Business Life - May 2000

Supply and Demand: How to Get the Best Employees in a Tight Labor Market

By Jim Weisbrodt

The economy is booming and opportunity is ripe, but where are all the people? According to the Small Business Administration’s Office of Advocacy, about one-third of small business reported labor shortages last year, and the tightest labor market in nearly 30 years doesn’t bode well for businesses—large or small. Since competition for attracting employees is fierce, companies are under pressure to pay higher wages and benefits—something many large companies can do, putting smaller companies in a very tight spot. In addition, healthcare costs continue to escalate faster for small and medium-sized companies making such benefits even more difficult for small firms to offer. Because small businesses (firms with fewer than 500 employees) represent more than 99 percent of all employers, they must find ways to offer a solid employee benefits package and a competitive salary while staying competitive and profitable. But how?

Outsourcing Your Human Resources
Owners of thousands of small and medium-sized businesses are offering excellent benefits packages and competitive salaries while devoting their time to growing their businesses by outsourcing their human resources needs to a Professional Employer Organization (PEO). For more than 15 years, businesses and PEOs have been entering a "co-employer" relationship. The PEO assumes many of the time-consuming, administrative duties of managing employees in return for a service fee, while the business owner retains managerial control as the on-site supervisor. Depending on the business owner’s needs, PEOs can handle a variety of tasks including payroll and payroll tax filings, unemployment claims management and workers’ compensation coverage and claims resolution, employer regulatory compliance, and the ability to offer a 401(k) plan and health insurance. In addition, some PEOs provide support services such as employee handbook and policy development, employee counseling, training, recruiting and selection, and performance management and review assistance.

With the boom of entrepreneurs and small businesses, PEOs have been growing at a healthy pace over the past few years. In fact, according to the National Association of Professional Employer Organizations (NAPEO), the industry has grown between 25 and 30 percent per year (www.napeo.org).

Sounds Great, but is it Safe?
In 1995, the Institute for the Accreditation of Professional Employer Organizations (IAPEO) was developed to provide national standards for the PEO industry (www.iapeo.org). Through its independent accreditation process, IAPEO evaluates a PEO's compliance with important ethical, financial and operational requirements. Once accredited, PEOs must be evaluated quarterly by IAPEO to maintain their accredited status. In addition, IAPEO offers a financial guaranty program, the Seal of Assurance for Professional Employer Organizations (SAFPEO). Likened to the banking industry's FDIC seal of confidence and the securities industry's SIPC program, the SAFPEO logo signifies that participating PEOs have met the industry's highest ethical, financial and operational standards.

What do PEO customers say?
With an original staff of five team members, VacationLink.com founder and chief executive officer E. Wade Shealy had to focus 100% of his efforts, and that of his entire staff, on meeting the needs of their growing clientele and expanding services. As a leader in resort and vacation home exchanges for second homeowners, VacationLink.com, based in Atlanta, Georgia, has grown steadily since its inception in April 1995. With no time to devote toward managing the everyday human resources and employment compliance requirements so critical in a successful business, Shealy turned to a leading PEO. Today, with a staff of over 23, the PEO’s services are still as critical as they were from day one.

"With a tight labor market, recruiting and retaining high quality personnel has become a top priority for our continued growth and success, and with the excellent benefits available through our PEO, we can compete with the larger companies for the most qualified personnel," said Will Brinkerhoff, VacationLink.com chief operating officer.

In addition to providing excellent benefits to attract qualified applicants, experienced PEOs offer professional recruitment services. Omega Services International, a freight management company based in Charlotte, turned to a leading PEO for recruitment services to place ads, review resumes and forward the best applicants to Omega for interviews. "Now I can focus my energies on accounts payable and accounts receivable," said Nelda Womack, office manager at Omega. "When I was responsible for recruiting, I received over 40 resumes in one day and had no idea how to read between the lines to choose the most qualified applicants to interview—it was overwhelming. The fact that our PEO offers so many services is terrific. As we grow, they are there with additional services as we need them," she added.

If your personnel management and employee benefits could use a lift to help entice job seekers, then look into the services of a PEO—they may give you just the competitive edge you need to recruit those highly qualified employees everyone is fighting over.

Jim Weisbrodt is the Charlotte District Manager for Administaff (NYSE: ASF), which serves as co-employer with thousands of small business clients representing tens of thousands of worksite employees. To reach the Charlotte office, call 704-357-9886. For more information, call 1-800-465-3800, or visit the company’s web site at www.administaff.com.

Reprinted with permission of Business Life.