Inside Collin County Business –- May 2001

Enhance Employee Retention

By T.R. Miller

As a senior partner at Plano-based Closest Point Solutions, Dale Huffman knew his small firm needed to offer benefits to its employees if the company was going to grow and retain top-notch employees.

So, the software consulting company turned to Professional Employer Organization (PEO), Administaff. "We wanted to focus on our core competencies and help provide solutions for our clients," Huffman said. "We’re a new company and prior to contracting with Administaff we didn’t have benefits." For him, the payback comes when he doesn’t have to worry about making time to do payroll or setting up insurance plans for his staff. "I can focus on making money," Huffman said. "Time is money. If I’m doing payroll, I’m spending my time doing something away from what helps us make a profit."

PEOs were previously referred to as employee leasing companies, but that is a term that really isn’t applicable any more, said Randy Evans, president and CEO of Addison-based E3 Group.

Most PEOs routinely provide negotiation and administration of benefits from including health plans, section 125 cafeteria plans, customized 401(k), dental insurance, workers’ compensation insurance, life and disability insurance, comprehensive payroll and record keeping services including payroll tax filings and payments. More sophisticated companies like E3 and Administaff do much more including hiring and even training.

The benefits of using a PEO are many, according to industry experts. Regarding group benefits, there is not only the expertise of the staff helping arrange the coverage but there is an economy of scale. By having a larger pool of "employees" to get a policy, it pays off with lower premiums, Evans said.

The PEO enrolls a client and its employees and while the company administrators still run their business the same way, legally we’re co-employers, Evans said. "Small companies with 25 employees can have their policy nuked if they have one person with a chronic health condition," Evans said. "With us, it doesn’t make a blip on our policy. It really does benefit the client company."

Many PEOs do only payroll and benefits delivery systems, said Greg Clouse, regional manager out of the Dallas office of Administaff. "We’re a one-stop shop. We can handle all personnel and HR needs," Clouse said. "We can do training and development, as well as e-business solutions. We deliver a custom-fit to a business and meet the needs based on the personality of the business."

E3 and Administaff both have systems in place to screen, hire and train employees.

Evans said E3 can determine if a potential employee is suited for a job thusly dramatically reducing turnover by hiring the right person initially and then providing that person with a lot of training.

Ellen Franklin, who works in accounting and human resources for North Texas Orthodontic Associates in Allen, said hiring is definitely easier for her than it would be without the help of Administaff. Her office has been with Administaff for more than four years. "We have the benefits of their expertise and the experience of a large corporation," Franklin said. "They are very helpful. It is like having the HR department in a big company just down the hall. I can pick up the phone and call for anything. They cover all kinds of things for us."

Companies like the orthodontic office are moving toward using PEOs more and more.

"PEOs have increased," Clouse said. "Estimates indicate that the market is 3 percent penetrated, which leaves a lot of market and needs available to be met." In today’s business, companies need to pick what they do best and outsource for the rest, Clouse said. "Outsourcing all you can that isn’t your core specialization is the ideal," he added. A business trying to grow while attracting and retaining employees is a challenge in today’s labor market, he said.

"PEOs can stabilize the workforce by testing and profiling and training employees. It can have a dramatic impact and that shows up in the renewal rate of our clients," he said. "One reason to outsource is for better technology and expertise and leverage from a buying standpoint." But, more than cost-effectiveness, Clouse said many of his clients feel they have more time to pay attention to their core business and their employees.

Reprinted with permission from Inside Collin County Business – Plano, Texas
May 2001.