Administaff - PEOs Help Insurance Agencies Focus More On Their Business And Less on Personnel Management Issues

Texas Insurance Journal - November 9, 1998

PEOs Help Insurance Agencies Focus More On Their Business
And Less on Personnel Management Issues

As an increasing number of independent insurance agencies are discovering, there are potential downsides to growth. Along with a thriving business and more employees come mounds of cumbersome administrative duties, complex rules and regulations with which to comply, and individual employee issues that can distract owners from attending the most important elements of success: overseeing operations, serving clients and growing the company.
According to the U.S. Small Business Administration, the average small business owner spends up to 25 percent of his or her time dealing with employee-related paperwork. Handling payroll, benefit plans, government compliance, safety and OSHA regulations, and even finding and training good employees, is essential but drains focus from the core business, burning time and money of the agency owner. How can both areas be managed effectively?

A growing number of business owners are finding the solution in Professional Employer Organizations (PEOs). Outsourcing human resource responsibilities to a PEO is like hiring an off-site human resources department.

Still in its infancy, the PEO industry has already achieved impressive growth. The National Association of Professional Employer Organizations (NAPEO) reports that the number of PEO firms nationally has increased from just a handful in the early 1980s to more than 2,000 today. Entrepreneur magazine named PEOs one of the "Hottest Businesses for 1998" in its December 1997 issue.

A full-service PEO ensures that administrative responsibilities such as managing payroll, dealing with government compliance issues, finding the best employee benefits, recruiting staff members and training employees are handled efficiently, accurately and in the most cost-effective manner. Top PEOs provide the resources, support mechanisms and experts to help businesses better manage employer obligations, while freeing up time for the business owner to explore opportunities for growth.

With the help of a PEO, the owners of independent insurance agencies can be relieved of most personnel-related administrative burdens, thus leaving more time to focus on maintaining and expanding their client base. Owners will also have more time to train and mold their salespeople, and to service their clients’ individual needs and requests.

Additionally, small business owners find it hard to compete with the comprehensive employee benefits packages offered by Fortune 500 companies. However, the same type of benefits packages are available for small businesses through PEOs. This is a valuable advantage in times of low unemployment since many employees consider benefits when deciding whether or not to join or stay with a company. Agency owners are now able to offer "big-company" benefits through a PEO in the small-business setting many employees prefer. And research indicates that well-cared-for employees tend to be more productive, leading to more motivated, goal-driven salespeople.

PEOs also can provide help finding the best job candidates for small business clients. By using databases of resumes, as well as additional outside resources, PEOs can reach into an employee market beyond the abilities of most small businesses. They can also write job descriptions, conduct initial interviews, administer pre-employment tests, outline salary information, place advertisements, conduct background checks – in short, perform the tasks necessary to deliver top candidates without taking a lot out of a small business owner’s day.

Once employees are on board, the full-service PEO can help improve individual and team performance through custom-designed training programs based on company goals. Such offerings include time management, communication skills, customer service, team building and total quality management -- cornerstones to a successful sales force. They also can train supervisors in the areas of performance reviews, employee counseling, leadership skills and motivation techniques.

Another growing concern for business owners is employer liability. With a significant increase in lawsuits involving issues such as sexual harassment and violence in the workplace, business owners need to protect themselves. Many PEOs provide guidance in dealing with the threats of harassment, violence and other issues, as well as implementing proper policies and procedures in the event that it becomes necessary to terminate or discipline employees. PEOs will also help their clients avoid adverse interviewing situations by advising the interviewer of legally permissible questions and helping select questions that will provide valuable insight.

Moreover, select PEOs offer additional protection by providing advice to small business owners on how to execute proper risk management. If a company is willing to follow the advice of unemployment specialists, safety consultants and workers’ compensation claim specialists furnished by the PEO, the PEO will share the liability of being an employer. This sharing of risk assures the business owner that workplace liability issues are being properly handled.

From an employee’s perspective, the changes that come with enlisting a full-service PEO are positive. Typically, employee benefits are enhanced, management has more freedom to focus on the business of providing the jobs and growth opportunities, and employee matters are professionally addressed in a timely manner.

In choosing a PEO, it is crucial for a company to do the necessary homework to select and retain a PEO that will provide the breadth and depth of services needed by a growing business. Financial stability and reliability, service capacity and flexibility in responding to the individual needs of your business are key considerations when choosing a PEO partner.

Not all PEOs provide the same services, so it is imperative to select one that meets the needs of your business. The right PEO will make sure that all the pieces of the administrative puzzle fit neatly together, ensuring that the human resource needs of the small business are met.

With a full-service PEO, the business owner remains in control of the business, but with the relief and resources necessary to take the organization to a higher level. In light of such benefits, it’s really no surprise that the PEO industry is growing 25 to 30 percent a year.

Selecting Your PEO

The scope of services offered by PEOs varies greatly. Some provide only basic activities, such as payroll administration and workers’ comp programs. Others provide a more comprehensive range of personnel services – such as medical insurance programs, employer liability management, employee recruiting and selection, performance management, and training and development.

The National Association of Professional Employer Organizations (NAPEO) offers the following guidelines to companies considering a relationship with a PEO.

Assess your workplace to determine your human resource and risk management needs.
Make sure the PEO is capable of meeting your goals. Sales brochures and fancy proposals are easy to print. Meet the people who will serve you.
Check the firm’s financial background; ask for banking and credit references. Ask the PEO to demonstrate that payroll taxes and insurance premiums have been paid.
Ask for client and professional references.
Check to see if the company is a member of NAPEO.
Investigate the company’s administrative and risk management service competence. What experience and depth does their internal staff have? Have any of the PEO’s senior staff members been certified as a Certified Professional Employer Specialist (CPES) or other relevant professional designations?
Understand how the employee benefits are funded – are they fully insured or partially self-funded? Who is the third-party administrator or carrier, and are they licensed?
Understand how the employee benefits are tailored. Determine if they fit the needs of the employees.
Review the service agreement carefully. Are the respective parties’ responsibilities and liabilities clearly laid out? What guarantees are provided? What provisions permit you or the PEO to cancel the terms of the contract?
The state of Texas requires a PEO to be licensed or registered. Make sure the company you are considering meets all such requirements.
Article courtesy of Administaff, Inc. For more information, contact the nearest office at 800-465-3800, or visit the company’s web site at http://www.administaff.com.