Outsourcing your HR

You’re frantically ordering merchandise, helping stock shelves, signing checks. Do you really have time to administer the payroll, make sure the workers compensation insurance premium is paid and find a good deal on health insurance?

An estimated 100,000 businesses outsource these tasks to professional employer organizations. Most of these businesses have fewer than 20 workers, but larger companies, such as retailers with multiple locations, also hire them.

PEOs offer myriad services. For retailers experiencing high turnover, they offer advice on how to keep good workers and improve underachievers’ performance. For those faced with limited choices in health care plans for their workers, the PEO may offer better benefit packages at competitive rates.

Many PEOs provide access to a comprehensive employee benefits package. Their programs can include major and supplemental health-care choices, including vision and dental care, 401(k) programs, employee assistance programs and even adoption assistance.

PEOs find and negotiate the benefit programs and can manage the regulatory requirements, such as those of Health Insurance Portability and Accountability Act and COBRA. They also handle the details of enrollment and administration.

Clients of seven out of 10 PEOs have access to health care benefits and an estimated 94% of employees in a PEO arrangement have access to a pension plan, according to the most recent research of the National Association of Professional Employer Organizations.

Nearly all (98%) PEOs have established Section 125 cafeteria plans to offer client’s employees the opportunity to offset medical expenses with tax-free dollars and many have access to flexible spending accounts to help them cover their out-of-pocket medical expenses.

When a business contracts with a PEO, the PEO takes on certain employment responsibilities, such as payroll taxes, workers’ compensation coverage and providing significant employee benefit plans. They also help ensure compliance with labor laws, including the Fair Labor Standards Act and the Family and Medical Leave Act.

PEOs can manage administrative functions like maintaining employee files, processing unemployment claims, managing workers’ compensation claims and developing employee handbooks. They also can manage much of the employer-related paperwork associated with benefits administration and government compliance, such as the IRS’s I-9 employment verification process.

“It’s like having a human resources department; you have a team of HR people but only pay a portion of the expense,” said Bill Reimers, general manager of Midcounty Coop in Minnesota, which operates convenience stores. He especially values the HR advice and expertise that his PEO, Doherty Employer Services, provides — including policy work, performance appraisals, employee training, employee handbooks and how to handle challenging employment situations.

PEOs secure coverage for their clients and they emphasize safety and compliance. As a result, they focus on risk management to create safer working environments. You can expect a work site assessment when starting to work with a PEO. They manage claims with a focus on controlling claims costs through prompt reporting, early treatment and speedy resolution of each claim.

The PEO industry has a certification program based on best performance practices in workers’ comp risk management. Businesses that value risk management can look for a PEO with Workers’ Compensation Risk Management Certification from the Certification Institute (www.certificationinstitute.org).

Jon Athey has been in retailing since 1967, when he started his convenience store business, City Stop, in Las Vegas. He works with his PEO, ManagedPAY, because he does not want to open an HR department; he wants to focus on opening stores.

Many PEOs help develop and document workplace policies and procedures in accordance with applicable state and federal employment laws. They will assist in developing an employee handbook and provide related guidance and training. Many also equip their clients with recruiting tools to find the best applicants. These tools include skill evaluations, background screening, personality tests and in-depth interviews. They also can help with wage and salary planning and with performance appraisals.

Regardless of a company’s industry, size or number of locations, PEOs might be a viable outsourcing option. Fees obviously are based on level of need — whether it’s several core human resources tasks, or those plus special services, such as total recruiting support — but services are customized for each business.