The Hartford Courant - January 24, 2000

Co-employment lifts the burden

By Sheryl Silver

Do you work for a small company? If so, one of these days your may find yourself simultaneously employed by a professional employer organization, known as a PEO. According to Richard Rawson, the recently installed president of the Alexandria, VA.- based National Association of Professional Employer Organizations (NAPEO), "The industry is growing 25 to 30 percent a year in terms of the number of worksite employees that are under a co-employment relationship with a PEO."

What exactly is a PEO? NAPEO defines it as a company that contractually assumes and manages critical human resource and personnel responsibilities and employer risks for the small to mid-sized businesses that are its clients, by establishing and maintaining an employer relationship with the employees of those client companies. Rawson, who is also executive vice president and CFO of Administaff, a Texas-based PEO with offices in 15 major markets, including Los Angeles, describes a PEO as "a business that provides a wide range of human resources services for small- to medium-sized businesses."

"What drives our industry is the co-employment relationship and what that means in terms of liability issues," noted Rawson. "We assume primary liability for everything from payroll taxes and workers' compensation to sexual harassment. The client company owners allow the PEO to enter into a co-employment relationship so each employee has two employers."

Besides the PEO, which is compensated by the small business owner for the services it provides, who else benefits from the PEO relationship? Both the small business owners and their employees, said Milan Yager, executive vice president of NAPEO.

"The White House Conference on Small Business issued a report in 1998 that said owners of small businesses spend 20 to 40 percent of their time on payroll, benefits, and other human resource responsibilities," said Yager. "The PEO relationship helps small business owners get rid of some of those administrative hassles. The relationship also helps those business owners find, attract, and retain the best employees in their market by enabling them to provide better benefits" than most small business owners typically can.

"Only 4 percent of companies that came to our members in 1998 offered 401(k) plans prior to initiating their PEO relationship. After the PEO relationship, the workers at 86 percent of those companies had access to 401(k) plans," Yager said.

Regarding health benefits, Yager noted, "Earlier this year, a Dun & Bradstreet study said that 39 percent of all small businesses surveyed offered health care. On the other hand, all of our members offer health benefits" to their clients' employees. Yager pointed out that 98 percent of NAPEO members also offer dental care in their benefits packages, 97 percent offer vision care and 86 percent offer disability coverage.

According to Rawson, "What we find 99 percent of the time when a client selects a PEO to do business with, is that the PEO brings a suite of benefits that the small business owner cannot generally offer on his own."

That appears to have been true for Glen Raiger, president and CEO of Laguna Hills, Calif.-based MicroSepTec Inc., a company with fewer than 25 employees.

A client of Administaff, Raiger said, "We elected to go the PEO route so we could offer employees a better benefit package overall and to outsource the human resource and administrative function, therefore reducing the overhead burden to us. We also wanted to gain access to a greater depth of human resources expertise, and we've experienced all those benefits."

Besides the benefits PEOs provide small business owners and their employees, they appear to be benefiting the economy as well by adding to the job base. According to Rob Blunt, president of PEO Consulting Group Inc. in Laurel, Md., which represents six PEOs, "the number of PEOs has grown from 250 in 1987 to about 2,500 currently." And all those PEOs need personnel.

For more information about PEOs, visit NAPEO's Web site: www.napeo.org.

Sheryl Silver is a national columnist on employment issues based in Washington, D.C.

For more information about Administaff, call 800-465-3800 or visit the company's web site at www.administaff.com.

Reprinted with permission.