Ever notice how everything you touch these days just seems to turn into an HR issue? Or perhaps you feel as though your title of president has slowly been replaced with the more descriptive title of HR manager. There may seem to be less time available to spend on what you originally went into business to do, as more of your time is being spent on your employees and their issues. In fact, according to the Small Business Administration, the average business owner can spend up to 25 percent of their time handling employee-related paperwork.
Managing these tasks can eat away at your opportunities to generate new business and cultivate existing client relationships. The question is: What can you do to fix this problem? One option is to outsource your HR related administrative functions to a Professional Employer Organization (PEO). Get back to focusing on things that can ultimately have a positive impact on your bottom line. In the words of management guru Tom Peters, ”Do what you do best and outsource the rest.” This is exactly what a PEO arrangement is all about!
So, what exactly does a PEO do? The short answer is that these organizations help today’s heavily burdened business owners get out of the “employer business” and back in their core business activity. This is an industry that has grown to be recognized as the premier administrative outsourcing tool for the progressive small to midsize business owner. Trusted business advisors, such as bankers, financial planners and certified public accountants now routinely recommend this type of program for their business owner clients.
Under this arrangement, the business owner contracts with a PEO to handle most of their company’s HR-related administrative functions. The PEO also helps provide relief from the many liabilities and responsibilities that have become inherent in running a business today. In essence, the PEO becomes somewhat of a one-stop resource or a remote HR and payroll department for today’s time-constrained small business owners. Not only are payroll, benefits and employee safety taken care of, but the PEO’s staff of HR professionals can also address compliance, compensation, discipline and employment law-related questions.
What’s more, the cost for utilizing a PEO is generally much less than the cost of a full-time HR employee and much more comprehensive when you consider the range of services involved. When contrasting the return on investment potential of adding a new employee vs. outsourcing to a PEO, the choice quickly becomes a no-brainer.
In order to get an idea of the relief this type of arrangement might provide for your business, just take a few minutes and list all of the different vendors your business is now required to utilize on an ongoing basis. Next, visualize a large chunk of those same vendor requirements being handled by a single payment to a single source, the PEO. This type of vendor consolidation strategy can represent huge savings in terms of both time and money. According to PricewaterhouseCoopers, companies that outsourced multiple HR functions to a single vendor saw an average of 32 percent cost savings compared to those who took the in-house approach.
The PEO is truly a ready-to-go, plug-and- play type of arrangement and can literally be integrated with practically any type of business. When you compare the PEO alternative to the vulnerabilities inherent with an infrastructure built around a number of key employees, the benefits ascribed to the PEO are overwhelming. According to Michael Gerber, author of the famous entrepreneurial book The EMyth, every company must ultimately be capable of producing the type of consistent, predictable product or service that every customer demands. This is impossible to accomplish without incorporating a systems approach in the development of your business.