|
Outsourcing your H.R.
|
 |
December 29, 1999: 11:27 a.m. ET
Employee-leasing outfits provide big-company benefits to small firms
By Jane Applegate
|
NEW YORK (CNNfn) - Tom Strasse's 40 employees at First-Weigh Manufacturing in Sanford, Fla., might not work for a large corporation, but they receive the same kind of insurance benefits and human resources services available to workers at most Fortune 500 firms.
Strasse can afford to take good care of his staff because he outsourced all his personnel management to ADP Total Source, the Miami-based Professional Employee Organization (PEO) division of ADP (AUD), the payroll processing company.
"I didn't have the time or the personnel to deal with the human resources, safety and OSHA regulations," said Strasse, whose firm makes industrial scales. The fact that First-Weigh's health insurance carrier dropped the company after its first two years added to his worries. When he could get coverage, the premiums were increasing about 30 percent a year. "We were always looking for new insurance," Strasse said.
Strasse needed more than a payroll service that provided benefits. He also needed help complying with a myriad of state and federal laws.
"With the ways the laws are written, especially related to questions you can't ask during job interviews, it was impossible to train all our managers about what not to do," Strasse said.
In addition to providing insurance benefits and workers' compensation coverage, the PEO's experts also handle everything from regulatory compliance to payroll administration and sexual harassment training.
Fast-growing industry
By serving fast-growing small companies, the PEO industry has become a $200 billion giant, growing at 30 percent annually. The PEO concept, also known as employee leasing, has been around since the 1980s.
The industry was tarnished a few years ago when large companies began leasing out their lower paid employees in order to boost the pension benefits offered to higher paid employees. This practice got the industry in trouble with state and federal regulators.
Although a new and improved industry has emerged, the employee-leasing concept remains largely unknown to many small business owners outside of Florida and California, where the concept is very popular.
A PEO actually hires your employees, puts them on its payroll and leases them back to you. So, instead of qualifying for the usually bare bones benefits available to small companies, your workers are part of group that often represents thousands of workers.
Hiring a full-service PEO in 1997 provided Strasse with peace of mind that he could afford, especially since the administrative cost of using the PEO was paid for by savings in other areas.
"They were able to reduce my workers' comp fees to the point that their fee came out of that savings," he explained.
Companies big and small are involved in the PEO industry. Three former ADP employees formed HR Tech, a Columbia, Md.-based PEO considered a leader in the field. The $110 million company, with offices in New York and Maryland, plans to expand its operations to Atlanta and San Francisco. HR Tech's success earned its young founders, Darren Seward, Scott Thompson and Toni Bonacuse, the 1998 Ernst & Young Entrepreneur of the Year award.
"To attract and retain key employees you need to offer top benefits comparable to the Fortune 500," said Sarah Stevens, Manhattan regional manager of HR Tech. "You not only have to deliver the benefits, but be able to afford to deliver them," Stevens explained. "We have the buying power because we approach the market as a large corporation."
Answers on employee issues
When Sherry Kelley, personnel and safety manager for the 120 employees at Value Line, an Arkadelphia, Ark.-based furniture manufacturer, has questions about legal issues or safety concerns, she calls her rep at Express Human Resources, the Oklahoma City-based PEO her company has been using for five years.
Express Human Resources is the PEO division of Express Services Inc., which has 400 offices in seven countries. The company also offers consulting, executive search, franchising, temporary employment and permanent placement services.
"There are plenty of people there to answer my questions," said Kelley, who relies on Express for payroll, workers' compensation insurance, health insurance and unemployment insurance administration.
PEOs like ADP, HR Tech and Express conduct regular training seminars for clients. They also publish manuals and materials that few entrepreneurs and small business owners have time to produce.
"We provide policy handbooks, employee learning materials and training," said Linda Hanebourg, vice president of marketing and public relations at Express. "Every company is different, so we customize all our services."
Back in Florida, Tom Strasse admitted that many of his managers were apprehensive about the changeover to using a PEO. They weren't sure whether to believe they would still have control over day-to-day hiring, firing and management.
"Once we went through the initial training, no one knows, realizes or cares that we use a PEO," Strasse said. "The actual supervision of people has not changed. We have the ultimate power to hire and fire."
HR Tech's Stevens said small employers should think of PEO's as an added level of protection and service for both their employees and themselves.
"Small business owners are overburdened with wearing so many hats," Stevens said. "With a PEO, you can transfer or share the liability."
(Jane Applegate, a syndicated columnist and author of 201 Great Ideas for Your Small Business, covers small business for CNNfn. "Succeeding in Small Business" appears Wednesdays.) 
|
|
|
|
|
|
ApplegateWay.com
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
