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.

Another Professional Employer Organization Horror Story

By Bruce Silver
Employers Rx LLC

Another Professional Employer Organization Horror Story

I came across an interesting website developed by Mr. Ed Shull called Filthy Lucre. Ed owns and operates USWeb LLC, a small online marketing and website development company based in Henderson, Nevada. Ed's website Filty Lucre not only is a showcase for his talented firm's programming capabilities and techniques, but he created a thought provoking community where visitors and members can post and exchange photos, videos and join in the "conversation".

From: "You Can't Make This Up" Department

The website has many interesting articles on a wide range of subject matters, including Health and Medicine, Lifestyle, Money and Community. While checking out some of the articles and comments, I came across a section aptly entitled The Working Affluent. The next thing to catch my eye is the headline - Complaints about TriNet HR Services.

Ed had recently signed on with TriNet HR Services for his small company at the relatively small fee of $1,860 per employee. Almost twice the average industry rate of $1,000 - $1,200 per employee.

Like I said, you can't make this up.







By Ed Shull, CEO USWeb LLC

I’m not a paperwork guy. As the CEO of a small business, with a few contractors (that really felt more like employees after a while), I decided that if I was going to take the step to have employees, I would need to do it right. I wanted to make sure I offered a competitive compensation package that included 401k, health insurance, life insurance, etc…

So I started to search around for ways solutions I came across a company that was referred to me a few years ago, Trinet. Trinet offers HR services as a PEO (professional employment organization). People often refer to this as employee leasing. Think of it as hiring whoever you want through a temp agency like Kelly Services. They take care of all the tax and insurance paperwork, and you just pay the agency a fee as a vendor. The fee was relatively small at $1,860 per employee, per year, so I decided that this would be the best of both worlds.

The Sign Up Process for Trinet

I have to say that of all the vendors I have ever worked with, none seemed so utterly incompetent as Trinet when it came to the sign up process. They would send over documents without instructions, or that were dated wrong. They would lose stuff I sent. The best part is that I would go through long spurts of not hearing from them, after confirming that everything was ready to go, and then all of sudden get a flurry of emails from them marked as urgent, saying they needed more paperwork from me.

Once, and I swear this is true, I was told weeks before that we were truly ready to go. There would be no further delays. A couple days before the payroll date, I contacted my rep there to ask about the amount they would be taking out. I didn’t hear back. But then , a day or two before payday, I get around 3 - 4 emails, all marked urgent, saying I need to call them right away. I happened to be out of town, so I didn’t get these messages until around 2pm. I called the main rep, she wasn’t around. So I called another rep I had dealt with, who had also emailed me saying I needed to call him and that it was urgent. When I got a hold of him and asked what they needed, he said, I and I swear this is true, he didn’t know. So they had spent most of the morning trying to reach me, but didn’t know why. I asked him if my payroll was going to go out. He didn’t know.

Payroll didn’t go out that week, so once again I had to scramble to cut checks myself. This went of for literally months. The best part is, they charged me retroactively for this time with the insurance. Insurance my employees weren’t aware they had. We had received no ID cards or selected any plans yet. But of course I had to pay for it.

The ongoing problems with Trinet

Since we worked out those initial issues, I would love to say things have gotten better, but I cannot. Each pay period is an exercise in patients, and comes with it’s own little set of grief. I have asked Trinet on numerous occasions to send me an email letting me know the exact dollar amount they attend on deducting. I set up a bank account specifically for payroll, and I need to transfer the funds into that account. Each time I ask, I’m assured that invoices are sent out ahead of time. The closest this has come unsolicited was last pay period when I got a notice after 3:30pm that funds would be taken out the next day. I got a follow up email from Trinet the next morning that they were unable to get the funds. So despite me asking for several days notice, I couldn’t even get a 24 hour notice.

One of the documents I filled out was to my bank, allowing Trinet to request a funds transfer. I had this hand walked into my banker, as well as got Trinet a copy in case of any issues. My bank has done things like this for me in the past without incident. And there have been no incident on the money transfer issue until this past payment. All of a sudden, after 3 - 4 consecutive successful transfers, Trinet is reporting my bank will not honor the request. They tell me this on Christmas eve and they want me to go to the bank “right away” to wire the fund manually. I explained to them that I was on vacation with my family and that they needed to work this out with the bank directly (that’s why they have a copy of that document), but for some reason it was determined that the easiest way for this to be handled was to have me go down to the bank on Christmas Eve. By the time we went back and forth on this, it was late enough that going to the bank was not an option. So they said I could cut my vacation short and go on the 26th.

Trinet had not real response to my question about why my bank would not honor the document I gave them. They just decided that it was too much trouble I guess. So as of now, employees checks have not been cut.

For the sake of not rambling on forever, I have actually not gone into other issues I have encountered with Trinet. I have not gone into the fact that none of the amounts they deduct make a lot of sense. But they are so screwed up, I know that if I open that can of worms, it will never be solved.

I do have to say that the main rep I deal with there, Angela, is quite nice. I feel genuinely bad when I start bitching about things to her because she clearly doesn’t control any of it. But she doesn’t strike me as overly surprised with all these issues. I get the feeling this must happen a lot.

There have also been issue with their website when trying to make changes for employees, or anything else. They brag that their technology is based around Peoplesoft. As someone who has worked with Peoplesoft, I know that’s not something to brag about. I have never seen a successful Peoplesoft implementation. And I don’t believe Trinet has either. It’s a crap system, and is likely the cause to much of Trinet’s issues.

So if you’re looking for something to make Hr a little more simple, I would not look at Trinet. I spend an obscene amount of time dealing with their issues, and apologizing to employees, which is exactly the opposite of what they are supposed to be doing. You’re better off looking to your bank or other places. I’m not saying that PEO’s or employee leasing is a bad model, I’m just saying that Trinet is not a company I would recommend trusting with your business.

Aon Puts a Favorable Spin on Health Insurance Increases

Aon Corporation, the world's 2nd largest insurance broker released their latest survey on projected "health care" costs for 2009. An increase of only 10.6%. So what would you expect the headline to be.

HEALTH INSURANCE RATES GOING UP AGAIN.

Well not exactly. How about ....

HEALTH CARE COSTS TREND DOWN

Don't be fooled by the industry "Spin". Small business owners and mid-size companies should be prepared to experience another round of double digit rate increases again this year. Just like your experience last year, and the year before that, and the year before that.

Aon Consulting's U.S. Health & Benefits practice director, John Zern, said of the survey results: "While the medical trend rate is still more than twice the consumer price index, it is encouraging to see that health care cost rate increases are continuing to slow down. This is a step in the right direction for companies nationwide that continue to feel significant health care price pressures."

Bill Sharon, senior VP of Aon Consulting and director of the study attributes the decrease in the medical trend rate to more employers and employees taking advantage of wellness, health promotion and consumer driven programs.

"Unlike some other healthcare trend surveys, Aon Consulting's survey reports the expected future increase in employer-provided health plan claims cost before any plan changes, based on the opinions of health plan actuaries. We provide this trend data to help employers evaluate the competitiveness of health insurance premium renewals. For employers with self-funded health plans, this trend data helps them (and their actuaries) develop future claim estimates for budgeting purposes."

This is "double speak" for let us see where we can cut your benefits this year. Once again, the insurance company will pay less of the claim (if any), employees will pay more, and the employer still gets socked for an increase in premiums, only not as much as last year. Sound familiar?

If your a business owner, employer or manager and you want to escape the annual treadmill or health insurance rate increases .... than you should consider the services of a Professional Employer Organization

PEO-quote.com offers a free guide that helps entrepreneurs and busy executives find out about the many solutions that employee leasing, HR outsourcing, and professional employer organizations can provide the small and midsize company. Take the time to learn what some of the industry leaders can do for you. You owe it to yourself, and to your employees.

Too busy, then call on the services of a consultant that specializes in employee leasing, and the HRO and PEO industry. Business owners can have their questions about employee leasing and professional organizations answered by experienced professionals at Employers Rx LLC.

Use of Health Savings Accounts up 35 Percent; Critics See Them as Tax Shelter

The number of Americans with insurance plans tied to health savings accounts has passed the 6 million mark, according to America's Health Insurance Plans. HSAs are tax-favored, individually owned savings accounts that can be used to pay for medical expenses in conjunction with a high-deductible insurance plan. About 6.1 million Americans were covered through HSA plans in January 2008, up 35 percent over the same period a year earlier, according to AHIP, a trade association representing insurers. The plans have been in existence since January 2004.

About 30 percent of individuals covered by HSA plans worked for small businesses, 45 percent worked for large employers, and 25 percent bought insurance in the individual market. The small-group market is the fastest-growing segment for HSAs. The AHIP survey found that HSAs are helping more Americans afford health insurance. HSA plans accounted for 31 percent of new coverage in the small-group market over the past year, and 27 percent of new coverage in the individual market.

The average deductible for the best-selling HSA plans in the small-group market was $2,244 for single coverage and $4,356 for family coverage, according to AHIP.

Average annual out-of-pocket limits were $3,462 for single coverage and $6,690 for family coverage.

Premiums averaged $3,189 for single coverage and $8,125 for family coverage.

"The increasing popularity of HSAs is a result of managed care's failure," said John Goodman, president of the National Center for Policy Analysis, a Dallas-based public policy research organization. "The best way to control health care costs is to put patients in control of more of their health care dollars."

Critics of HSAs, however, pointed to another study. The Government Accountability Office found that taxpayers with HSAs in 2005 were, on average, more than twice as wealthy as other taxpayers. Contributions to HSAs were more than twice as high as withdrawals. "HSAs clearly are attractive to higher-income people who are looking for tax shelters," said Rep. Henry Waxman (D-Calif.). "But they aren't the answer for providing adequate health insurance coverage for the average American. This report provides further evidence that we need to re-examine whether this is the right way to use the government's resources to address our health care needs."

The House recently passed legislation that would require HSA trustees to substantiate that withdrawals from the accounts were used for allowable medical expenses. Republicans who opposed this provision said it was designed to undermine HSAs by adding unnecessary administrative burdens. "Democrats should stop trying to dismantle this coverage option," said Rep. Charles Boustany (R-La.). "These accounts help cover the uninsured and lower health costs with preventive care, lower-cost medicines and fewer visits to emergency rooms."

The HSA studies are available at www.ahipresearch.org and www.gao.gov.

The 4 P's of HRO and PEO Evaluation

By Bruce Silver
May 4, 2008

All too often companies spend hours analyzing, assessing, and comparing the cost or savings that one HRO or PEO service provider offers versus another. While a detailed spreadsheet of costs may help to determine "hard dollar" expenditures, it very rarely accounts for the intrinsic value of the competing service models you are trying to compare.

Usually, items such as the co-pays of a health plan, workers compensation rates and administrative fees take precedence over far more important questions. Are you teaming up with a HRO or PEO partner who offers complimentary strengths or merely duplicative expertise and services? Is your corporate philosophy compatible?

Focusing on our 4 P's will help you to make the "right" choice.

People – Meet with the management and team you will be working with in person, by phone or tele-conference. What are their backgrounds, functions, qualifications, and responsibilities? What are the scope of services each will deliver, how, and how often?

Process – What is the plan for a smooth transition? Map steps for employee notification, orientation, and enrollment. Identify the who, what, where, and when of plan implementation. Set goals, time-lines, reviews and evaluations.

Platform – Human Resource Information Systems (HRIS) provide a robust set of tools for employee administration, benefits, compliance, payroll, and risk management. Identify levels of employee and management access, orientation, and training. How will you coordinate IT staff for system integration with automated attendance and Point Of Sale systems, 3rd party software and hardware?

Programs – Employee Benefit programs provide a competitive edge in attracting and retaining a highly motivated and productive workforce. Evaluate the quality, value, and choices of health, life, dental, disability and retirement plans. What employee communication, mediation, recognition, rewards, and relocation services are available?

Bruce Silver is the founder and managing member of Employers Rx LLC.
The author can be reached at 561.843.4333 or bruce@employers-Rx.com.
Your comments are welcome. For additional information visit our websites:
http://employers-Rx.com
http://peo-quote.com

Employment-based Health Coverage Could be Near "Tipping Point"

The end of employment-based health insurance isn’t in sight yet, but a study released Thursday raised the possibility of a “tipping point” that will cause employers to consider alternatives. The Employee Benefit Research Institute said: “If one larger employer actually did drop its health benefits, others might follow for competitive reasons.”

The report published on www. ebri.org said work-based health insurance benefits, which are held by the majority of Americans who have health insurance, are still a competitive tool to attract employees. But between 2000 and 2007, the cost of providing health benefits has doubled, and the percentage of employers that provide health benefits — especially small businesses with fewer than 200 employees — has declined slightly.

Over that time, in which the Consumer Price Index rose 17 percent, premium costs for employee-only coverage rose 86 percent, and family-coverage premium costs rose 80 percent. Copayments for nonformulary brand-name drugs jumped 124 percent. Also, the percentage of employees with employment-based insurance has fallen slightly since 2000, with 71 percent of workers now covered. Between 1994 and 2000, the percentage of workers holding health benefits through an employer had held steady at between 73 and 75 percent, the report said. “While a 4 percentage point drop in the number of workers with health benefits may be significant, it does not imply that these benefits are vanishing”.

Employers interviewed by the nonpartisan, nonprofit research institute expressed divergent opinions about employment-based health insurance, ranging from “it’s the best system available” to “inefficient” and “not intelligent.” One of the main drawbacks of an employment-based system, the report said, is the lack of insurance portability from job to job. Most workers, unless they have pre-existing conditions as specified by the Health Insurance Portability and Accountability Act, can’t stay in the same health plan if they change jobs. Furthermore, between-job coverage through COBRA, the Consolidated Omnibus Budget Reconciliation Act, is often not affordable for people in job transitions.

The institute’s research indicated that the steady erosion of employer-based health-care benefits for retirees shows that a tipping point has already been reached in regard to that coverage. And “most active workers will never be eligible for health insurance in retirement through a former employer,” the report said. While the majority of employers interviewed for the study said they want to offer health insurance as a work force benefit, they think there should be “greater shared responsibility and accountability on the part of workers and their families.” The report noted the trend toward consumer-driven health benefit plans, with high-deductible plans such as health savings accounts or health reimbursement arrangements.

The study also noted significant concern about what would happen if there was “erosion or elimination of ERISA pre-emption of state insurance regulation (which) could result in the complete elimination of employer support for a voluntary employment-based health benefits system.” ERISA is the federal Employment Retirement Income Security Act, which regulates employee benefit and pension plans. What should reverberate through national health-care discussions was this finding:

“(Employers) all agree that if one major employer were to drop health benefits, others would immediately begin to assess whether or not they should follow, on the one hand, or take advantage of others dropping the benefits to enhance talent acquisition.”

One employer interviewed said it would be “insane” to be the first large employer to drop health-care benefits. But many of those interviewed said they would consider following suit under such circumstances as the elimination of the employer tax deduction, movement to a universal health-care system or the erosion of ERISA in favor of state regulatory authority.

Arizona Startup Company Blog

The Arizona Startup Company Blog has an interesting post about Professional Employer Organization (PEO) here. The article covers an explanation of what a PEO is and what services a PEO typically offers.

If you would like to explore working with a PEO visit http://www.peo-quote.com

Bill Makes HSAs More Flexible

The U.S. House and Senate on Saturday passed a bill that may increase the popularity of health saving accounts. The Tax Relief and Health Care Act of 2006 (H.R. 6408) awaits President Bush's signature.

Under the legislation, employees and employers can contribute up to $2,850 for single coverage and $5,650 for families, even if the deductible is lower. Moreover, companies can contribute more money to HSAs for workers making less than $100,000 per year than for higher-income employees.

The legislation allows a one-time transfer of funds into an HSA from an individual retirement account, health reimbursement arrangement or flexible spending account. The provisions also permit workers hired during middle of the year to enroll in an HSA and make a full-year maximum contribution at that time.

Barry Barnett, a principal at PricewaterhouseCoopers, comments, "I think it's good. I think it'll drive more employers to adopt these plans. It allows people to put in more cash. As they have more cash at risk, they'll be better consumers."

John Hickman, a partner at Alston & Bird law firm, predicts, "This is probably the last, given the makeup of the [new] Congress, favorable HSA legislation we're going to see for a while. We fully expect all of the provisions to be signed [by the president]. Most of these are improvements."

Christopher McFadden, deputy business unit leader for Goldman Sachs' U.S. health care group, notes that Sen. Edward Kennedy (D-Mass.) and Rep. Pete Stark (D-Calif.) are not fans of HSAs and will head key committees on health policy. "What I hope is that this doesn't antagonize these two increasingly powerful members of Congress in a way that incites them to [reverse] the progress that has been made," he adds.

An analysis from the Center on Budget and Policy Priorities states, "HSAs provide a tax subsidy for virtually any out-of-pocket health care costs, including elective procedures not normally covered by health insurance. By enabling individuals to overfund their HSAs, the bill could encourage some people to spend a portion of their excess HSA balances on elective services they would not otherwise consume. The change would primarily benefit high-income individuals, since they are the people most likely to make such a transfer" from an IRA.

The bill garnered praise from the U.S. Chamber of Commerce, the American Benefits Council and America's Health Insurance Plans.

The bill makes "several important improvements to help the growing number of Americans enrolling in these plans and to increase the number of people who will find these plans attractive," says James Klein, American Benefits Council president.

"If you want consumers to prepare for long-term care, they need to develop a long-term strategy," says Karen Ignagni, president of America's Health Insurance Plans. "With higher contribution limits that are indexed to inflation, HSAs will offer new opportunities for consumers to plan for their long-term care expenses."

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

IRS Announces 2007 HSA Limits

CHH Online

The IRS issued guidance on the maximum contribution levels for health savings accounts (HSAs) and out-of-pocket spending limits for high deductible health plans (HDHPs) that must be used in conjunction with HSAs. These amounts have been indexed for cost-of-living adjustments for 2007.

Annual contribution levels

* For 2007, the maximum annual HSA contribution for an eligible individual with self-only coverage is $2850. (Note: for any individual, the maximum contribution is the lesser of the indexed amount or the deductible of the HDHP.)
* For family coverage the maximum annual HSA contribution is $5,650.
* Catch up contributions for individuals who are 55 or older is increased by statute from $700 to $800 for 2007.
* Both the HSA contribution and catch up contribution apply pro rata based on the number of the months of the year a taxpayer is an eligible individual, and, with respect to the catch up contribution, the number of months of the year that the taxpayer is age 55 and over.

Out-of-pocket spending

* The maximum annual out-of-pocket amount for HDHP self-coverage increases to $5,500 and the maximum annual out-of-pocket amount for HDHP family coverage is twice that, $11,000.

Minimum deductible amounts

* For 2007, the minimum deductible for an HDHP increases to $1,100 for self-only coverage and $2,200 for family coverage. (IRS Rev. Proc. 2006-53, IRB 2006-48, Nov. 27, 2006.)

http://hr.cch.com/news/payroll/112106a.asp

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.

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