption assistance and educational benefits. Most small businesses just couldn’t afford or manage these benefits on their own.

Finding the Right PEO for Your Company

Ideally, a PEO will relieve its client companies of the time-consuming and money-draining burdens associated with HR. Because PEOs offer many different types of services, choosing the right PEO is essential. If you’re thinking about hiring a PEO for your business, consider the following factors to find the best possible PEO arrangement to meet your needs:

• Conduct a basic needs analysis. Lay out exactly what type of HR and risk management concerns your company has.
• Review the services of all the PEO firms you’re considering. Find out which firms can meet all your needs and will do so in a manner that meets--if not exceeds--your expectations.
• Perform extensive background research to find out if the PEOs’ sales pitches are really what they deliver.
• Check out the companies' staff. Does it have the depth and expertise to deliver on its promises?
• Find out how the firms deliver their services. In person? By phone? Via the web? A mix of all three?
• Determine what kind of consulting the PEOs provide on strategic HR issues like recruiting, HR procedures and processes.
• Ask for a few references, and then check them. If a particular PEO can’t relieve your HR burden, one of the other ones certainly can.
• Find out if the PEOs charge any upfront fees and how those fees are determined. What about pre-payments? Do you have to put up a deposit?
• Ask for some demonstration that payroll taxes and insurance premiums are being paid properly, and that any past clients’ legal issues have been correctly and efficiently handled.
• Once you’ve selected the PEO you’ll be hiring, lay the foundation for a lasting relationship with your PEO by meeting the people you’ll be working with face to face. An open line of friendly communication ensures you won’t be lost in the in-box.

The bottom line is, PEOs can help small and midsized employers enjoy the same HR benefits as large companies without the considerable overhead. A PEO costs less than hiring an internal HR employee and will maintain critical employment records and payroll reports, as well as provide the forms needed to make sure you’re in compliance with all required employee regulations. Being an entrepreneur is difficult enough without all the accompanying HR hassles, so find a PEO for your company today.

Copyright © 2006 Entrepreneur.com, Inc.