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.

Staffing - The New Growth Industry?

Bruce Silver
Employers Rx LLC

Employment agencies and staffing companies across the country are announcing a "pick-up" in volume. Of course many are admitting that it is due to the record number of layoffs, as well as an increase in applicants who are willing to accept part-time or temporary positions, while waiting for better times ahead.

Indeed, many industry observers like Jack Rainer, owner of Career Personnel Services in Montgomery, Alabama expect that it can' last. He predicted there would be some hiring rebound before the economy begins to recover. Some firms will find they have cut too deeply in layoffs and will need to replace lost staff, he said. It will take time for people to digest what is going on, but they still have needs".

What I find valuable in this Montgomery Advertiser article written by Cosby Woodruff are the observations of Anna Doeren, a stafffing specialist at Career Personnel. She recognized that job cuts have progressed beyond those in purely clerical jobs to more senior positions. "It is lower-level administration to middle managers, a lot of that has been cut."

"One area where they are seeing more demand from companies is in providing outsourcing of human resources functions. People are contracting us to be the human resources manager. Many of them have cut out their HR departments."

What Anna and Jack may not be aware of, is the increasing trend by many of the most successful and innovative companies in their industry to provide a full range of services for employees from "hire to retire". I am referring to the fastest growing industry in the gamut of HR services commonly referred to as "RPO" or Recruitment Process Outsourcing.

Recruitment Process Outsourcing refers to a business service where an employment or staffing agency not only finds a suitable applicant for a particular position at a client's worksite, it also can include training, payroll, group health benefits and workers compensation coverage. In effect, it is the recruiter who is employing the worker, and is responsible for HR compliance and adhering to Federal, State and local employment regulations.

PEOs - The Outsourcer's Resource

With few exceptions, these functions are being outsourced to companies who actually do this work. Let's face it. Most successful employment agencies and staffing companies are owned and managed by individuals who are very good at finding and placing suitable candidates for their clients. Many are great at developing relationships with employers and HR managers, but lack then administrative and insurance background to tackle all the areas involved. Only the largest firms have the resources to invest in the infrastructure and technology platforms required to efficiently support an full service RPO effort.

While the majority of employee leasing companies and professional employer organizations refuse to accept employment agencies and staffing companies as clients (many have incurred significant workers compensation claims ) there are handful of quality PEOs who have established a working partnership within the staffing and RPO industry. These firms have developed a "niche" by better understanding the unique challenges, products and services that enhance an agency's ability to compete and succeed in these demanding times.

Employers Rx has many staffing clients who have developed successful long term relationships with their PEO partners. If you own or manage an employment agency or staffing company and are considering making the leap into the "RPO" Recruitment Process Outsourcing marketplace, our experienced professionals are available to discuss your options and opportunities.

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.

Disappointed by your PEO or Employee Leasing Company?

By Bruce Silver, Founder
Employers Rx LLC

Have you been disappointed by an employee leasing company or professional employer organization? Was your PEO hired to help you with your employee administration, benefits and compliance tasks. Let's face it. Most PEO's claim to be comprehensive HR organizations who help small business save time and money.

Sometimes this isn't always the case.

Blogger Jonathan Kamens on his blog entitled Something Better To Do describes his experience as an employee of Advent Software, a small software company specializing in financial management systems.

Administaff disappoints

A little less than a year ago, my employer, Tamale Software (since acquired by Advent Software, in what I would happily classify as the fourth successful acquisition of the five in which I’ve been involved), decided to outsource its human resources function to the Professional Employer Organization (PEO) Administaff.

Administaff uses a “co-employment” model, wherein the employees of Administaff’s clients become employees of Administaff as well, and Administaff handles health insurance, payroll, recruiting, performance management, etc. Administaff clients don’t necessarily use all of Administaff’s services; it’s a menu from which they choose what they want. The biggest reason for a company to use Administaff is probably to reduce the cost of health insurance. Administaff can bargain with the insurance industry for lower rates than a small or medium-sized business can on its own, since they have a far larger employee pool.

Tamale has always had awesome benefits, including great health insurance with 100% of the premiums paid by the company. But the company and its employees got a little older and more mature (read “got married and/or started having babies;” I must confess that I’m a major contributor to this!), and at the same time the cost of health insurance skyrocketed across the board. It’s therefore not surprising that Tamale went looking for a way to reduce its costs, and perhaps switching to Administaff was a necessary evil.

Nonetheless, from the point of view of the employees, it was not a positive change. We went from having all of our HR needs seen to directly by an extremely competent, friendly Tamale employee in our office, to dealing over the phone or internet with nameless, faceless Administaff employees cut out of the “barely adequate customer service representative” mold.

Of course, the Administaff sales people sang the praises of their service team and spoke glowingly about how painless the transition would be. I’m sure it will come as no surprise that the reality did not live up to the hype. There were problems from the start, and the problems continued throughout our time with Administaff. A few examples:

1. When we filled out the HMO enrolment paperwork, we were given the option of specifying primary care physicians (PCPs) on the forms and told that they would be entered into the system with our initial enrolment. Many of us took the time to look up PCP ID numbers and include them on the form. Administaff did not bother to enter anyone’s PCPs into the system.
2. When our HR manager contacted Administaff about the fact that they had completely ignored everyone’s PCP designations, rather than immediately admitting the error and agreeing to rectify it, they told her that we would all have to call the insurance company directly to take care of it. Needless to say, she pushed back until they agreed to solve the problem.
3. With their commuter pass program, it was impossible to know from one month to the next which paycheck the cost of the pass would be deducted from. Some months it was the first paycheck, some months it was the second, and some months they completely forgot and had to deduct from both paychecks in the following month.
4. They charge a $2 fee per month for the commuter pass program. No employer I have ever worked for in my entire life has charged a fee for participating in a commuter program.
5. One month they simply failed to process the commuter passes on time, and we didn’t get them until after the beginning of the next month. We received a letter notifying us that our passes were going to be late and instructing us to buy “day passes” for the intervening days (what about people who live out in yachupitzville where nobody sells T passes?) and then to send in a form to be reimbursed for them. Wow, what a great time-saver!
6. It sometimes took Administaff as long as a week and a half to deposit 401k money withheld from paychecks into people’s 401k accounts. Yes, that means that Administaff was making money off of the float in the interim.
7. When we terminated our relationship with Administaff after the acquisition, I applied to have my Health-care Flexible Spending Account (FSA) continue under COBRA, because there was a lot of money remaining in the account and I needed more time to spend it. Two weeks after sending the premium check to Administaff to continue the FSA coverage, the check still hadn’t been cashed and the FSA provider still had my account marked closed and therefore was refusing to accept new claims.

Everybody makes mistakes, and occasional mistakes can and should be forgiven. But when there’s a pattern of mistakes, as in the odd-numbered items above, that a sign not only of a lack of quality, but of not caring about quality. And as for the even-numbered items above, they represent much more than simple mistakes; they represent conscious decisions that are detrimental to the customer.

I did a little research about Administaff and discovered that in addition to the “little” problems (not so little, really!) described above, they’ve had their share of Big Problems as well:

1. In October 2007, an Administaff laptop containing unecrypted personal data on 159,000 current and former employees managed by Administaff was stolen. Adam Breindel has a great takeon just what this incident says about Administaff (and it isn’t good).
2. Back in 2003, Administaff attempted to intimidate people out of saying negative things on their Yahoo! Finance message board by suing Yahoo! and demanding that they reveal the identities of the people making the comments. More information at The Center for Internet and Society at Stanford.

I understand that small and medium-sized businesses face incredible pressure to lower costs any way they can, and for some of them, going with a PEO like Administaff might be inevitable. But I urge any business considering such a move to evaluate carefully the impact on employee morale and the time employees will waste dealing problems like the ones described above, and I urge such businesses to evaluate not merely cost, but also quality of service when choosing which PEO to utilize.

Employers Rx Founder Bruce Silver is Featured on the South Florida Business Report

West Palm Beach, FL, October 17, 2008 -PR.com --- Bruce Silver, founder of employee management consulting firm Employers Rx LLC will be featured on this week’s edition of “The South Florida Business Report” airing on WPEC-CBS Channel 12. Bruce is interviewed by veteran television producer David Weir, who delves into the reasons for his founding of Employers Rx LLC, and the variety of areas that South Florida business owners and entrepreneurs can reduce costs in these challenging times.

The interview touches on the most troubling areas for companies operating in South Florida, and across the country. How can I provide affordable health care for my employees? How can I reduce my administrative costs? How do I stay ahead of HR compliance and employment regulations? Answers to these and other challenging problems are discussed. Bruce explains what a Professional Employer Organization (PEO) is, and the concept referred to as the co-employer relationship.

The South Florida Business Report is devoted exclusively to the local business community, delivering all the local business news, from the lemonade stand to the boardroom. The show, now in its 23rd year, has produced over 20,000 local business stories and nearly 2,500 interviews with local business people. Guests on the show have included Senator Phil Gramm, Senator Connie Mack, and Steve Forbes.

Join David Weir and PEO industry expert Bruce Silver to learn how a Professional Employer Organization can help small and midsize companies weather the storm and prepare for brighter days. The show is broadcast to over 775,000 homes on WPEC-CBS12. Viewers from Ft. Lauderdale to the Space Coast and west to counties surrounding Lake Okeechobee can watch the telecast on Saturday October 18th at 12:00 noon. The show will be rebroadcast Sunday morning at 5:30am on October 19th.

Additional information is available at http://employers-Rx.com, or contact Bruce Silver by email at bruce@employers-Rx.com or by telephone at (877) PEO-CURE.

Information about David Weir and the South Florida Business Report is available at: http://www.southfloridabusinessreport.com

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

Employers Rx Founder Bruce Silver is Featured PEO Expert for HR World Webinar

Bruce Silver, founder of employee management consulting firm Employers Rx LLC will be the featured guest speaker for a webinar presented by HR World.com on September 25th, 2008. Entitled “7 Ways to Effectively Run a Growing Company in a Slowing Economy” the webinar will focus on ways that small and midsize companies can survive the current economic downturn and prepare for the coming recovery. This informative webinar will look into specific areas where a Professional Employer Organization or PEO can help business owners and entrepreneurs to reduce costs and maximize their human capital investments.

Visitors joining the webinar will learn the top 7 ways to "take the headache" out of effectively running a growing company using a complete Professional Employer Organization (PEO) solution, including:

• Payroll Processing
• Health & Welfare Benefits Administration
• Workers compensation coverage
• Mitigating & Reducing Compliance Risk
• Outsourcing HR Administration - The Pros & Cons
• Improvements you can make to stabilize & control costs
• Plus much more...

Joining Bruce on the webinar will be HR World Editor and Senior Editorial Director Owen Linderholm and Doug Leonard, Vice President of Marketing for Gevity HR, one of the nation’s leading HR Outsourcing companies who is sponsoring this event.

HR World is a leading resource for HR professionals. The site provides in-depth content that HR professionals at small, medium and large companies need to make key decisions. The site provides original content covering news, events and information relevant to HR professionals. HR World is a trusted source for human resource managers and buyers.

Join industry experts to see how a PEO can enable you and your company to focus on saving costs while boosting employee performance and satisfaction. Employers Rx is proud to be a part of this informative and timely subject. The webinar will enlighten HR managers and decision makers to the many ways that partnering with a Professional Employer Organization can help their small and midsize company weather the storm and prepare for brighter days. Attendees can register at the Employers Rx website by clicking on the link at http://employers-rx.com/solutions.php.

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.

Legislators Mull Professional Employer Organizations

Regulating employee leasing companies and professional employer organizations can be a formidable task. Elected officials of West Virginia's Government Organization Subcommittee C is learning just how difficult it can be. Mannix Porterfield, a reporter with the Register-Herald, provides us with an insight into examining the operations of these companies.

This article makes a strong case why business owners and executives should seek professional advice when considering the selection of an Employee Leasing, HR Outsourcing, or Professional Employer Organization for their company.

Legislators Mull Professional Employer Organizations

By Mannix Porterfield
Register - Herald

An emergency rule is coming in mid-June to govern how Professional Employer Organizations align with workers’ compensation coverage, but other issues affecting them don’t end there. In fact, based on Sunday’s discussion by Government Organization Subcommittee C, lawmakers had best plan on looking at PEOs during interims for the rest of the year. Taxes, labor laws and unemployment compensation are all matters the panel plans to look at, Sen. Evan Jenkins, D-Cabell, a co-chairman, assured members. Until last year, there was no regulation of the growing business, and it was the PEO industry itself that called on lawmakers for some standards.

“They are worried, in part, about the image an unscrupulous entity that would act like a PEO but not really be a PEO, and come in and spoil what an appropriately formed and structured PEO may do,” Jenkins said. Insurance Commissioner Jane Cline told the panel her office intends to file an emergency workers’ compensation rule governing PEOs with the secretary of state’s office next month. “The issue of health insurance coverage seems to be a big concern,” Cline said. Cline recalled “a disastrous situation” that occurred with a PEO in North Carolina when the company slipped into bankruptcy, leaving a number of employees in the lurch.

About 14 states have some type of legislation on the books similar to West Virginia’s new law. “Are there places that have a track record of PEOs that we could somehow follow and not have to re-invent the wheel?” asked Sen. Ron Stollings, D-Boone, a doctor. Cline said the industry is interested in the Legislature providing some levels of regulation. “There are legitimate ones doing legitimate things out there,” the insurance commissioner said. “They’re concerned about the ones who might be doing it in a rogue manner.” Committee counsel Brenda Thompson said legislation “varies so greatly” in states that have enacted such legislation, “and it’s really a new creature.”

A lawsuit in Nevada over a PEO law has traveled through four courts already and remains unsettled after eight years of litigation, she pointed out. “This is pretty heavy stuff we’re going into,” Stollings said. “I wish someone had plowed a furrow for us to follow.”

PEOs function as a go-between for a business and its employees, such as in the operation of a firm offering temporary secretarial help, Jenkins explained afterward. “So that company writes one check to the PEO, who would cover all aspects of the employees,” the senator said. “It’s almost like having a dual employer situation. The PEO promotes itself as relieving that employer of the many traditional employer-employee management responsibilities.” A company may retain its right to discipline and fire its workers, but the PEO is the actual entity writing the checks, paying taxes on wages and covering the benefits, he said.

“As we studied this last year, we kept peeling back layers of what these PEOs did,” Jenkins said. “We realized it’s a very complex system.” Last year’s measure merely requires PEOs to register with Cline’s office to lay the groundwork for getting workers’ compensation coverage. “We were wanting to make sure employers weren’t dodging their workers’ compensation responsibilities by using a PEO, and a worker, if injured on the job, wouldn’t find himself in a Catch-22,” Jenkins said.

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

Ask Questions to Avoid Hiring a Shaky PEO

newsobserver.com

David Ranii, Staff Writer

The Castleton Group, which shut down last month, was operating as a professional employer organization -- even accepting new clients -- though it wasn't licensed. The Raleigh company was able to do that because it had operated as a PEO before the enactment of a 2005 law that required PEOs to be licensed. Under that state law, Castleton was permitted to continue operating as long as it was pursuing a license. That pursuit included its legal appeal of the Insurance Department's decision to deny Castleton a license.

Some former Castleton clients insist that the Department of Insurance fell down on the job for failing to notify Castleton clients about the company's problems. The Insurance Department position is that it went public as soon as it could -- when it denied Castleton's license in early December. Insurance Department spokeswoman Chrissy Pearson said no other PEOs are in the situation Castleton was: operating as a PEO in North Carolina without being approved by regulators.

But it's still important to do your homework before hiring one. PEOs provide vital services such as payroll and health insurance to small and midsize businesses, so businesses must make sure the company they hire is financially sound and a good fit for their organization.

Here are some questions to ask and things to check.

* Is the PEO accredited by the Employer Services Assurance Corp.? This nonprofit group, better known as ESAC, has tough financial standards, one reason only 25 of the nation's more than 700 PEOs are accredited. Nine in North Carolina are.

Accredited companies must meet operational and ethical standards and are backed by $6 million in performance bonds. That money is available to reimburse clients, their employees and tax authorities if the PEO defaults on obligations.

* Is it licensed by the state?

Companies can be denied licenses for failing to meeting the state's financial standards.

The Insurance Department's Web site lists the 90 companies licensed to do business in the state. Its "listing of active PEOs" is accessible at www.ncdoi.com/FED/SE/ fed_se_home.asp.

If a company isn't on the list, it can't accept new clients. However, more than 40 companies that don't have an office in North Carolina and aren't on the list are authorized by the state to work with existing clients. If your PEO isn't on the state's list of licensed companies and you want to check whether it falls into this category, you can contact the Insurance Department at (800) 546-5664.

* Ask to see an audit.

To get a state license, a PEO must provide the Insurance Department with an independent audit of its finances. You should be able to get an audit from the company, or you can request it from the Insurance Department.

* Find out whether a PEO's health insurance plan is self-funded or if it's providing insurance underwritten by a licensed insurer. The distinction is important.

Licensed insurance companies are required by the state to pay into a fund that can be used to pay claims if the insurer becomes insolvent; self-insured companies face no such requirement.

The vast majority of PEOs don't have self-funded health insurance plans, said Ron Ennis, an Insurance Department manager.

Meet Rebecca. She's Here to Fire You

Inc.com has an interesting article by Max Chafkin on HR Outsourcing and how it is changing the face of business.

Meet Rebecca. She's Here to Fire You

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

HSA’s – A Year End Tax Planners Dream

Tax Savings From My Health Plan You Say?

If you have just completed your 3rd quarter review and discovered that Uncle Sam will be taking a bigger bite out of your profits, the cure for your ills may be found in your health plan. HSA’s or Health Savings Accounts were established by Congress in 2003 when they passed the Medicare Prescription Drug Improvement and Modernization Act. When first implemented, it came with a myriad of complicated rules and conditions.

In 2006, President Bush signed the Health Opportunity Patient Empowerment Act which simplified the rules for employees and employers wanting to put an end to ever rising health insurance premiums. Simply put, Health Savings Accounts are like Healthcare IRA’s. Money deposited in your HSA grows tax free, and the funds placed in the account either by you, your employer, or both, uses pre-tax dollars, money that is free from payroll and income taxes.

What Dream?

Unlike an IRA or 401k account, money withdrawn from your Health Savings Account must be used for a wide range of allowable medical, dental, and health related expenses. If not, you are subject to the same 10% penalty and taxes that a 401k plan has. However, money spent for allowable expenses is never subject to taxes either going in or coming out.

The amount you are able to shelter depends on whether you are an individual or have a family of 2 or more people covered by a qualified (HDHP) High Deductible Health Plan. A single person could contribute $2,850 tax free in 2007 and $2,900 in 2008. A married couple or family can contribute $5,650 and $5,800. By taking advantage of an IRS sanctioned Health Savings Account between November 2007, and January of the next year, an individual can shelter $5,750. For married couples or families, their maximum grows to $11,450 in the next 3 months.

Pinch me!!!

Follow this example, John is single. He contributes $2,850 in a Health Savings Account prior to December 31st 2007. In January, John deposits another $2,900. In February, John goes for Lasik eye surgery to repair his vision back to 20-20. The cost is $5,000 which John has deducted from his health savings account. In a period of less than 4 months, John was able to deposit $5,750 tax free, spend most of it, without paying a dime in taxes.

Charles, age 57 and Susan 55, are married, kids are grown, and Charles is covered under a qualified High Deductible Health Plan (HDHP) offered by his employer. His employer is contributing $100 a month for single and $150 for all other employees who applied for the lower cost health plan. Charles plans to contribute the maximum allowed. Because Charles and his wife are over 55, the law allows for “catch-up” contributions of $800 each in 2007 and $900 each. Their catch–up contributions add up to an extra $3,400 or $14,850 between 2007 and 2008.

All that you need is coverage under a qualified High Deductible Health Plan, which by law can be a policy with deductibles as low as $1,100 for individuals and $2,200 for two or more people. Open your Health Savings Account at a bank or other financial institution, and its lights out for the tax man. Pleasant Dreams.

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Bruce Silver is the founder of Employers Rx LLC, an employee management consulting firm specializing in HR Outsourcing and Professional Employer Organizations.

http://employers-Rx.com

Why Work With A PEO Consultant?

A PEO Consultant is a person who is a specialist working with PEOs. The typical consultant does an in-depth assessment of your needs and goals before matching you with a PEO. You save hours of research and get the best possible deal from the PEO you ultimately choose. There are hundreds if not thousands of PEOs in the United States alone. You could narrow your choices by visiting a PEO directory such as http://www.peo.com and http://www.employeeleasing.com. A business owner could not possibly evaluate all of the potential PEOs and this is where the PEO consultant steps in.

For more information about working with a PEO consultant visit http://www.employers-rx.com

Evaluating a PEO

Amy Grimmer, President of Centripetal Consulting Group published an excellent article about evaluating a Professional Employer Organization (PEO). Centripetal Consulting Group are experts in human capital management and they have alliances with PEOs. To read the entire article visit the "Winning" blog.

Direct Deposit Saves Time And Money

A direct deposit is when your employer deposits your paycheck into your bank account rather than handing you a paper check. Direct deposits save employers money and employees time. Employees no longer have to wait for their paycheck to clear the bank before paying bills or making purchases. Paper checks can be lost, torn or stolen. Direct deposits are secure, confidential and require very little paperwork to set up. Direct deposits are routinely offered by Professional Employers Organizations (PEOs) and Employee Leasing Companies. If your employer does not offer direct deposits ask them to consider working with an employee leasing company that offers this benefit.

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

What is workmen's comp insurance?

Workmen's Comp Insurance is a type of insurance required by each state (some exceptions are made) to cover the employer when a worker is injured on the job. Some of the earliest workmen's comp insurance requirements became a reality in the early 1800's. Before this employees received no help when injured while working and often sued the company winning damages that could put the employer out of business. This type of insurance is paid for wholly by the company.... an employee is never required to contribute.

Every state has different requirements for Workmen's Comp insurance. The easiest way to get this insurance while staying on top of state requirements is to partner with a Professional Employer Organization (PEO). To find the perfect PEO visit http://www.PEO-Quote.com

What Is Employee Leasing?

Employee leasing is when an employer moves employees from his or her payroll onto the payroll of an employee leasing company. The employee leasing company becomes the employer of record for the employees and then "loans" the employees back to the original employer for a fee. This fee includes payroll costs and usually includes benefits. The employee leasing company handles all human resources functions for the employees including but not limited to payroll, legal compliance, record keeping and benefits. Employee leasing firms work with any size company and normally offers an employer a significant cost savings.