Today’s Myatt on Monday’s question was posed by a CFO who asked: “What is the best way to manage the rising cost of employee benefits?” While the escalating cost of benefits is something that all companies deal with, for small and middle market entities the prices and complexities are nothing short of staggering.
In today’s post I’ll address one of the best and most often overlooked option for minimizing HR related expenses and maximizing HR opportunities…
Hard dollar expenditures are just part of the benefits debacle, as soft dollar costs associated with management often act as a silent but very lethal killer. As a business grows, so does the brain damage associated with managing HR related initiatives. Scaling your workforce means spending more time setting up and administering employee benefits, overseeing details like payroll, and making sure the business is in compliance with an ever burgeoning list of employment-related laws and regulations. The aforementioned tasks can create a painful time-suck for executives who now must spend time hiring and managing human resources staff on top of everything else…
One of my favorite solutions for companies ranging in size from as a staff of 5 employees to as many as 2,500 employees is a Professional Employer Organization (“PEO“). Essentially, a PEO provides one-stop shopping for employee benefits and human resources services. When a company decides to contract with a PEO, most or all of the company’s employees actually go on the payroll of the PEO. You determine who gets hired, what they’re paid, how they’re managed and who gets fired…The PEO takes care of the rest…
PEOs manage your company’s health benefits, paid time off (PTO), retirement savings plan administration (401k, 403b or deferred compensation plan). Through the PEO you have access to a variety of health care partners to choose from offering your employees a range of affordable plan options, including HMOs and PPOs, dental and vision insurance, life insurance, AD&D insurance, and short term and long term disability insurance. PEO plan choices also typically include flexible spending accounts, health savings accounts, an employee assistance program, a legal assistance program, and several other innovative wellness programs.
The PEO also takes on responsibilities such as payroll taxes, workers’ compensation coverage, and benefit and employment compliance responsibilities in areas such as the FLSA (Fair Labor Standards Act), FMLA (Family Medical Leave Act), HIPAA (which governs health-care privacy) and COBRA (which allows employees to continue group health benefits under certain circumstances). PEOs can also assume a wide range of other administrative functions, such as employee file maintenance, unemployment claims processing, workers’ compensation claims management and employee handbooks.
The advantages of PEO’s are somewhat obvious. You no longer have to deal with human resources issues directly. That means you can say goodbye to the days of maintaining payroll records, negotiating health insurance plans, and mediating workers’ compensation claims. This frees up time for you and your office staff to concentrate on growing your company…there’s an interesting thought.
The bottom line with PEOs is that they afford companies the benefits of increase the quality of benefits offered, lowering costs, transferring risk, saving time and generally improving the efficiency of HR related functions…If you want more information on PEOs please contact us.
