Subscribe to Blog ContentI met a woman at a seminar last week and thought her business had a brilliant solution for small businesses. Her business does the administration -- the non-profit part of the job for small businesses. The small business becomes a part of her company -- helping grow its employees even though they technically don't work for her. The advantage of this approach is that her company can provide health insurance since it gets a better deal by acting as the umbrella for all these smaller companies.
Her company handles human resource activities, worker's comp, retirement, health insurance, managing payroll, paying employment taxes and staffing. Small businesses retain their brand and company name by "doing business as" (DBA). This allows the small business to focus on what it does best, which is the profitable part of the business. This business set up is known as a professional employer organization (PEO).
This practice is also called co-employment and staff leasing. The PEO becomes the legal "employer of record" for insurance and tax purposes. PEOs charge a service fee for managing these functions, typically 3 to 15 percent of the payroll. Furthermore, it'll take a lot of administration tasks off your hands and cuts your paperwork so you can spend more time on the most important part of your business. They also share employer-related liabilities.
While your business needs to pay a service fee, it can save more by getting better benefits and options and use that extra cash to grow the business. Since you most likely don't specialize in human resources, it takes you longer to complete related activities. Besides, government regulations continuously change making it difficult for businesses to keep up with legal and regulatory compliance. PEOs stay updated on such regulations.
PEOs can also create employee handbooks, handle new employee orientation, new employee screening, recruiting, interviewing and hiring. This might be worth exploring as you could cut expenses associated with insurance, retirement and other benefits and free up cash flow for growing your business. You can learn more about PEO at National Association of Professional Employer Organizations.
Businesses need to shop for a PEO business just as they would look for a new partner. You want your two business cultures to play well together. Prepare questions you would ask if you were considering a merger with another company. I've heard a couple of stories where a business wasn't happy with its for PEO, but thrilled with the next one. So one bad PEO doesn't mean PEO isn't for your business.
An interesting post - it does gives new meaning to "working hand in hand". The company is a novelty idea that can benefit many small and medium businesses. With the growth of a business comes more operational and adminsitrative tasks that can get in the way. Outsourcing these tasks is a great solution to increase profitability and productivity without sacrificing operational quality.
Business processes, especially the non-core ones, need to be given equal importance and attention to achieve efficient business operation. Outsourcing these business processes will not be a waste of time and financial resources, but rather a strategy to be followed. Surviving in this highly-competitive global marketplace is not as easy as you think. You need an option that will work to your advantage - and that is outsourcing.
Julienne
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Interesting thoughts here on ways to make sure the HR Outsourcing is the right thing for a company. However many small and medium sized businesses can gain a competitive advantage as well from engaging at PEO or Professional Employer Organization. For a complete list (by state) of PEOs in the USA see http://www.staffmarket.com/peo/peo-list.asp.
Thanks for offering this resource. Yes, small and medium sized businesses can be helped by this, especially in these days and times.
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