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BLG Ventures 2002
PEOs: The Smart Entrepreneur's Business Ally
By Richard Rawson
Administaff, Inc.
The Professional Employer Organization
(PEO) has surfaced as one of the fastest-growing forms of outsourcing
during the past few years. PEOs specialize in human resources
management. They offer businesses a wide variety of services,
including payroll management, employee benefits design and administration,
payroll tax filing and administration, and compliance with state
and federal workplace regulations.
Government compliance can be especially
helpful to a small or medium-sized business. According to
the Small Business Administration, small businesses carry
a heavier regulatory burden than large companies. Small companies
employ about 53 percent of the workforce but shoulder 63 percent
of the total business regulatory costs. A PEO can help a company
improve its government compliance, reduce or eliminate fines
and penalties, and enhance the work environment.
One of the keys to understanding the power
of PEOs is the co-employment relationship between the PEO,
a client company and that client's existing employees, including
the business owner. Under the co-employment arrangement, a
PEO assumes or shares many of the responsibilities of being
an employer. The result is lower risk and reduced liability
for the client company - a key to safeguarding the enterprise
that provides jobs for workers and services for customers.
In addition, through co-employment the PEO provides the client
company and worksite employees with value-added benefits and
services not typically found at a small business.
Some full-service PEOs, like Administaff,
Inc. (www.administaff.com), offer many additional services.
Training and professional development, for example, are among
Administaff's most popular offerings. Administaff University
and its 24/7 online extension, eUniversity, provide customized
training programs that help employees become top performers
in achieving company goals.
Small and emerging growth companies should
consider entering into a co-employment relationship with a
PEO for several reasons, including the fact that PEOs are
able to provide the client's employees with benefits similar
to those offered at Fortune 500 companies. Such an
impressive array of benefits can be helpful in attracting
and retaining key personnel.
Using the services of a PEO also helps
entrepreneurs cultivate an overall "people strategy"
to give their companies a competitive advantage. Business
owners who think strategically recognize the value of quality
employees in the success of their business. They understand
the importance of attracting, retaining, rewarding and improving
the productivity of those employees. A full-service PEO can
help by creating job descriptions, placing ads, screening
resumes, conducting interviews, administering pre-employment
testing and complying with laws regarding background checks.
Choosing the right PEO
Companies considering using a PEO
should consider the following factors when selecting a PEO:
- Standard service offerings such as
payroll processing, benefits management and regulatory compliance,
as well as value-added services such as training and development,
work-life balance programs and comprehensive HR manuals.
- Experienced staff, including HR professionals
and certified professional employer specialists. Look for
PEOs that use advanced computer technology and proven online
systems to administer their services to save client companies
time and make life easier for worksite employees.
- A proven track record with companies
similar to theirs in size, industry and situation.
- A PEO should be a member of the industry's
trade organization, the National Association of Professional
Employer Organizations (NAPEO), and its state chapter. In
addition, the PEO should be accredited by the Employer Services
Assurances Corporation (ESAC). Maintaining these memberships
signifies that a PEO abides by the industry's highest standards
for service quality and professional integrity. Visit NAPEO's
Web site, www.napeo.org, or ESAC's Web site, www.esacorp.org,
for more information.
Richard Rawson is the Executive Vice
President of Administration, Chief Financial Officer and Treasurer
with Administaff, Inc., (NYSE: ASF) the nation's leading PEO,
serving as the outsourced human resources department for small
and medium-sized businesses throughout the United States.
Administaff's 2001 revenues totaled $4.4 billion and at year-end
2001, Administaff had more than 4,400 client companies, 70,000
worksite employees and 1,200 corporate employees. Headquartered
in Houston, Administaff has three client service centers and
37 sales offices in 20 major markets. It ranks number 448
on the Fortune 500 list. Mr. Rawson has been a member of Administaff's
board of directors since April 1989. He has held numerous
positions with the National Association of Professional Employer
Organizations (NAPEO), including serving as chairman of the
Accounting Practices Committee.
Reprinted with permission
from BLG Ventures, 2002.
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