PEO Utah

Looking for a PEO in Utah? What is a PEO? PEO is a Professional Employer Organization. Using a Utah PEO can help reduce your liabilities, increase retention, create affordable employee benefits packages, reduce stress from dealing with HR issues, and reduce workers compensation claims and audits. This is a win-win situation, we can do what we do best and you can focus on your business more thus saving your company time and money. If you wish to find out more about a Utah PEO call us at 1.866.637.3900 or click on the contact form to ther right.

Which Human Resource Functions are Best to Outsource?

Due to increasing departmental responsibilities, greater employee needs, and decreased budgets for staffing a full Human Resource department, many companies are choosing to outsource aspects of HR work in order to save time and money.  There are many areas that can be outsourced, including payroll processing, employee benefits administration, workers compensation, and insurance.  Each has advantages and disadvantages that should be considered before the decision is made.

Payroll Processing – this is an area that can cause a considerable drain on staff time and resources.  While paychecks may only be given out every two weeks or even once a month, there are a great deal of “behind the scenes” tasks that need to be done on an ongoing basis.  The time pressures increase even further during a “payroll week” and payroll office employees can find themselves working long hours just to get checks done on time.  In addition, there are employer reporting responsibilities that must be done each pay period, such as notifying a state office of new employees who have been hired and dealing with child support payments or other garnishments that must be paid to many different locations.

Because of all of this work, as well as the changing tax laws and responsibilities that can be difficult for an employer to keep up with, many are choosing to outsource the creation of paychecks to outside vendors.  Typically a company will process timesheets internally and will then transmit a total number of hours for each employee to the vendor.  The vendor will then create the check, meet all reporting responsibilities, and send completed paychecks back to the company for distribution to employees.  This can free up a great deal of staff time and allow them to focus on other accounting and financial responsibilities.  However, the outsourcing process does not always come cheap and a company can find some “sticker shock” as they begin pricing and shopping for this option.  Many services are charged per employee and a smaller company may find it difficult to afford those options.

Employee Benefits Administration – this is another area that can be very time consuming for an employer.  There are hundreds of regulations at the state and federal level that are constantly changing and that carry severe financial penalties when they are violated, including topics such as COBRA, ERISA, FMLA, flexible spending accounts, etc. 

In addition, Employees often do not understand all the benefit options available to them and then a large number of questions about how to sign up for and use their benefits.  This can be a large drain on an HR staff member’s time as they repeatedly answer the same types of questions.  Therefore, many companies are deciding to outsource benefits to a vendor who has a larger call-center staff and additional resources to handle the enrollment, administration and reporting of benefit issues.

Advantages of outsourcing again include time-savings for HR departments and the ability to focus on other tasks and employee issues.  In addition, with programs like the Family and Medical Leave Act (FMLA) and flexible spending accounts, there can be confidentiality issues under the new HIPAA laws.  In addition, many employees feel uncomfortable sharing serious medical information with their employer fearing unfavorable treatment from the knowledge.  Therefore, outsourcing can be a way to acknowledge and deal with the reluctance of employees to discuss such issues directly with their employers and the employees can instead communicate with a third-party.  However, again, this outsourcing does not often come at a low cost and other employees may actually feel more uncomfortable having to call an external number for support and would rather talk to someone on site.  These issues must then be weighed as an organization when making the decision to outsource.

Workers Compensation– this is another area that is full of regulations and reporting requirements and again, an employer can find themselves on the receiving end of some severe financial penalties for failure to follow the laws.  For example, a First Report of Injury form usually must be filed with the applicable state agency within 24 hours of the occurrence.  This requires an employer to act fast and make sure forms are filled out correctly and thoroughly.  Because this is dealing with an injury or illness that occurred to an employee and can require follow-up and tracking of their medical progress, many employees are becoming increasingly uncomfortable with communicating this information directly to their employee.  There can be fears of being demoted or losing their job if the employer feels that they can’t return to work or that they caused it themselves.  There can also be fears of submitting a claim because of the financial draw that is then placed upon the employer.

Therefore, many employers are choosing to outsource this area to an expert vendor who has the time and ability to keep up with all the regulations and that can deal with the employee and remove some of the fears of talking with the employer about medical issues.  The biggest disadvantages with outsourcing this area involve the financial cost of the program administration, as well as the need to closely communicate and coordinate employee issues.  This isn’t an area that an employer can outsource and not think about again.  There will still be the need to communicate the proper reporting procedure and phone numbers to employees, dealing with return to work and light duty programs on-site, etc.  So a company must look at the amount of time and money that would be saved by outsourcing some of the responsibilities and determine if it makes sense for them.  Companies that have a larger number of claims each year may find great savings, while a company that only has a few claims may determine that it doesn’t make sense for them at the present time.

Insurance and Risk Management – a final area of responsibilities that many companies are choosing to outsource is the handling of property and liability insurance, auto (fleet) insurance, and risk management services. Again, all of these areas can be ones that are time consuming for an employer to handle internally, as they typically require a great deal of paperwork to be filed and maintained, continual updating and monitoring, and reporting.  For example, a company that has their employees driving company cars or even transporting clients in their personal vehicles must verify the driver’s license of each relevant employee and keep up-to-date on any violations or accidents on the employee’s record.  The area of risk management and liability is becoming an increasingly large drain on employers as the number of litigations has increased over the years.  The risks of not being compliant in an area or failing to appropriately protect the company and its assets can be huge.  Therefore, many companies are choosing to outsource these areas to vendors that have the expertise in protecting companies and making recommendations for changes that need to occur.

As companies are realizing that the Human Resources department is increasingly finding it difficult to handle all of the employee needs that are occurring in the workplace, they often turn to outsourcing of certain areas, including payroll processing, employee benefits administration, workers compensation, and insurance.  The company must, however, consider the advantages and disadvantages of outsourcing a particular area and determine if it makes sense and meets their needs.

Outsourcing Human Resources: Common Concerns

Outsourcing HR functions is a big decision for companies today—one with implications for every employee. Decision makers do not take the step lightly, nor should they. The process can be relatively simple, depending on the specific services being outsourced, but it can also be very complex, difficult and costly to reverse should the relationship with the service provider not work out.

This article discusses common objections employers have to the idea of outsourcing and shows how service providers and the Human Resources Outsourcing (HRO) industry at large address those concerns. But first a bit of background.

Outsource to whom?

A large number of vendors offer some level of service in the area of HRO. The services they provide can be simple, such as payroll processing, or complex multi-tiered arrangements touching every aspect of human capital management. This article assumes a more complex arrangement, such as those offered by Professional Employer Organizations (PEOs) like Workforce Solutions. The National Association of PEOs estimates that HRO is a $51 billion industry with approximately 700 PEOs operating in the U.S. (http://napeo.org/newscenter/industryfacts.cfm)

Workforce Solutions provides all the services you would expect an internal Human Resources department to provide, but it is a separate entity from the organization to which it delivers these services. PEOs deliver expert and efficient employee-related administration, sharing the responsibility and risk of managing workers.

Common Concerns

Employers come to the outsourcing process with a range of concerns that need to be addressed. These include the following, which are discussed in greater detail below:
Fear of loss of control
Concerns about the provider’s qualifications or suitability
How to handle personnel cuts

Fear of loss of control

Kristian Svindland is well positioned to hear and understand concerns and objections of organizations who are considering a PEO for their HRO needs. He is Vice President of HROplus, a New Hampshire-based consulting firm specializing in matching companies with the PEO that is right for them. The most common objection he encounters? Loss of control. “A lot of companies that are not willing to go with co-employment think they’re losing control,” he said. “They think the PEO is going to come in and look at their employees and say, ‘You have to get rid of this guy.’”

This fear is unfounded, however. Svindland states that the outsourcing organization retains control over most aspects of HR. PEOs are well suited to take over the transactional functions of HR—payroll processing, benefits administration, Worker’s Compensation insurance, and so on—but not the “soft” HR details such as employee hiring and firing, pay rates, training, retention, and workplace dynamics. Svindland recommends that his clients with 50 employees or more hire an internal HR manager to handle these details while leaving the repetitive and mundane transactional tasks to the PEO.

Doing so allows the HR staff to focus on strategic initiatives because they are freed from data entry. As a dramatic example, Fay Hansen reports that the vice president of HR at Catalina Restaurants and a staff of four manage “8,000 employees in 225 restaurants scatter across seven states” (“Midsize employers in sweet spot for end-to-end HRO.” Workforce Management 2/12/07). This efficiency is possible because a PEO handles the day-to-day administration of employee pay and benefits.

In-house HR departments may indeed give up some control, but not over strategic functions, and the loss might not be a sacrifice at all. Hansen also reports the experience of Business Advantage, a Human Resources consulting firm with 1,000 employees. Its CEO, Stanley Joseph, addresses the perceived loss of control—a fear his company confronted when switching HR functions to a full service PEO. "It was a scary transition because it felt like we were giving up control," Joseph says. "But I believe that the more control you give up, the more powerful you become. [The new comprehensive PEO arrangement] offers not only increased functionality but, more importantly, complete system integration between payroll, tax, benefits, HR, reporting and scheduling systems. In short, we reduced six unique systems down to one." (“Midsize employers in sweet spot for end-to-end HRO.”)

PEO qualifications

Another concern companies have is whether the vendor under consideration can handle their specific needs. A 2007 study by EquaTerra, an HRO consulting firm, found that some buyers of services “question whether HRO service providers have the experience, skills and global reach to consistently and profitably deliver HRO services” (EquaTerra “Taking the Pulse of Today’s Human Resources Outsourcing Market,” April 2007 PDF.)  In short, can the PEO do the job? The market is still maturing, so due diligence is the watchword here. Very large, well established PEOs with unquestionable credentials might not be a good fit for every employer, so employers need to research the PEO carefully before signing a contract.  Alina Gabbard, regional vice president of Oasis Outsourcing, advises, “The business owner should ask for financial and ownership history of the provider. In addition, are the workers’ compensation insurance A-rated? And do not forget to ask for client references.” (HR Outsourcing: Trends and Tribulations, by Kristian Svindland. www.businessnhmagazine.com, May 2007)

HRFocus Magazine agrees. In its comprehensive “2007 Outsourcing and Shared Services Survey,” readers who have already outsourced stated that those considering the move should take “the necessary time to do vendor proposals and reference checks, and then build strong vendor relations” (HR Focus, April 2007).

One reason extensive research is necessary is that no industry-wide HRO standards exist. This lack of standardization has meant that “employers often don’t know what to look for or what to measure” when they are searching for a vendor that is right for them (Jessica Marquez, “HRO Competitors…” Workforce Management, 6/25/07).  The PEO industry is taking steps to standardize its services to provide reliable and consistent benchmarks for employers shopping for a vendor.

How to handle personnel cuts

Svindland’s clients are often small to midsize businesses whose owners and decision makers personally know their employees. Employees can even be family members, making outsourcing a scary proposition because the person who works in payroll processing might be “Aunt Edna.” Svindland works to help his clients repurpose employees to value-add tasks when their jobs are being outsourced. “Maybe your Aunt can work on accounts receivable,” he says whimsically. And employers are generally quick to understand both the necessity and the business value, Svindland reports. By the time they come to him for help, clients have done substantial research into HRO and understand that it may require some organizational shuffling.

This possibility is actually one of the significant value propositions in the services provided by a PEO. With the PEO handling the transactional elements of human resources management—the repetitive tasks associated with payroll and benefits, for example—human resources employees can focus on issues such as recruiting, training, and retention. Indeed, the director of a large automobile manufacturer with 110,000 full time employees, reports, “We never reduce HR staff when we outsource, but rather re-allocate those resources to higher value business” (“How to Maximize…” HRFocus, April 2007).

Depending on the size of the business, the complexity of the PEO arrangement, and the business model and culture, however, outsourcing might require (or enable) substantial personnel shifts. In such cases, it is important to be completely forthright with employees; tell them of your outsourcing plans and why you’re taking the step. Employers might even be able to transfer employees to the PEO; those who have worked on payroll in the past could continue to do so, but would work for the PEO rather than the original employer. Some employers are surprised to find another benefit in this arrangement: employees then have the opportunity to work for a profit center rather than a cost center, and they may have more advancement opportunity at the PEO than in the original HR department (“How Outsourcing Can Help You Now.” HRFocus, July 2007).

The Value of Outsourcing

Despite these concerns, HRO is growing in popularity because business owners recognize that the practice very often makes good business sense. In fact, EquaTerra concludes that the costs of employee administration are consistently lower in outsourced arrangements than when handled in-house—and that is the primary reason organizations give for seeking HRO (EquaTerra “Taking the Pulse of Today’s Human Resources Outsourcing Market,” April 2007 PDF).

The process can bring benefits to businesses in at least two additional ways: risk transfer and employee repurposing or business transformation. When transactional HR functions are handled by a third party, the organization frees both human and hard capital to focus on core competencies and value added initiatives and skills. Survey respondents report that their vendor “[Has] software and expertise we do not have. They have economies of scale on boutique tasks such as deferred compensation.” (EquaTerra “Taking the Pulse of Today’s Human Resources Outsourcing Market,” April 2007 PDF.) These benefits are compelling prizes that continue to encourage employers to select PEOs despite the common concerns.