:: Outsourcing Choices – Not All Service Providers Are The Same

After 20 years of consulting with owners and employers of small and midsize companies, it still amazes me how often a business owner will invest more time, money, and resources on equipment, while providing the bare minimum for their workforce.

Business owners can devote weeks and months evaluating fleet financing arrangements, floor planning, maintenance, and service issues. But spend little time developing and evaluating employee incentive and benefit plans. Companies seldom institute support systems and training programs for their most valuable asset... their workforce.

Doesn’t it make sense to provide the best and brightest to enhance and preserve your company’s human capital investment? Today employers, large and small, can take advantage of the benefits and solutions provided by today’s Outsourced Human Resource Industry.

These companies, officially known as Professional Employer Organizations (PEO) are represented nationally by NAPEO, the National Association of Professional Employer Organizations based in Alexandria, Virginia. NAPEO, which represents over 400 member firms nationwide, reports that almost 2,000 PEO’s were operating throughout the United States in 2002.

Last year, approximately 5.4 million employees received benefits, payroll, risk management, and human resource services through a company sponsored co-employer relationship. With a growth rate of over 25% annually, analysts predict that the industry will grow to 80 million employees by 2010.

Professional Employer Organizations can generally be classified into 3 levels of service offerings. The first or basic level firms offer rudimentary payroll processing and tax filing systems, workers compensation insurance and risk management. Entry-level HR services may also be available. These firms fit well with employers involved in agriculture, hospitality, and the trades. Rates on a per employee basis can range from $450 to $700.

Level 2, or midlevel PEOs, typically offer more robust payroll, benefits, and human resource administration systems able to perform budgeting, job costing, and analytical reporting functions. Many of these firms offer a selection of employee benefit plans including health, life, dental, and disability insurance plans at reduced large group rates. The charge for this level of service ranges from $750 to $1,000 per employee.

Level 3 providers offer the highest level of service. These firms have made significant investments in their technological and human knowledgebase infrastructure. Your company can get advice and solutions from the best and brightest HR, insurance, legal, risk avoidance and tax specialists in the country. These firms offer a wide choice of employee benefit plans available from leading insurance and financial providers.

Utilizing “state of the art” systems, employers and employees have the ability to obtain personal, corporate, benefits, human resource, and risk management information from any computer or wireless internet device. They offer “Employee Self Service” systems where employees can access their vacation time, change beneficiaries and review claims and 401k statements.

Emphasis is placed on employee advancement and retention through the use of programs designed to address grievances and facilitate dispute resolution. As well as employee incentive and recognition plans focused on promoting and rewarding outstanding corporate and individual performance.

Fees for this highest level of service start around $1,100 per employee and may reach $2000 for specialized client specific services. Recently, several Professional Employer Organizations have instituted a flexible “menu” of services, enabling clients to pick and choose the level of benefits and services they require, and are charged accordingly.

As the Outsourced Human Resource industry continues to evolve and grow, you can expect to see more innovative and unique business solutions in the future.

Mark J. Burger, CPA/PFS is CEO of PEO Solution Advisors LLC, providing companies with outsourced human resource solutions. Mark can be reached by telephone at 561-889-3503.