Commerce -- September 2001

Taking Care of Your People is Smart Business

By Joe Ringwood

Making employees wait at least six months to become eligible for company benefits was taking a toll on JustBalls.com's recruiting efforts when the Internet sales company opened its doors three years ago.

"In this day and age, that's no way for a company to attract employees," said Antwane Owens, chief financial officer of JustBalls.com. The company offers balls and ball-related gear from a variety of manufacturers for just about any purpose - from toy balls to pro balls, footballs to foosballs, and foam balls to hardballs.

Company management quickly realized that the lack of focus on human resources could seriously hurt the business in other ways, too. Without an HR expert, important administrative tasks could slip through the cracks - things like staying abreast of safety requirements or filing employment-related paperwork. "I started searching for a Professional Employer Organization (PEO)," Owens reported. "We wanted to find the best employees and provide them with access to high-quality benefits to help us with employee retention. In addition, we wanted to be sure that the many regulatory requirements required of an employer were being met."

Although PEOs have been around for more than 15 years, the industry is still relatively new to many business owners. A PEO serves as an off-site human resources department for small and medium-sized businesses and, depending on the PEO, provides a number of services - from benefits and employer liability management to recruiting and training assistance. Because PEOs can take advantage of volume buying power, they are able to offer employees of small businesses excellent benefit packages they couldn't otherwise access. After conducting research, Owens chose Administaff, one of the nation's leading PEOs.

"Some PEOs only offer payroll services," Owens said. "Administaff has more depth and breadth in the services they offer. Under their proven co-employment arrangement, they share or assume many of the liabilities and responsibilities of being an employer. We look to Administaff for all our human resources needs - which has really helped improve our employee recruiting and retention."

The Importance of a "People Strategy"
The U.S. Department of Labor estimates that it can cost a company up to one-third of an employee's annual salary to replace them. And without the right people to help a business meet its goals, a company is on a slippery slope. Studies show that employers who invest in a "people strategy" have a competitive advantage over those that don't. Despite a growing emphasis on HR issues, not all employers realize that the key to success revolves around hiring and keeping the right people.

Consider the following:
· In a recent study by consultants Watson Wyatt Worldwide, only 14 percent of responding companies viewed their people strategy as a significant source of a competitive advantage. Those that did reported nearly twice the shareholder return of companies that did not.
· 45 percent of companies in the study did not have a formal recruitment strategy.
· 80 percent reported moderate or great difficulties in attracting critical-skill employees.
· More than 50 percent said they did not have a formal strategy for retaining employees once they had been successfully recruited.

In addition, the 2000 Retention Practices Survey by the Society for Human Resource Management indicated a growing concern among HR professionals about voluntary turnover. Of those surveyed, 41 percent reported that the number of voluntary resignations in their organizations rose in the past three years. Seventy-eight percent said most employees who left did so to pursue career opportunities elsewhere. Better compensation and benefits packages as well as poor management were the next most often cited reasons for resignations. In terms of retention tactics, respondents cited health care benefits and competitive salaries as the most effective tools.

The challenge of providing Fortune 500-level benefits to employees is why many companies turn to PEOs. "Many organizations initially select a PEO as a way to offer workers an improved slate of employee benefits," according to Connie Barnaba, Administaff vice president of human resource services. "However, they soon discover that a full-service PEO can also provide them with other vital employment resources - services like professional recruiting assistance, compensation strategies and productivity-based training courses."

Administaff helps a small business develop its own effective "people strategy." It offers instant infrastructure by taking a systematic and strategic approach to providing a customized human resources solution. Bringing high-performance human resource practices to a small business can make a big difference in performance and profitability.

Personnel Management
The goal of Administaff's personnel management system is to help boost the productivity and profitability of client companies. Major components of the system include:

Recruiting and Selection - The right people are the foundation of any successful business. That's why Administaff helps business owners with recruiting and selecting quality employees. At a client's request, Administaff HR professionals develop job descriptions, run ads for job openings, review resumes and contact candidates for interviews. The firm also conducts pre-employment testing and background checks and provides salary information and employee profiles.

Performance Management - Administaff helps clients achieve organizational goals by developing employee potential. The PEO can train supervisors, provide tools for effective communication and help resolve disputes. Assistance with performance measurement/reviews and compensation/incentive plans are other options.

Training and Development - Performance improvement is a continuous process that Administaff can help facilitate. It offers analyses to identify areas for improvement, customized professional development programs, and more than 40 different training courses and continuing education credits. Administaff also has several training classes online, so employees can get the training they need when it's most convenient for them.

Benefits Management - Attracting and retaining the best employees require a competitive benefits package. Administaff's buying power results in the best benefits value and cost stability in the marketplace. As a result, clients are on the same playing field as Fortune 500 corporations when it comes to giving employees access to top-notch benefits.

Employer Liability Management - Administaff's unemployment specialists, workers' compensation claims specialists and HR professionals work to manage workplace liabilities. Implementation of these programs leads to more effective management of employer obligations and reduced risk.

Owner Support - Through alliances with a growing list of best-of-class service providers, clients have access to financial planning services, executive benefits, business continuation planning, key person coverage and financial education services. A secure Internet client/employee access site, Administaff Assistant, lets client owners conduct business with Administaff at their convenience.

Government Compliance - Administaff keeps pace with employment-related government regulations. According to the National Association of Professional Employers Organizations, the federal government has enacted at least 32 laws since 1980 that affect the workplace. With the complexity of issues on the rise, it makes sense to choose a PEO to take care of your people so you can take care of your business.

Employment Administration - By taking care of payroll, direct deposits, employment verification, quarterly reports and more, Administaff enables a business owner to focus on tasks other than administrative work.

Entering into a relationship with a PEO gives a business the financial, administrative and professional skills of an experienced human resources organization that handles employment-related tasks day-in and day-out. It just goes to show that taking care of your people is smart business.

Joe Ringwood is district manager of Administaff's New Jersey office, which is located in Florham Park.

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

1. Assess your workplace to determine your HR and risk management needs.

2. Make sure the PEO is capable of meeting your goals. Sales brochures and fancy proposals are easy to print. Meet the people who will be serving you.

3. 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.

4. Ask for client and professional references.

5. Check to see if the company is a member of NAPEO, the national trade association of the PEO industry. (A directory of NAPEO member companies is available at www.napeo.org)

6. Investigate the company's administrative and risk management service competence. What experience and depth does their internal staff have? Do any of the senior staff have professional training or designations?

7. Understand how the employee benefits are funded. Are they fully insured or partially self-funded? Who is the third party administrator (TPA) or carrier? If required in your state, is their TPA or carrier licensed?

8. Understand how the employee benefits are tailored. Determine if they fit the needs of your employees.

9. 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?

10. If your state requires a PEO to be licensed or registered, make sure the company you are considering meets all such requirements. The following states currently require licensing and/or registration: Arkansas, Florida, Illinois, Kentucky, Maine, Minnesota, Montana, New Hampshire, New Mexico, Nevada, Oregon, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Washington and West Virginia.

Reprinted with permission from Commerce, September 2001.