Dollars & Cents - American Society of Association Executives - February 1998

A New Wrinkle on a Proven Technique: Outsourcing Employment Obligations

"There just never seemed to be enough time," says Lawrence C. Pencak, executive director of the Spina Bifida Association of America, Washington, D.C. "On one hand I was handling my association responsibilities, keeping our members happy and growing the organization. On the other hand I was trying to juggle personnel policies, benefits packages and other employee needs."

For Pencak and other association executives, the solution was to outsource the human resources function to a professional employer organization, or PEO. "They take care of the administrative details of our personnel management, so now I have more time to serve the needs of our members," says Pencak. "And our employees like it better, too, because the PEO arrangement enables us to offer improved benefits."

Pencak's story is becoming more commonplace as the relatively young PEO industry expands rapidly across the country. According to the National Association of Professional Employer Organizations, Alexandria, Virginia, PEOs now account for between 2 million and 3 million employees, up from only 10, 000 in 1984. By the year 2000, that number is expected to exceed 10 million.

Typically, PEOs provide services in the areas of staff development, employment administration, and compliance and liability.

Staff Development
Associations face stiff competition in the struggle to find, attract, and keep the best staff. By outsourcing human resource functions to a PEO, associations can take advantage of the resources, services, capabilities, knowledge and expertise of a wide range of human resource professionals. The PEO addresses four key staff development objectives:

Find the best candidates. Using databases containing hundreds (in some cases, thousands) of resumes, PEOs offer a reach into the employee market far beyond that of most associations. PEOs can also write job descriptions, place recruitment advertising, conduct background checks and interviews, and screen and test candidates.
Offer a compelling benefits package. PEOs can provide associations with a direct staffing advantage by offering employees benefits typically available only at Fortune 500 companies. PEOs are able to leverage the collective employment base of their many small clients to produce vastly improved health care programs and workers' compensation. A full-service PEO can provide comprehensive medical, dental, vision and pharmacy plans; a 401(k) retirement plan; life insurance; employee assistance programs; credit union services; and a host of other benefits. High-caliber employees often view these benefits as a deciding factor when considering job opportunities.
Improve employee performance and ability. PEOs and association executives can work together to design programs that develop more productive and motivated employees and future managers, including programs for professional development, total quality management and team building.
Give employees reasons to stay. A full-service PEO trains supervisors in such areas as conducting performance reviews, counseling employees, and leadership and motivation. PEOs can also help formulate clear job descriptions and write and implement an employee handbook.

Employment Administration
The PEO can free association executives, board members, and personnel from many of the headaches and liabilities of personnel management. As the co-employer, the PEO is responsible for payroll taxes, unemployment insurance claims, annual 401(k) benefits, workers' compensation claims, dispute resolution lawsuits (e.g., sexual harassment), employee background checks, and environmental and safety regulations compliance.

Compliance and Liability
In the 1940's, there was far less governmental regulation of business. Today, the number of regulation agencies - WARN, COBRA, IRCA and OSHA - indicates that government compliance is here to stay. The PEO can help by updating the association on the ever-changing body of liability issues; in some cases the PEO assumes liability. Because PEOs are generally more effective at managing employer obligations, they ultimately lower liability risk. A full-service PEO has attorneys, paralegals, unemployment specialists, safety consultants and workers' compensation claim specialists for the association to consult when needed.

Making the Switch
"As an association with a small staff, we have found the benefits of a PEO to be both economical and far better than anything we could have offered alone," says Pencak, whose association serves as the national representative of over 70 local spina bifida affiliates nationwide.

Executives who've made the switch to a PEO stress the importance of keeping staff informed every step of the way - from initial consideration to signing an agreement. Remind employees that co-employment does not impact their job function or supervision lines. Also inform the board of directors from the beginning so that they understand the PEO will not alter their relationship with the executive director. With a PEO, your association and staff may enjoy improved employee productivity, lower turnover rates, and more time to enhance member services and focus on the organizational mission.

Sidebar: PEO Services

Recruiting & Selection. A PEO will help your association attract and retain the highest quality staff possibly.

Benefit Management. The buying power of PEOs results in the best value and cost stability in the marketplace.

Training & Development. A PEO helps provide the staff training needed to be more productive, which ultimately makes the association more effective.

Liability Management. PEOs insulate the association and its leaders by providing more effective management of employer obligations, lowering risk and reducing fiduciary liability.

Government Compliance. Associations are kept abreast of changing employment-related federal, state and local laws and regulations, which helps protect against fines and penalties.

Employment Administration. Expertise in managing payrolls, taxes, insurance and employment record keeping frees the association to focus on its mission.

Performance Management. Association staff will be more productive through the use of individual and group performance-enhancement tools.

For more information about Administaff, contact the nearest office at 800-465-3800 or visit the company website at http:/www.administaff.com.

Reprinted with permission of the American Society of Association Executives.