More Insights on the Benefits of PEO's vs. HRO's

A PEO, or professional employment organization, is a company that specializes in taking care of all the responsibilities that come with employing qualified people, but also adhering to all the numerous employer/employee laws and requirements. By hiring a PEO, you are "getting out of the business of being an employer," says Bill Maness, president of Syndio Outsourcing, a PEO in Wichita, Kansas.

PEO's started in the 1980s and have grown quickly in the past few years as the number of state and federal regulations has increased, resulting in a pronounced increase in paperwork and different compliance requirements. There are about 700 PEO's in the United States serving more than 100,000 businesses with approximately 2.5 million employees, according to the National Association of Professional Employer Organizations, the trade association for the PEO industry.

The primary distinction from other HR service providers is that the PEO actually becomes the legal employer of your workers and thus takes on the accompanying legal liabilities. There are other distinctions as well that make PEO's a very attractive alternative to a standard HR service.

The Debate Over Employee Free Choice Act Widens

One of the bills in Congress this year that is expected to be heavily debated is the Employee Free Choice Act.

What is it? Workplace Horizons has this take on it: "The Employee Free Choice Act (H.R. 800; S. 1041) would amend the National Labor Relations Act to make it significantly easier for unions to organize employees, to require binding arbitration of first contracts after 120 days, and to stiffen penalties for certain unfair labor practices."

The AFL-CIO has an alternative take on it: "The Employee Free Choice Act (H.R. 800, S. 1041), supported by a bipartisan coalition in Congress, would level the playing field for workers and employers and help rebuild America’s middle class. It would restore workers’ freedom to choose a union by: Establishing stronger penalties for violation of employee rights when workers seek to form a union and during first-contract negotiations; Providing mediation and arbitration for first-contract disputes; Allowing employees to form unions by signing cards authorizing union representation."

How to Select a Professional Employment Organization

Here's a video entitled "How to Select a Professional Employment Organization" featuring a spokesman from UHY's Business in the Eye of the Storm:

Overcoming Negativity in the Workplace

It is a common fact that people do not always enjoy what they do, or they simply hate certain tasks associated with their role in the company. Many people feel undervalued or underpaid in their current position. These are just a few things that can bring about negativity among one’s workforce. Whatever the cause of the negativity may be, the results are consistently similar. Negative people are less productive. Additionally, one or two negative people can bring down the morale of an entire office.

This is why the saying “one bad apple spoils the bunch” or “a chain is only as strong as its weakest link” is so true. Sayings such as these two, along with others that I am sure you can think of, are abundantly true in the work place. So this begs the question, “How do I overcome negativity in the workplace?”

The most vital step in eliminating workplace negativity, especially if you are going to be the driving force behind the solution, is addressing your own negative thoughts. It is unrealistic to think that anyone will always be positive; however, before we can initiate a change we must begin working on our own negativity. One thing that I have seen work exceptionally well is simply trying to smile more. Smiles project a positive energy to others along with making you feel better. Have you ever heard anyone say “smiles and laughter are contagious”? Try it out; you may get a pleasant surprise.

PEO's, or professional employment organizations, employ those who are adept at making sure morale and positivity are a staple of any workplace. Their benefits are manifold in aiding any sized company.

PEO's aid businesses with pre-employment screening

Pre-employment screening is an often overlooked area where PEO's can greatly help large and small businesses. Without a screening or testing process, you risk placing not only the wrong type of persona for the job, but a potential liability for your company in the form of a person with a violent history, perhaps. So, lost productivity, costly turnover, liability for an accident or assault or other injury or negligence in the workplace -- these things can all be possibilities when a proper screening process is not done.

Small business owners don't tend to relish the idea of sifting through stacks of resumes and conducting interviews, when the running the business at hand goes by the wayside, or into a junior executive's (or lesser employee's) hands. PEO's can significantly reduce this burden (as well as a host of other aspects of running a business) and quickly deliver candidates who are most likely the right pick for the job.

PEOs control cost through putting crucial programs into action

Implementing, maintaining and supporting an ongoing risk management program can help control business costs, and a good PEO, or professional employment organization, can help you with this. The most effective cost control process involves a combination of elements, which may include the following:

Office safety program
Safety rules and regulations
Duties and responsibilities
Employee selection
Employee orientation and training
Office inspections
Job safety analysis
Accident investigation
First aid activities
Record keeping

Given the stringent regulations related to the medical industry, in particular, many physicians and physician offices are turning to a PEO to outsource all or some elements of risk management and workers’ compensation. There are PEOs with significant health care expertise and many who provide high levels of workers’ compensation management. Not only do many PEOs arrange coverage, but they provide assistance in directly assisting with safety and risk management, claims administration, return to work programs, and employee manuals designed to reduce costs.

Florida Passes New Legislation for PEO Employee Data Inclusion, Analysis

The State of Florida has passed the "Accurate Employment Statistics Enhancement Act" to require PEO and Employee Leasing companies to submit client level detail information to the state government for use in unemployment compensation data analysis. Known as Florida House bill HB641 and Senate bill SB1062.

The bill amends the definition of “employee leasing company” in s. 443.036(18), F.S., to include a statement that requires employee leasing companies to produce quarterly reports concerning their clients and internal staff. The new definition will require employee leasing companies to “produce quarterly reports concerning the clients of the employee leasing company and the internal staff of the employee leasing company.” Quarterly reports will provide AWI with more timely and accurate labor market statistics.

Source: State of Florida

PEO's Wield Huge Insurance Buying Power

PEO's, or professional employment organizations are a good alternative because they have huge buying power. Instead of buying health insurance for your company of 5, a PEO might have 10,000 or more co-employees using its health insurance. The same is true of buying other types of insurance such as worker’s compensation and providing other benefits, as well. Since a PEO might have 500 companies and 10,000 employees it works with, for it to be profitable and successful, it must be extremely good at purchasing benefits for all its co-employees and administering them in an efficient yet personalized way.

There are many benefits to having a PEO for any primary employer. Among these are being able to offer a very good benefits package without having a huge number of employees, having a strong outsourced human resources team on your side without having to employ your own staff, ensuring that all employment laws and workplace rules are being followed correctly, and finally, helping protect yourself from employee lawsuits.

Defining the Term "Co-Employment"

Just what is meant by the term co-employment?

Co-employment is the sharing of employment responsibilities between the PEO (the administrative employer of record) and the Client Company. Specifically, Professional Employer Organizations become contractually responsible for:

* Paying wages and employment taxes of the employee from its own account.
* Collecting, depositing, and reporting employment taxes with federal, state, and local authorities.
* Maintaining an employment relationship with employees that are intended to be long-term, not temporary.
* Reserving and retaining—along with the client company—the right to hire, reassign, and terminate employees.
* Providing Workers' Compensation coverage for its employees.

A PEO can substantially add to any company by cutting out the time and paperwork employers would normally have to spend on the clerical part of being a business owner.

There are Some Similarities and Differences Between HRO's and PEO's

When exploring HR-outsourcing solutions, many companies encounter two unclear and unexplained acronyms: HROs (Human Resources Outsourcers) and PEOs (Professional Employer Organizations). Since these three-letter terms often appear hand-in-hand, it’s easy to assume that they refer to the same thing. But that’s not necessarily the case.

Most people use HRO when they're talking about either breed of service provider, so it’s easy to get confused and assume that HRO is the blanket term for HR outsourcing. While HROs and PEOs do offer similar services, however, fundamental differences exist between the two approaches. And every company — whether it’s a startup just breaking into the market or an enterprise with years of experience — needs to understand these differences before choosing an outsourcing solution for their HR needs.

In general, HRO’s are of more benefit to companies with 100+ employees. In larger companies scale of operations may require a high level of expertise in some technical HR areas. However, it isn’t cost-effective to bring a highly technical HR staff member on board for a less than full-time job. PEO’s are potentially great solutions for companies with 100 or less employees because those companies have significant HR activity and may also have difficulty getting quality and cost-effective Worker’s Compensation or Group Health Benefits.

While being an indicator, the actual size numbers aren’t hard and fast rules, but rather, are a general guide. We have had clients with 600+ employees on a PEO program and also have a company with 2 employees. Don't let the usual cases decide for you. Look into both, study their individual pros and cons, then decide for yourself.

The Market for PEO's: Small Business and a Fluctuating Economy

According to the National Association of Professional Employer Organizations (NAPEO), about 80,000 U.S. companies with 3 million employees currently use PEO's, and the numbers are growing at about 30 percent annually. Most of these companies have between 10 and 200 employees. Here are some compelling reasons for business owners to form a relationship with a PEO:

Record keeping, regulatory compliance and budgeting take up on average 22 hours a week of a small business owner's time, according to a MasterCard survey of 300 entrepreneurs.

50 percent of all new employees will quit their jobs within the first six months of employment. (U.S. Department of Labor)

The cost of employee turnover is about $1,185 per employee. (Bureau of Labor Statistics)

One out of three companies pay tax-filing penalties each year. (Bureau of Labor Statistics)

Small companies spend up to 80 percent more per employee than bigger companies in complying with federal regulations. (Small Business Administration)

The estimated value of the total addressable market for comprehensive HR outsourcing to the small market is a staggering $44 billion per year in potential recurring revenue in the United States, based on 2004 employment figures. The number of PEOs in the United States declined in 2003 over 2000 but made a dramatic rebound in the 2006 census. This is due in part to an increase in the number of small businesses in the United States according to the U.S. Small Business Administration's 2006 study of the small business economy. But, as small businesses are now in decline again, so go the PEO's.

PEO's and DOL Much More Effective at Keeping a Drug and Alcohol-Free Workplace

You can't do it on your own. Not when you're kept busy enough with the nuts and bolts and day-to-day business of running a business. A professional employment organization, or PEO, will help keep Dept. of Labor drug-free workplace standards enforced. It's one of the many things which hiring an HR agency can do for you. Being able to streamline and economize your business with those who understand DOL standards -- and keep to them -- is paramount to success in the business world.

Studies have clearly shown that having a PEO do the technical stuff keeps your employees at their peak performance, which in turn keeps your company consistently oriented toward growth. In the long run, it's the businesses who went with professional HR firms that have succeeded overall. Don't lose your workplace environment to drugs, alcohol, or inattention to federal laws and guidelines specifically designed to help your business succeed.

Notes on PEO Pricing, or Statutory "Pass-Through" Costs

As an employer you are required to withhold social security taxes from employees and pay a matching amount of these taxes. The matching amount is your obligation as an employer. FICA amounts are billed at 6.2% of wages up to a wage cap of $87,000 (2003) per employee. As an employer you really have two responsibilities for FICA. First to withhold and remit the amounts for the employee and second to pay your matching share as the employer.

Your PEO quotes will show the “pass-through” amount for only the employer’s portion of FICA. While calculating your payroll, the PEO will calculate and withhold the employee’s portion automatically. The employer’s portion of the FICA obligation will be shown as a “pass-through” amount collected from you by the PEO and remitted to the government.

Just like the withholding for FICA, Medicare is billed at 1.45% to the employee and 1.45% to the employer. The difference is that the Medicare tax is not wage capped and applies to all employee wages. The employer’s portion of the Medicare tax obligation will be shown on a PEO quote as a “pass-through” amount collected from you by the PEO and remitted to the government.

Your PEO quotes will include a “pass-through” charge for your company’s Federal Unemployment Taxes (FUTA). In general, any amounts shown for FUTA on a PEO quote will show a FUTA amount of .008 or .8%. When you engage a PEO, they are responsible for depositing the FUTA payments and filing the Form 940.