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Talking to the Boss - June 28, 1999
Handling "Details" Becomes Big Business
By Rick Fazio
Whoever said, "Don’t sweat the small
stuff" obviously never ran a small business. Seemingly "small
stuff" adds up to a lot of time and attention – filling
out endless administrative forms, filing tax reports promptly and
accurately, keeping up with ever-changing workplace regulations,
recruiting and retaining talented employees…the list goes on
and on.
These "little" things can keep entrepreneurs awake at
night. They also can leave business owners with much less time to
focus on the essentials of their businesses. Consequently, an increasing
number of companies have taken the popular outsourcing concept to
a whole new level – actually entering into a co-employer relationship
with a professional employer organization (PEO).
PEOs were born out of the frustration many small-business
owners experience when administrative work inhibits their ability
to grow the organization. To overcome that challenge, a business
and a PEO enter into what is called a "co-employer" relationship
with the existing employees, enabling the PEO to serve as the business’
virtual human resources department.
A PEO assumes certain responsibilities for a
business’ human resources functions, including payroll and
tax filings, unemployment and workers’ compensation reports,
employer regulatory compliance, and offering a 401(k) plan and health
insurance.
In addition, some PEOs provide support services
such as employee handbook and policy development, employee counseling,
training and screening, and performance appraisal assistance. Of
course, owners still make all the strategic business decisions and
can delegate various human resources projects to the PEO on a "makes
sense" basis.
Within the past five years, the PEO industry
has gained nation-wide recognition as a viable resource for small-business
owners. Today, PEOs operate in every state. The National Association
of Professional Employer Organizations estimates there are approximately
2,000 PEOs operating throughout the country – up from less
than 10 in 1982. PEOs currently account for between two million
and three million employees – up from 10,000 in 1985.
According to NAPEO, there are three principal
reasons why the PEO industry continues to grow rapidly. Chief among
them is the increase in the number and complexity of workplace regulations
– there are more than 4,000 local, state and federal employment
regulations on the books today. The second underlying factor stems
from the need of business owners to attract and retain superior
talent in an increasingly competitive workforce. For example, with
a PEO, employees at small and medium-sized businesses are able to
receive big-company health plans, 401(k) programs and other employee
benefits that previously may have been unattainable. Third, business
owners seeking to control their operating costs are turning to PEOs
to help them manage administrative expenses.
The PEO industry is still relatively young and
very dynamic. New PEOs abound, and small businesses should do their
homework before entering into a co-employer relationship.
Business owners should first check to see whether
a PEO is a member of NAPEO, or better still, is accredited by the
Institute for the Accreditation of Professional Employer Organizations.
Many states do not yet require PEO certification or licensing. Consequently,
IAPEO was established to ensure business owners that the PEO in
question has been audited by an outside organization to verify that
it follows sound business practices. Owners also should investigate
how long the PEO has been in existence and if it will furnish the
names of current and past clients for reference checks.
For more information on how to best search for
a PEO, contact NAPEO at (703) 836-0466, or visit the organization’s
home page at http://www.napeo.org.
Rick Fazio is a Chicago District manager for
Administaff, Inc., the only PEO listed on the New York Stock Exchange.
Visit Administaff on the World Wide Web at http://www.administaff.com
or call 800-465-3800 to contact the nearest Administaff office.
Reprinted with permission of Talking to the Boss
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