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.

Survey Finds Nearly 20 Percent of Employers Plan to Drop Health Benefits

Nineteen percent of employers responding to a new Hewitt Associates survey are planning to stop offering health benefits over the next three to five years, nearly five times as many as the 4 percent that said they were planning an exit strategy last year.

For those employers planning to continue to provide health benefits, keeping employees healthy has become the primary workforce issue in 2009, up from the No. 2 position in 2008, according to Lincolnshire, Illinois-based Hewitt’s survey, “The Road Ahead: Emerging Health Trends 2009.”

“Promoting employee accountability” was ranked the chief health and prevention component of employers’ health care strategies in 2009, followed by “offering competitive benefits” and “managing health risk.” In 2008, employers selected “offering competitive benefits” as their chief objective, followed by “promoting accountability” and “tightly managing health care cost trends.”

“In today’s environment, employers are under pressure to cut health care expenses, but they realize that short-term cost-management tactics do not address the underlying drivers of health care cost,” Jim Winkler, head of Hewitt’s North America health management consulting practice, said in a statement. “This leaves them with two options: making a long-term commitment to improving the health of employees and their families, or exiting health care altogether.”

Among other survey findings:

• More employers are targeting specific health conditions within their employee populations than in previous years. Specifically, employers are targeting asthma, cardiovascular disease, depression and diabetes.

• When employers were asked to what extent health care reform proposals outlined by the Barack Obama administration would affect their current health care strategies, 51 percent said they would have some impact, while 44 percent said it would have no impact.

• While one-third of executives think the Obama administration and Congress should address health reform in the president’s first year in office, 63 percent believe it will take place in Obama’s first term.

• Moreover, 60 percent of executive said the federal government should take the lead, while 33 percent said the federal government and the states should share responsibility.

A total of 343 benefits executives from a broad spectrum of industries responded to the survey, which was conducted from December 2008 to January 2009.

For more information about the survey, contact Maureen Mersch at maureen.mersch@hewitt.com or Mary Ann Armatys at maarmatys@hewitt.com.

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.

Health benefit costs continue to rise, survey shows

Bruce Silver

Employers Rx LLC

After over 25 years of trying to help small business owners and entrepreneurs to provide affordable, quality health insurance coverage for their employees, it seems that with all the changes and industry "innovations", very little has actually changed.

Health insurance still remains problem number 1 or 2 for the average business regardless of size.

I have a saying that often evokes laughter, unfortunately, being able provide and afford quality health insurance is not funny, especially if you have a sick child who needs care.

"If you want to make an enemy, sell them health insurance."

Bruce Silver, Founder, Employers Rx LLC

Why do I say this? It's because you are always delivering bad news. Year after year at renewal time , you inform your clients that their premiums have been increased. Some years, it's only 10% or 15%, lately their increases have ranged from 20% to 50%. Where are the regulators?

The bad news does not stop there. Most employers cannot afford to absorb the increase so they look to you (me) to FIX it. But how? Well the only way is to reduce coverage and decimate the benefits that employees receive. So the doctors office copay goes from $10 to $20 and today most plans have $25 and $35 co-pays. If you are going to see a specialist, you can expect to have a $50 co-pay or higher.

But that is only one side of the coin. Not only are employees paying more for everything from doctors visits, diagnostic tests, medications, and heaven forbid - inpatient stays, but they are paying a higher share of premiums as well. The system is clearly broken.

Here is another attempt by industry insiders trying to put a positive spin on more bad news from Employee Benefit Adviser

Health benefit costs continue to rise, survey shows

New data by Towers Perrin suggests that employers will pay, on average, $9,552 per employee for health benefits in 2009, a jump of 6% from 2008. Yet some employers will buck the trend because they proactively manage their benefit programs.

In its 2009 Health Care Cost Survey, the HR consulting firm reveals that high-performing companies, those who rigorously track their health benefit objectives, will spend, on average, 12% less in annual health care premiums in 2009, compared to low-performing companies.

For example, high-performing firms report a per employee cost of $8,904, compared to $10,104 for low-performing companies. The cost variation fell even lower ($7,032) at high-performing companies utilizing consumer-driven health plans with health savings accounts.

The survey defined high performers as companies who not only had a strong commitment toward improving employee health and engagement, but who also aggressively managed their health plans and the delivery process.

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Fortunately, our team at Employers Rx LLC has found an answer for many small business owners, HR executives, and entrepreneurs.

Check out my interview with David Weir of the South Florida Business Report to learn more. Click on the You-Tube link or contact us at (877) PEO-CURE.

Workers Compensation Savings with a PEO - How Employee Leasing and Professional Employment Companies Do It?

By Bruce Silver

Employers Rx LLC

Workers Compensation Savings with a PEO - How Employee Leasing and Professional Employment Companies Do It?

You have read all of the claims how employee leasing and professional employer organizations can reduce your workers compensation costs by 10% or 20%. If your company has developed a high experience mod rate as a result of a large "shock" claim, or claims that may be questionable, it is possible to receive rate reductions of over 25% from employee leasing companies that are competing for your business. Have you ever wondered how this is possible? How do PEOs do it?

The Rule of Large Numbers

All employee leasing companies carry workers compensation coverage just as any small business is required to do (except Texas). However, because they are "pooling the risk" of hundreds of companies and thousands of employees, they have the ability to "self insure" the risk up to a certain amount, the deductible. Some PEOs purchase workers compensation policies that pay only after the first $250,000 of a claim, others are responsible for the first $500,00.

Skin In The Game

What does this mean for the small business owner who is with a PEO or employee leasing company? Because PEOs really have "skin in the game" when your employees submit a claim, and claims paid come from reserves that will be returned as profits, it is much more likely that claims will be vigorously investigated and contested than in the standard markets.

Some employee leasing companies have more flexibility than others. They can offer small employers unique WC programs containing a claims "cost sharing" arrangement that can further reduce your rates and improve cash flow. Your company assumes more of the risk, but shares in the rewards of maintaining a safety conscience and healthy workplace. Workers compensation programs like this and others, are not available to small and midsize companies because of insufficient premium. Entrepreneurs and business owners who take advantage of the benefit's of using a PEO, now have the ability to compete, and beat a larger company when bidding for that "prize" contract.

Caveat Emptor - Let The Buyer Beware

You've learned how most large employee leasing companies and PEOs essentially "self -insure" their workers compensation risk. It is equally important to understand that the ratings of the insurance carrier hardly matter because they will only be responsible for expenses that exceed the plan deductible. Since only the most traumatic claims with extensive medical bills and long term disability will be covered, it much more important to know the financial soundness of the employee leasing company or professional employer organization.

Below is a press release from Gevity, a leading professional employer based in Bradenton, FL.

Gevity Announces 2009 Workers' Compensation Insurance Renewal

BRADENTON, Fla., Dec. 30, 2008 (GLOBE NEWSWIRE) -- Gevity (Nasdaq:GVHR), a leading professional employer organization (PEO) that provides HR services to businesses nationwide, today announced that the Company has renewed its 2009 workers' compensation insurance agreement with member companies of American International Group (AIG) Commercial Insurance.

Consistent with 2008, Gevity will maintain a $1 million per occurrence deductible and will make monthly payments to AIG for program costs and estimated future claims costs in the form of loss collateral funds, which will be approximately $17 million lower in 2009. Garry J. Welsh, Chief Financial Officer, commented that "We are very pleased with the terms and conditions of our renewal for 2009. Moreover, we are encouraged that our effective risk management practices and continuing favorable trends in claims costs have resulted in lower loss collateral funding requirements from AIG."

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.

A Sign of the Times - Recruiting Website Cuts 15% of Workforce

Bruce Silver, Founder
Employers Rx LLC
December 12, 2008

Report: CareerBuilder Slashes Jobs

Another ominous headline. This one from the Washington Business Journal. Simply a sign of the times. It feels very much like the early 80's. Do you remember the oil embargo, odd and even days, rationing? Jimmy Carter was out, Ronald Reagan was in. Reagan broke the backs of the unions when he fired the air controllers. He brought in Paul Volker to wring out inflation, partially caused by high oil prices. He did it by ratcheting up interest rates which sent a slowing economy into a tailspin.

The saying then was "if you had a job you were in a recession, if not, it felt like the depression".

Washington Business Journal

by Jeff Clabaugh Staff Reporter

Hundreds of jobs have been cut at a company that is supposed to help people find jobs.

Job posting Web site CareerBuilder has slashed 300 jobs, or about 15 percent of its workforce, according to the Chicago Tribune. The cuts were across the board, but mostly in its small business segment, the Tribune reports, citing chief marketing officer Richard Castellini.

The cuts took place last week, the newspaper reported. (Happy Holidays)

CareerBuilder is majority-owned by Gannett Co. Inc. and Tribune Co., both companies that have struggled with dropping advertising revenue at their publishing businesses. Gannett has responded by cutting hundreds of jobs this year. Tribune this week filed for Chapter 11 bankruptcy protection.

“When we forecast our business for 2009, the growth rates we had anticipated weren’t going to be in line with where we were currently seeing the business,” The Tribune quoated Castellini as saying about the job cuts at CareerBuilder.

Gannett (NYSE: GCI) upped its stake in CareerBuilder earlier this year to 50.8 percent, buying part of Tribune’s interest for $135 million. Tribune still holds a 30.8 percent stake. Publisher McClatchy Co. (NYSE: MNI) and Microsoft (NASDAQ: MSFT) are minority owners.