by Mike Yoder | Business Resource, Business Strategy, HR News, HR Tips, Human Resources, Legal Compliance, Outsourcing, Payroll, Servant HR
Servant HR provides fully integrated HR services—giving employers the freedom to focus on the success and growth of their businesses. Operating as a PEO enables us to take on the administrative load that comes with paying employees, offering benefits, managing risk and more.
But what exactly is a PEO again? And how is it different from the other HR service options out there? Good questions! Let’s get a lay of the land.
PEO stands for Professional Employer Organization. The biggest distinction of a PEO is that it offers its services through a “co-employment” relationship. Co-employment means that the PEO allocates responsibilities between the employer and the PEO, as expressed in a service agreement.
While the employer maintains their relationship with worksite employees, PEO’s provide many back-end services in a bundled offering. These often include payroll, health and welfare benefits, workers’ compensation and risk management services.
Perhaps the biggest misconception about PEO’s is that the client loses control of its workforce through the co-employment model. But this is not the case, as PEO clients retain complete control over day-to-day operations and workforce management. Employers continue to make their own hiring, termination, discipline, scheduling, promotion, safety and culture decisions.
The relationship actually provides the exact opposite, as PEO’s often add to the control and confidence of an employer. Clients have access to higher quality HR offerings, systems and processes, and benefit from PEO expertise in making big decisions.
You may have heard of an ASO as well, which stands for Administrative Services Organization. The main difference between a PEO and an ASO is the co-employment relationship. An ASO manages only day-to-day administrative operations, but does not process payroll, remit taxes, sponsor benefit programs or offer workers’ compensation coverage under the PEO umbrella. There is no shared employment relationship.
If that’s still not enough acronyms for you, there is an HRO model as well! Human Resources Outsourcing is the process of subcontracting human resources functions to an external supplier. This option has traditionally been only available to larger organizations, but like an ASO, an on-site employer remains the “employer of record” in the arrangement.
So, why a PEO?
Here are three of our favorite reasons to consider:
For many small businesses, administering payroll is a huge task in itself. What may seem just like “cutting checks,” actually involves many parts of the business, all affected by payroll functions. PEO clients enjoy easier, more confident compliance in tax payments, and more benefits options. A PEO literally has hundreds of years of human resource experience. Partnering with a PEO provides peace of mind that a full-service team of experts is working solely for your protection.
Another perk is there may be access to more affordable health and ancillary insurance. Alongside a PEO, you gain access to a much larger pool of employees when obtaining insurance quotes. PEO’s may receive bulk, discounted pricing so that clients are able to offer employees more comprehensive insurance coverage with better rates.
For many small business owners, cost is the most compelling reason for signing on with a PEO. Service fees for PEO’s are often significantly less expensive than hiring a full-time, in-house Human Resources professional. The PEO manages all the functions of a full-time employee, and in some cases, for as little as a quarter of the cost.
In addition, many employers struggle under the weight of being both the business owner and the HR department. The inability to balance both effectively can ultimately cause a business to suffer.
Thinking it through
Partnering with a Professional Employer Organization can have a ripple effect across an entire company, offering better health benefit options, employee management and more time for business owners to spend on what they really care about—their business.
Working with a PEO is a big decision for any company. While it may stand to benefit your business in many ways, don’t just take our word for it! Feel free to check out our reviews and explore our website resources. Learn more about our team and exactly what we do.
Still not sure if a PEO is right for you? Give us a call today! We’d love to help answer any of your questions and determine how Servant HR can serve you and your business.
by Mike Yoder | Business Resource, Business Strategy, Human Resources, Outsourcing
You are a business owner. You are passionate about what your business does. But, legal compliance of I-9 documents? Benefit renewals? Unemployment compensation defense? Maybe not so much.
And yet, attention to the details of HR is critical. Overlooked tax changes, missed reporting requirements or a tricky employee termination can cause serious legal and financial repercussions.
Fortunately, Servant HR is a full service HR department that enjoys serving clients through eliminating their administrative hassle. Our team of experts partners with you to manage and optimize all your human resource responsibilities, so you have the freedom to focus on what matters most — growing your business.
What is a PEO?
When a company signs on with Servant HR, a unique relationship is formed as Servant HR becomes the company’s PEO.
The acronym PEO stands for Professional Employer Organization. While the acronym is attached to a variety of business models, NAPEO (The National Association of Professional Employer Organizations) defines a PEO as a “provider of comprehensive HR solutions for small and midsize businesses.”
A professional employer organization establishes a three-way relationship between a company, its employees and the PEO. Rather than the traditional employer/employee relationship, the company and the PEO become “co-employers.”
What is Co-Employment?
Servant HR is an administrative employer, managing payroll, workers compensation, benefits and unemployment compensation matters. Management and day-to-day oversight is still the responsibility of the worksite employer.
When a company engages Servant HR as its PEO, employees sign a Co-Employee Acknowledgement Agreement. This agreement confirms employee understanding that he/she is now an employee of both Servant HR and their worksite employer.
What exactly does Servant HR do?
We provide comprehensive HR management tasks across five main disciplines:
- HR Coaching & Counseling
- Benefits Administration
- Risk Management
- Retirement Program Setup & Admin
As a PEO, we strategically partner with clients to manage and optimize all human resource responsibilities — for both the benefit and protection of the client.
Any other reasons to consider a PEO?
So glad you asked!
According to NAPEO, small businesses that work with a PEO:
- Grow 7 to 9 percent faster
- Have employee turnover that is 10 to 14 percent lower
- Are 50% less likely to go out of business
Any other reasons to consider Servant HR specifically?
- Relief from the burden of employment administration
- Expanded human capital management through a team of professionals
- Improved employment practices, compliance and risk management
- Administration of comprehensive employee benefit packages
- Improved productivity and profitability
Unlike single-task outsource companies, Servant HR values the total relationship. By maintaining close management of all HR functions, our team gains valuable insights, understands procedures and offers holistic service. Our mission to take care of you and your employees makes relationship our priority.
Have more questions? Considering a PEO for your business? Contact us today! We’re excited to show you the benefits of a relationship with Servant HR.
by Mike Yoder | Business Resource, Business Strategy, Legal Compliance, Outsourcing
Business owners have to take risks to grow, but not all risks are worth the gamble. When it comes to outsourcing HR services, as with all business decisions, smart entrepreneurs and owners take calculated risks — not leaps of faith.
Risks worth considering
The kind of risk business owners like and should be willing to take should feel more like opportunities to gain than to fail. A cost-benefit analysis should be applied to any situation from which you could lose. For example, insurance is a hedge against risk. You make payments to your provider so that you reduce liability for things such as property damage. Other such risks worth considering include things including
- moving into a new market
- purchasing new software
- changing processes or systems
- increasing your marketing budget
Risks to avoid — always
On the other hands, some risks are fraught with danger, with no benefits available. Anything in your business related to taxes or your company’s general welfare isn’t worth the gamble. If you don’t have general liability insurance, for example, serious company-killer risks can emerge. Simple errors and omissions can put your company at considerable risk.
HR Risk Management
If you are considering outsourcing HR services, the big questions to ask yourself are:
- What are my responsibilities and risks as an employer?
- What are my risks and responsibilities if I outsource?
From a HR professional’s perspective, employers carry three major areas of risk.
1. IRS/TAX COMPLIANCE. When issues of compliance and withholding funds for tax purposes come into play, there is no benefit to being risky. The short-term effects of mishandling tax issues include penalties and additional taxes. This is also where audits with employee classification come into place. If you have misclassified someone as an employee or contractor, you can owe back wages, benefits and taxes, and may be required to pay interest and penalties.
WHEN YOU OUTSOURCE: A full-service PEO collects and passes on payroll taxes, workers’ compensation payments and other IRS-related items so the employer doesn’t assume all of the risk involved. While you can’t outsource every aspect of IRS liability because you still have some control over your workers and workplace, you are receiving consulting advice on statutes, which helps you make smart HR decisions.
2. EMPLOYMENT LAW. Federal, state and local employment laws can be a hairy, complicated combination of rules and requirements. Compliance issues cover employee handbooks, required signage in workplaces — workers’ compensation, employee rights, minimum wage amounts, etc. — and processes related to hiring, disciplining and firing employees. If you aren’t diligent, you can end up with fines, penalties, lawsuits related to wage/hour issues or discrimination, attorney’s fees, lost business and opportunities. These are company-killer issues you don’t want to risk.
WHEN YOU OUTSOURCE: When you outsource these kinds of legal compliance items, you are obtaining access to the knowledge and experience to reduce your risks of legal liability.
3. COMPANY CULTURE AND RETENTION. If you choose to cultivate and manage your company’s culture and manage employee retention on your own, you should expect to spend a lot of time and money to do it well. You want to train your team to be their best, and you want to keep them on the payroll. A lot of studies show that replacing an employee is often as expensive as a full-year’s salary of that employee. Between ending a relationship with one employee, and recruiting, training and getting up to speed a new employee, you are losing precious time and opportunities — plus the financial burden of that process.
There’s a real financial cost to creating the right place to have the right talent. An engaged employee is going to be a more valuable employee. In fact, a Gallup poll of more than 17 million employees showed that engaged employees are more profitable, productive, customer focused and safer. If you aren’t doing everything right when it comes to support your company culture and retention rate, you are definitely carrying serious risk.
WHEN YOU OUTSOURCE: A PEO is a full-service human resources service provider, which means it doesn’t stop at legal compliance and payroll issues. It provides consulting and direction to ensure your company’s goals are being supported by a strong culture, and engaged employees are keys to that overall picture. If you outsource the risk related to building and maintaining a valuable culture, you are putting those responsibilities in the hands of professionals who know that the occasional ice cream social isn’t going to prevent employees from finding other employers.
What are your responsibilities and risks as an employer? What are your risks and responsibilities if you outsource? If you would like to learn more about how a PEO can reduce your risk, please contact me, Mike Yoder, at 317-585-1688.
Lumatic via Compfight cc
by Jeff Leffew | Business Strategy, Legal Compliance, Outsourcing
HealthCare.gov is a great source for more information.
The wheels of health care reform are constantly turning, leading to new and revised requirements being rolled out on a rather irregular basis. What was market driven up to this point will be directed by federal government health care reform in the future. In the past, employers of at least 50 full-time or the equivalent of 50 full-time employees had a choice whether to offer insurance. In the future, the choice will be laden with costly consequences. Health care reform is another large government regulation that will have an impact similar to that of Cobra and the FMLA on businesses. It’s a game of play or pay.
While there are still many unknowns, we do know several big changes business owners can prepare to see come to pass in 2014. Here are three ways you can prepare for health care reform in 2014 and one overarching “Bottom Line” choice to consider.
1. In light of the individual mandate, take a hard look at insurance benefits for employees.
The biggest thing to happen in 2014 will be the individual mandate. In 2014, virtually every American will have the “choice” to obtain health insurance coverage through one means or another. If they choose not to obtain health insurance, they will be subject to a related tax. Under this individual mandate, individuals will be able to purchase coverage on their own or through their employers.
If they don’t carry insurance, they will have to pay a tax. For example, if a 20-year-old male in excellent health chooses not to purchase insurance, he will have to pay a punitive tax. Other likely candidates who will choose to or have to pay this penalty include the superrich and the poor.
At this time, if you want to find private insurance, you have to go through a broker, which, some argue, is typically a rather clumsy process. As a result, the federal government is creating exchanges. These exchanges are essentially online sellers of insurance.
Unfortunately, creating a more transparent, fluid marketplace for insurance will not have the same effect this same approach has had on online sellers such as Travelocity and Amazon. The math needed to lower the cost of insurance simply doesn’t add up. The risk carriers take on is simply too high and unpredictable. In fact, projections are that insurance rates will go up as a result of the individual mandate. As insurance becomes more regulated, competition will likely go down.
2. Better understand upcoming market reforms so you can make smart decisions.
Another major change related to health insurance is market reform, which includes a number of changes. The Patient’s Bill of Rights falls under market reform and is designed to, among other things, protect children (and eventually everyone) from obtaining coverage if they have a pre-existing medical condition. The market reforms going into effect in 2014 also prevents annual dollar limits from being set on annual medical coverage of essential benefits such as hospital, physicians and pharmacy benefits.
Under the law, if a plan includes children, a parent can cover children on their health insurance plan until the child turns 26 years old. Prevention regulations in 2014 will require new private health plans to cover certain evidence-based preventive services. Rate reviews will be put in place to improve insurer accountability and transparency.
These are just few of the reforms coming down the pipeline for employers. It is important to familiarize yourself with these upcoming changes, as your employees will have questions about how these changes will affect them. Be prepared to help them understand why costs are going up and where the blame lies so you don’t feel the brunt of it.
3. Budget now to pay new taxes in 2014.
There are a number of new federally imposed taxes that will begin in 2014. These are being put into place to offset insurance premiums, which are projected to go up across the board.
- Reinsurance Assessment fee — A flat fee to be paid 2014-2016 that applies to both insurance and self-insured plans that provide major medical coverage
- The Health Insurance Industry fee — Created to help offset cost-generating provisions of health care reform
- Patient Centered Outcomes Research Institute (PCORI) fee — Designed to fund research that will compare different medical treatments and interventions to determine what is most effective
- Federally Facilitated Exchange User fee — Put in place to pay for access to exchanges facilitated by the federal government
Employers can’t avoid having to pay these taxes. It doesn’t matter how healthy your team is or how robust your wellness programs are, these new taxes need to be in your budget in 2014.
BOTTOM LINE: Decide who you are in your marketplace.
The most far-reaching, strategic action that business owners can take regarding health care reform is to think about what role they want to play and what impact they want to make in this new group benefits world and then act accordingly. Look at who you are in your marketplace and what you’re trying to be for your people. Ask yourself what all of this means from an employee retention and morale standpoint. What should you do in order to recruit and keep valuable employees?
If your business is small (49 employees or fewer), you have a real choice whether to offer insurance. If you choose to offer it, something else in your business will have to give to pay for the future pay increases that are inevitable. Perks such as gym memberships and paid parking spaces might become things of the past. If you’re a large group (50 or more employees) and you don’t want to offer insurance, you will be liable for a significant tax.
Aside from advocating change, business owners need to know how to handle the changes. Having a partner such as a PEO professional who can help them navigate these choppy waters is critical.
I can offer much more insight into how health care reform will affect your business. Please contact Servant HR more for a free consultation.
by Mike Yoder | Culture, General, Outsourcing
Ray Hilbert, CEO, Truth@Work
When Jeff Leffew launched Servant HR in 2003, he knew that as a business leader, he wanted to be held accountable to live out his faith in his professional life as well as his personal one. This part of his mission led him to Truth@Work in 2003. Jeff has been an active member ever since, one of hundreds around the country, and Truth@Work became a client of Servant HR in 2005.
Truth@Work is a nonprofit organization based in Indianapolis cofounded by Ray Hilbert, whose career path tested his ability to run a business on biblical principles versus worldly values. A man of strong conviction and bold vision, Ray and the Truth@Work team serve business leaders by hosting Christian Roundtables to integrate Christian faith into businesses’ daily operations. Products, programs and services help entrepreneurs, CEOs and executives develop and share technologies, achieve personal-spiritual-business “life integration” and balance, and experience a safe place to share issues and challenges.
Ray cofounded Truth@Work with fellow businessman Matt Peelen in 1998. At the time, they weren’t sure exactly how the new organization would function on a daily basis or precisely what this new model would look like. What they did know is they were searching for the next chapter in their lives and that the Lord would direct their steps.
In April 2000, Truth@Work had a roster of nine members. Slowly and organically, the Indianapolis organization grew. When a few people in other cities reached out with an interest in expanding Truth@Work to their cities, Ray said he wasn’t surprised.
“Since our inception, we felt it would happen. We didn’t know how or when. We just wanted to build the best things we could right now so we would be ready if and when it presented itself,” he says.
They ran beta tests in other cities for three years, 2007-2010, to see if the Truth@Work model was repeatable. The answer was yes. In 2010, Ray and his team decided to really scale and grow to other chapters. Since 2010, Truth@Work has moved into to about 30 cities.
“A very realistic plan is that by the end of 2014, we will be up to 100 cities. Five years from there, we will be in 200 markets,” Ray says. He calls it the “proverbial flywheel.” His team is totally focused on the job at hand. All systems are on go. They aren’t distracted by tasks that wouldn’t help them grow or risks they shouldn’t carry, so they are all going in the direction they want to go.
“The big takeaway of our value and relationship with Servant HR is it allows us to focus on what we do, which is grow and serve and build our Roundtable program,” Ray says. “We have peace of mind knowing our HR and payroll and all those pain-in-the-neck issues are off our plate so we can grow and build and sustain our organization.”
Truth@Work has seven full-time employees. To carry out the organization’s functions across the country, Ray and his team certify chapter presidents who are independent of the company payroll. Servant HR helped counsel Ray regarding why that would be a good structure.
From the start, Ray and Matt also made two critical decisions that have influenced the current growth. First, they wanted to be structured as a nonprofit.
“Because business owners and high-level executives are our audience, the nonprofit route has allowed us to stay very focused on what we do and to have very trusting relationships. There is no alternative agenda to make money,” Ray says.
Second, related to scalability, the Anderson University marketing graduate says Truth@Work didn’t make itself visible or findable on the web for its first several years. They didn’t want phone calls and emails without the infrastructure in place to be able to deliver on what they wanted to provide.
“We had the vision, but we intentionally didn’t position ourselves for fast, rapid growth that we couldn’t handle. So in beginning, we sent out a few letters sharing the concept and invited people to come to informational meetings regarding the Roundtable,” Ray says. Truth@Work is now highly visible on the web.
A major advantage of partnering with a PEO is to reduce risk. Asked how Servant HR helps him avoid unnecessary HR risks, Ray answers, “This the most intriguing question. My view and perspective on this is that they are doing their job right, so I don’t even know about the risks I’m avoiding.”
Most recently, Ray says Servant HR is helping Truth@Work navigate the real-world implications and impact of the Patient Protection and Affordable Care Act, helping them understand how different choices might impact or affect the organization and its employees.
Servant HR has also helped on a number of occasions when Truth@Work has had to terminate employees by putting together solid exit plans to help them maintain friendships and a healthy culture. Handling those situations with honor, dignity and respect was important.
“Servant HR has been a great fit for us because they are also very family and values oriented. Christian faith is their No. 1 priority for them like it is for us. This is all a natural extension,” Ray says.
For more information about Truth@Work, visit the website. Contact Servant HR to find out how we can help your organization stay focused.
by Mike Yoder | Business Strategy, Legal Compliance, Outsourcing
Many people look at human resources as one of those things you have to do in business. It’s just the way it is. Our clients understand that human resources isn’t just an obligation — which it is to a degree — but when it’s used strategically, it can be a means to unlock opportunities and grow your business. The bottom line is, when you use a PEO, you are being strategic.
Here are six ways a PEO helps you grow your business:
1. PEOs create the freedom for you to focus on your business. PEOs like Servant HR take projects off their clients’ plates. Administrative tasks are the obvious ones. For example, the State of Indiana requires you to report all new hires. This is one of the things that can easily slip through the cracks at businesses in growth mode. When you are focused on building your infrastructure, hiring the best people and moving into new markets, tasks like reporting a new hire can get lost — and get you in trouble. When you have someone else focusing on those things, you can keep growing your business. There’s no wasted time scrambling to figure what’s required and how to fulfill the requirement. A PEO simply does it, often without our clients even knowing it’s been done. Setting up workers’ compensation is another admin task that often goes overlooked — we just do it.
2. We can help minimize potential attorney fees and wasted time. You probably have an accountant, so when you have an accounting-related question, you call your accountant. In the same way, once business leaders understand their PEO’s areas of involvement, they begin to contact them first when they are dealing with a sensitive HR-related issue.
Going directly to your PEO when you have an issue may help prevent you from wasting money on attorney fees or wasting time researching issues on your own. If we can handle the issue, we will. If we need to work with a client’s attorney to help, we will, and we will have the background information needed to inform our client’s attorney of the issue. In this way, a PEO can help look out for your bottom line.
3. PEOs work strategically with your business goals in mind. Your PEO knows your employee handbook from cover to cover – it probably helped you develop it. And it knows your company philosophy and priorities. When you are dealing with risk issues, such as a discipline challenge, business leaders can turn to their PEO to help them figure out the next steps, and those handbook details and understanding of your business play key roles in how you should strategically respond to risk-laden circumstances. PEOs advise their clients with a full understanding not only of your employee numbers but also an understanding of where you stand financially and other seemingly non-HR matters.
4. PEOs minimize risk. Entrepreneurs recognize the depth and breath of HR today. Healthcare reform helps greatly accentuate that point. All employers are intimately aware of opportunities and threats related to legislation and regulations. If you don’t follow the rules, you could conceivably lose your business in a matter of months. That doesn’t happen often, but it can happen. When you work with a PEO and have a process in place related to payroll, benefits, risk management, workers’ compensation, employee coaching and counseling services, you can keep your eye on the ball in your particular area without worrying about potential penalties or threats related to HR legislation. It’s like using an FDIC-insured bank, as a PEO assumes some of the risk related to HR issues.
Take payroll for example, if you withheld moneys for taxes and didn’t submit them to the government, it’s a federal offense. I’ve seen this happen often. Most of the time, I believe it happens by accident, but there isn’t a risk of this happening when you work with an effective PEO. As another example, you might not know about some FMLA rules that you inadvertently ignored. An employee who bears the brunt of your ignorance might bring a suit against you for failing to comply. A PEO helps take on some of the risk related to these types of issues.
5. A PEO’s process adds value in the eyes of investors. When investors are shopping for opportunities, their due diligence process is thorough. When they see that you work with a PEO, you are demonstrating that you are focused on growing your business (not HR admin tasks) and you don’t have any HR skeletons in your closet. Having a PEO’s input as a third party also can appear as more reliable than information submitted to a potential investor directly from the business seeking funds.
6. Having a PEO in place is impressive for prospective employees. For businesses that want to grow, seeking out and hiring top employees is key. When a potential hire sees that you have health care plans, direct deposit, an employee handbook and other HR-related items in place, they regard you as credible. They can see that you have your house in order as it relates to one of the most important aspects of your business – your people. A PEO helps put that internal structure in place.
If you have questions about how a PEO relationship works, please contact me, Scott Ingram, at 317-585-1688.