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.

Common Mistakes of Shopping for PEOs and Employee Leasing on the Web

By Bruce Silver, Founder

Employers Rx LLC 

Third of a three part series.

What is Behind Door Number # 1, 2 or 3? 

When searching the internet for a PEO, it is important for a busy executive to have some idea of what your needs are, and understand the process you are about to undertake, before starting on your virtual journey. We have identified three types of websites that Google and Yahoo link to when searching for employee leasing or professional employer organizations. The first type of website that visitors will encounter are “Provider” sites, next are “Leads” sites, and last but not least, websites of PEO “Brokers” or consultants.

Is your company among the thousands who are looking for affordable health insurance coverage? You probably have read that professional employer organizations can save business owners 20% to 30% on their health insurance premiums because of their large group health plan. While this claim may be slightly exaggerated, the fact is that less then 10% of all professional employer organizations actually have a master group health plan.

Door # 1 – Are You A PEO Provider?

So how do you know if the website you visit belongs to a true employee leasing or professional employer organization? Look for logos of national and local industry associations like NAPEO, ESAC, FAPEO and others. At the same time, logos from payroll or staffing associations may mean the company is not focused on providing comprehensive human resource services or the “Fortune 500” benefits plans you want.

The “About Us” section should identify the management, their background and expertise. Are you looking for a company that offers a true “master” group health plan? Click on the employee or benefits section to see what types of employee benefits programs are available. Don’t be fooled by insurance company logos. Linking to the websites of Aetna, Blue Cross, or any of the national or regional health plans networks, does not indicate that a company has a large group health plan to offer.

 

Many PEO’s claim to save you money because of their “large group purchasing power”. In reality, all you get is their insurance broker shopping the market. You may be better of with your own broker. It is important to read between the lines. Here are a few examples.

 

We offer customized, tailored benefits programs, suited to meet each of our clients’ needs, objectives, demands, and budget. We negotiate contract renewals or we handle receipt of carrier billing and payments.

Be prepared to ask tough questions when you contact the PEO or employee leasing company. Ask about renewals and underwriting. Remember that you will be speaking with someone who represents only that company, and it’s their job to “close the sale”.

Door # 2 – You’re Leading Me On?

Next stop on our virtual tour are the nefarious “Leads” websites. Many of these websites are very attractive, easy to navigate and usually feature information taken directly from websites of established companies (without their knowledge). A typical example is the website SmallBusinessExpo.com. Notice the last sentence at the bottom of the page. 

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Google links to obvious “Leads” websites like BuyerZone.com and Staffmarket.com. It is relatively easy to see that these sites collect your company information and sell it to the highest bidders. Many “Leads” websites provide visitors pages of information on topics relevant to employee leasing such as payroll processing and workers compensation. Often the articles are written offshore or copied from legitimate HR blogs and websites.

 

Websites carrying ads from Google is another clear sign to move on. Why would any employee leasing, PEO or HR company want a competitor advertising on their website. Beware of companies who consistently rank first or second place in Google or Yahoo. In a recent search of Google for employee leasing, first position linked to wiseGeek.com. wiseGeek is owned and operated by Conjecture Corporation of Sparks, Nevada who “creates and manages a portfolio of informational and entertaining consumer web sites”.

Door # 3 – PEO Broker, Who’s Side Are You On? 

Our last stop takes us to websites of “Brokers” or consultants specializing in employee leasing, HR outsourcing and the professional employer industry. You will find there are exceptional professionals across the country, many have years of industry experience, with backgrounds in accounting, banking, and insurance. But, how will you know if you have found a qualified consulting firm or PEO brokerage that will help you find and negotiate for a suitable provider? My best advice comes from President Ronald Reagan, who when dealing with the USSR on nuclear disarmament said; “trust but verify”. 

“Brokers” websites typically offer business owners and executives a choice of leasing firms and PEOs to select from. Some consultants specialize in a particular region of the country, or have experience with certain industries. The demands and requirements of a client in the trucking business is not the same as an IT company. An industry professional will know exactly which PEOs to contact for a proposal. Ask the firm for their years in business, background, industry experience and expertise, and how they are compensated?

Website testimonials may indicate client satisfaction, but it is always a good idea to ask for, and follow-up on references from both their clients, and the companies they work with. LinkedIn members can access groups dedicated to the PEO industry where you can ask industry professionals about a particular broker or consultant’s reputation. Buyer beware is the rule of the day when shopping for payroll, HR outsourcing and professional employer services.

Tell us if we removed some of the bumps on your road to finding the right employee leasing company or professional employer organization for your business.

7 Signs That Your Company May Be Ready for HR Outsourcing

A Note From the Editor
By Bruce Silver

HR World continues to be a valuable source of "Real World" information for busy executives, business owners and HR managers. John Edwards points out the signals that successful enterprises, large and small, should pay attention to.

We know that many readers of this blog operate small and mid-sized companies who do not have HR departments. That doesn't mean that your HR functions aren't being performed. Unfortunately, many firms lack employees well "versed" in employment rules and regulations.

John's article takes you on an enlightening tour from the boardroom to the mailroom . When will you know it's time to consider outsourcing your organization's HR administration and compliance functions? See how HR practices can effect the success of your business.

By John Edwards

There comes a time in the life of most successful businesses when a decision has to be made as to whether certain HR tasks are best handled in-house or by an HRO (human resources outsourcer). Making the right call at the right time isn't easy, but certain telltale signs can indicate when it's time to "pull the trigger" and call for help. This is what you should look for:

Spiraling Costs: Rapidly rising costs in payroll, benefit management and other key areas continue to be the primary driver for HR outsourcing. While cost reduction isn't the only reason for using an HRO — efficiency, quality and speed are other motivating factors — it's certainly a major consideration.

Missed Deadlines: If a growing number of employees are complaining that critical documents, ranging from paychecks to W-2 forms, are arriving late, it's a sign that something is broken. There's a good chance that the delays are being caused by an HR department that's stretched beyond its capabilities. An HRO can step in and help get critical work back on schedule without the need to hire new HR employees or upgrade facilities.

System Overloads: If HR tasks are beginning to overwhelm internal IT resources, it’s time to either invest in additional technology or turn at least some of the crippling workload over to a third party. HROs rely on their own IT systems, enabling in-house systems to focus on non-HR-related tasks. A cost/benefit analysis may show that it would be cheaper for your business to shift data-intensive and high-priority HR resources, such as employee databases and Web self-service operation, to an HRO rather than invest in new on-site technology.

Increasing Mistakes: No HR department is foolproof, but snowballing goofs are another sure sign that people and systems are being stretched beyond their limits. Assigning mistake-prone work to an HRO can lower the pressure on in-house staffers. The best part is that an HRO can be held accountable for supplying a basic level of accuracy in whatever work it handles. This is especially important in situations such as payroll where legal compliance is an issue.

Poor Quality Work: Mediocre or worse output over an extended period of time is a sign that an HR department is being overworked or — more ominously — simply isn't competent. While a business may wish to experiment with new managers and work procedures, it may be simpler to just outsource everything to a third party, either permanently or while a new HR department is being assembled.

Disgruntled HR Workers: Employee griping is as common as office football pools. But when the complaining begins drowning out normal discourse, it's time to start considering remedial action. An HRO can step in during busy seasons to take on the extra time-consuming tasks that drive up HR workloads and staff discontentment.

Competitors' Moves: Are many of your business' prime competitors shifting to HROs? If so, they might have spotted a need that you may not have yet detected or have been unwilling to acknowledge. Ask around and find out what benefits your rivals are gaining from outsourcing HR work. You may discover that these same issues apply to your organization.