Preparing for the Future:How Professional Employer OutsourcingWill Help Small and Mid-Sized EmployersCope with an Uncertai...
Looking Back, Looking ForwardLast year was one of the most volatile economic periods in U.S. history. Reams of newemployme...
The Cost of ComplianceBeyond the economic uncertainty that is hampering business growth and expansion,the cost of regulato...
Additional Employment Challenges in 2013Beyond the fiscal uncertainty and cost of compliance, employers face some uniqueem...
Additionally, employee classification issues, such as exempt versus non-exempt and thedistinction between an employee and ...
Human Resources Outsourcing:More Than Just an Idea Whose Time Has ComeIn recent years, Human Resources Outsourcing has gro...
Key Outsourcing DriversAccording to Global Industry Analysts and Hewitt Associations, a world-wide provider ofHR consultin...
“The market for HR outsourcing may benefit from a weakened economy    as buyers look to lower costs and trim staff.”      ...
Professional Employer Outsourcing Gains StrengthWhen considering whether or not to outsource human resources, employers sh...
How Does It Work?In a Professional Employer Outsourcing relationship, the PEO shares many employmentresponsibilities with ...
Included in this team of experts are trained BenefitsSpecialists who are familiar with Health Care Reform andcan provide a...
Proven Systems and Robust ResourcesBeyond negotiating rates and plans, PEOs maintain the internal resources to managerouti...
In SummaryThe economy remains flat, fiscal uncertainty abounds, employment regulations continueto grow, and small business...
About CPEhrCelebrating its 30th anniversary this year, CPEhr is one of California’s leading HumanResources Outsourcing and...
Contact CPEhrWe encourage you to contact us and schedule a complimentary HR consultation.In this no-obligation consultatio...
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Preparing for the Future: How Professional Employer Outsourcing Will Help Small and Mid-Sized Employers Cope with an Uncertain 2013.

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In recent years, Human Resources Outsourcing has grown from merely an interesting idea, to a way of doing business. Despite the current economic woes, HR Outsourcing continues to grow as employers look to consolidate vendors, cut costs and improve efficiencies. When considering whether or not to outsource human resources, employers should review all aspects of their employee administration, compliance and strategic needs to determine which elements should be outsourced, and which can be maintained in-house. Some employers may be only looking to outsource a specific function or process, such as payroll administration, recruitment or benefits administration, while others may find it more productive to outsource the entire spectrum of their human resources function. For those looking for the broadest and most comprehensive solution possible, Professional Employer Outsourcing (PEO) is the answer.

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Preparing for the Future: How Professional Employer Outsourcing Will Help Small and Mid-Sized Employers Cope with an Uncertain 2013.

  1. 1. Preparing for the Future:How Professional Employer OutsourcingWill Help Small and Mid-Sized EmployersCope with an Uncertain 2013.
  2. 2. Looking Back, Looking ForwardLast year was one of the most volatile economic periods in U.S. history. Reams of newemployment legislation were passed into law, the country endured a vicious presidentialcampaign, the constitutionality of Health Care Reform was challenged and maintained,and months of economic uncertainty lead up to theNew Year deadline of the fiscal cliff.While the worst seems to have passed, businessconfidence has dipped back to recession-level lows,according to the National Federation of IndependentBusiness (NFIB). Their “Small Business OptimismIndex” for year-end 2012 was the second worstreading since March 2010.Consider some of these disconcerting statistics:  70 percent of owners say it is a bad time to hire or invest.  No employment changes were made by 76 percent of the owners surveyed.  Future hiring plans weakened, falling 4 points to 1 percent of employers.  Political uncertainty stopped one in four employers from expanding. They listed the top business problems in the way of hiring as taxes (23 percent) and regulations (21 percent). Poor sales came in third at 19 percent.  30 percent of retailers reported lower sales during the holiday season.  52 percent of businesses are not looking for new loans CPE HR, Inc. All Rights Reserved. 20132
  3. 3. The Cost of ComplianceBeyond the economic uncertainty that is hampering business growth and expansion,the cost of regulatory compliance impacts employers even more. And according to theSmall Business Administration (SBA), small businesses bear the largest burden ofcomplying with federal regulations. These regulations include tax and payroll,occupational safety and health, labor and employment, insurance and other economicrestrictions and incentives. The SBA reports that on average, Costs per employeea small business (under 20 employees) spends on average appear to be at leastclose to $10,000 per employee annually managing 36% higher in smallregulatory compliance, compared to large companies (over firms than in medium-500 employees) that only pay on average $6000 per sized and large firms.employee. These results are roughly consistent withThis cost differential is easy to understand, as many … other studiesexpenses relating to compliance are ‘fixed’. That is, a firm of completed during the20 employees incurs many of the same base expenses as a past 25 years.firm with 200. In large firms, these fixed costs are spread “The Impact of Regulatory Costs on Small Firms,” SBA Office of Advocacyover a large employee base, which results in lower costs perindividual. This phenomenon is known as economies of scaleand it results in an obvious advantage to large firms over smaller ones. CPE HR, Inc. All Rights Reserved. 20133
  4. 4. Additional Employment Challenges in 2013Beyond the fiscal uncertainty and cost of compliance, employers face some uniqueemployment challenges in 2013.1. Health Care ReformAs the Affordable Care Act is rolled out in 2013, employers will be confronted with newchallenges. For the first time, W2s issued in January 2013 included the value ofemployer-sponsored health care benefits. This almost certainly resulted in increasedcosts and time of preparing W2s as a result of gathering and reporting this information.Small businesses also have to prepare for open enrollment in health insuranceexchanges that begins on October 1. These exchanges will allow individuals and smallbusinesses with up to 100 employees to purchase qualified health insurance coverageonline. Employers will have to decide what their health care programs will look likegoing forward, or whether they’re going to offer coverage at all. And looking towards2014 when the Individual Mandate becomes effective, employers will be forced tounderstand how this law will impact their business.2. Wage and Hour IssuesIn January of this year, former Labor Secretary Hilda Solis resigned following four yearsof aggressive Department of Labor investigations and prosecutions of employers whoviolated the Fair Labor and Standards Act (FLSA). Unfortunately, the departure ofSecretary Solis is not likely to change the Department’s aggressive enforcement policy.Current issues range from the relatively simple, such as complying with the minimumwage increases that went into effect on January 1, to the very complex, such asensuring employees are compensated properly for working through meal breaks,guidelines involved with employees checking company email at home from a mobiledevice, putting on (and taking off) uniforms, and booting up their computers in themorning. CPE HR, Inc. All Rights Reserved. 20134
  5. 5. Additionally, employee classification issues, such as exempt versus non-exempt and thedistinction between an employee and an independent contractor, continue to trip upeven the most well-intentioned employers.3. Discrimination and Equal Opportunities Regulation is likely toOn Dec. 17, 2012, the U.S. Equal Employment Opportunities pose a significantCommission (EEOC) approved a strategic enforcement plan, challenge for employ-beginning in 2013, with a requested budget of $373 million. The ers in 2013. To meetplan outlines six enforcement priorities, such as eliminating this challenge, it’sdiscriminatory hiring practices, protecting immigrant workers, important to stay onenforcing equal pay laws, and preventing sexual and religious top of what’s happen-harassment. Additionally, the employment of individuals with ing on the regulatorydisabilities has received a lot of attention recently, and front. Once you fallcompliance with the Americans with Disabilities Act (ADA) is also behind, it can be hardlikely to be a priority for regulatory agencies in the year to come. to catch up. - Stephanie R. Thomas, Ph.D.,The result of these changes is apparent, as the Equal CEO of Thomas Econometrics.Employment Opportunity Commission (EEOC) reported that a full70% of all 100,000 claims reported in 2012 were alleged violations of Title VII whichprohibits discrimination based on race, sex, national origin, religion and color.So, with uncertain economic days ahead, growing financial burdens, and the never-ending flow of employment regulations and compliance challenges, what hope is therefor small employers to succeed in the near future?The Answer: Human Resources Outsourcing. CPE HR, Inc. All Rights Reserved. 20135
  6. 6. Human Resources Outsourcing:More Than Just an Idea Whose Time Has ComeIn recent years, Human Resources Outsourcing has grown from merely an interestingidea, to a way of doing business. Despite the current economic woes, HR Outsourcingcontinues to grow as employers look to consolidate vendors, cut costs and improveefficiencies.Global Industry Analysts, an international business strategy and market intelligence firm,conducted a comprehensive survey of 274 major-market human resources outsourcingfirms in mid-2012. They report that the global HRO market could reach $162 billion by2015, up from $103 billion in 2007 and $61 billion in 2002.In the United States, Everest Research Institute, an independent research and analysisorganization, states that North American HR outsourcing transactions reached $25.4billion by the end of 2009, an increase of 19 percent over the previous year.At a global growth rate of 300%+ over the past decade, HR outsourcing is now the fastestgrowing sector in the broad “business process outsourcing” market. CPE HR, Inc. All Rights Reserved. 20136
  7. 7. Key Outsourcing DriversAccording to Global Industry Analysts and Hewitt Associations, a world-wide provider ofHR consulting services and research data, the most common reasons for engaging an HROutsourcing firm are to reduce overhead and improve efficiencies. Companies alsorecognize the value of utilizing an outside resource to conduct various business-relatedactivities, as compared to maintaining these functions internally.Other reasons to outsource include:  Provide cost effective healthcare benefits  Access to outside expertise  Ability to offer quality HR service to improve recruitment and retention  Need to focus on core business competencies  High cost of remaining up-to-date with rapidly changing environments  Eliminate high volume of low-value transactional activitiesFrom the ExpertsExperts from across the human resources and human capital spectrum have expressedopinions on the growing popularity of the Human Resources Outsourcing industry. Hereare several selections: “HRO started off as a cost reduction move for some companies. It has expanded well beyond that to become a driving force for creating business value. We expect even greater emphasis on business outcomes, as companies explore HR Outsourcing as a way to meet business needs and improve business performance.” - Jill Goldstein, HR BPO offering lead at Accenture. CPE HR, Inc. All Rights Reserved. 20137
  8. 8. “The market for HR outsourcing may benefit from a weakened economy as buyers look to lower costs and trim staff.” - Lisa Rowan, program director, HR and Talent Management Services Research. “HRO is providing more of a strategic support for clients, while still providing line leaders with tools to improve day-to-day talent management. This stands in contrast to the older notion of HRO as simply a way to reduce the tactical burden on HR.” -The Aberdeen Group, 2011 HR Outsourcing Survey. “In many ways, this is the golden era of human resources outsourcing.” -Josh Bersin, CEO and president, Bersin & Associates “The report points out that while compliance and core HR programs continue to be business-critical, they often do not add enough value in todays global business environment. Chief HR officers (CHROs) and their teams who have found a way to automate, streamline and outsource such "non-strategic" parts of their operations and focus on more strategic initiatives will likely outperform their peers. - Deloitte, “Predictions for 2013: Corporate Talent, Leadership and HR” CPE HR, Inc. All Rights Reserved. 20138
  9. 9. Professional Employer Outsourcing Gains StrengthWhen considering whether or not to outsource human resources, employers shouldreview all aspects of their employee administration, compliance and strategic needs todetermine which elements should be outsourced, and which can be maintained in-house.Some employers may be only looking to outsource a specific function or process, such aspayroll administration, recruitment or benefits administration, while others may find itmore productive to outsource the entire spectrum of their human resources function. Forthose looking for the broadest and most comprehensive solution possible, ProfessionalEmployer Outsourcing (PEO) is the answer. “ The growing urgency among companies to lower costs, enhance revenues, and stabilize operations is driving companies to seek tools that offer support for HRO requirements. A Professional Employer Organization (PEO) is one such tool that facilitates access to HR management solutions, and skilled HR professionals. ” “Human Resource Outsourcing: A Global Strategic Business Report, 2012.” Global Industry Analysts, Inc.PEOs, were established in the early 1980s, offering insurance and payroll services to smalland mid-sized employers. In the early days of the industry, PEOs were also known as“Staff Leasing” or “Employee Leasing” firms.However, as employment laws became more complex in 1990′s, the need arose for amore comprehensive employment solution. The PEO industry expanded to include manynew elements relating to employee relations and human resources compliance. CPE HR, Inc. All Rights Reserved. 20139
  10. 10. How Does It Work?In a Professional Employer Outsourcing relationship, the PEO shares many employmentresponsibilities with their clients. While the client maintains complete control over all dayto day operations – such as hiring, directing the employees and setting wages – the PEOassists with the management of complex administrative functions relating to theemployees. Examples of these back-office HR functions include:  Assistance with labor law compliance Companies that seek  Employee handbooks & policies HRO services essen-  Health insurance plans & administration tially require cost  401 (k) and Cafeteria 125 Plans reductions, process  Payroll processing  Tax administration improvements,  Governmental form submissions external knowledge  Safety consulting and skills and the  Workers’ Compensation Insurance ability to concentrate  Management Training on strategic activities.  Recruiting services - “HRO: A Global Strategic Business Report,  Assistance with unemployment administration 2012.” Global Industry Analysts, Inc.With a PEO, the employer can turn to them for clear direction, guidance and support. Ateam of experts are assigned to assist the client in complying with all relevantemployment laws and regulations, on both the state and federal level.These experts also help businesses comply with the multitude of employment forms,documents, and employee management. They begin by reviewing the client’s currentcorporate policies and employee handbook, and update them as necessary. By taking ahands-on, proactive approach, clients enjoy increased protection against unnecessary andexpensive employment litigation. CPE HR, Inc. All Rights Reserved. 201310
  11. 11. Included in this team of experts are trained BenefitsSpecialists who are familiar with Health Care Reform andcan provide accurate, timely information and education.These specialists invest the time to review the legislationwith brokers and industry experts, and can focus onrelaying this information to clients when changes to thelaw arise.Economies of ScaleAs mentioned previously, economies-of-scale offer large employers tangible advantagesover their smaller competitors. Businesses with low payrolls and less than 500 employeesare often limited when shopping for cost-effective workers’ compensation insurance,have fewer employee health insurance options and typically have less flexibility innegotiating better rates administering these plans. “ The management of costs through outsourcing is achieved not only through cost-cutting measures, but also by enabling companies to shed fixed operating costs in favor of vendor offered variable pricing. ” “Outsourcing Services in the Face of an Economic Downturn,” Morrison and Foerster LLP.In the PEO relationship, small employers gain access to the PEO’s pool of hundreds, oreven thousands, of businesses. By aggregating health benefits, workers’ compensationinsurance, retirement plans, and legal expertise, the PEO is able to offer these smallbusinesses systems and products at a much more competitive rate. Additionally, the PEOhas established relationships with large regional insurance companies and can providebetter plan selections with lower premiums. CPE HR, Inc. All Rights Reserved. 201311
  12. 12. Proven Systems and Robust ResourcesBeyond negotiating rates and plans, PEOs maintain the internal resources to manageroutine employment tasks efficiently and cost effectively as the necessary talent andinfrastructure are already in place. When a small employer engages the services of a PEO,they simply access these existing programs and can hit the ground running, thus reducingstart-up time and costs.PEOs also offer programs that are very effective in keeping insurance premiums low inthe future. Many offer health and wellness programs, work/life balance incentives, anddiscounts at local health clubs and gyms. Research consistently indicates that a healthyand balanced lifestyle can have a significant, positive impact on the future cost of healthinsurance premiums.Similarly, in regards to safety and risk management, the PEO is able to implementsuccessful programs that results in fewer workplace injuries and more competitiveinsurance premiums. Sample safety services include the creation of effective injury andillness prevention plans, conducting on-site safety inspections, and offering employeessafety incentives to reduce the frequency of workplace injuries. CPE HR, Inc. All Rights Reserved. 201312
  13. 13. In SummaryThe economy remains flat, fiscal uncertainty abounds, employment regulations continueto grow, and small businesses are struggling to keep their head above water. Short of amiracle turnaround in the immediate future, employers can expect much of the same forthe duration of 2013. As such, thousands of businesses currently outsource humanresources functions to Professional Employer Organizations. PEOs have the size, strengthand stability to weather these turbulent times, and enable small employers to ride alongwith them.PEOs assist small employers by: 1. Reducing employment risks through proactive HR support, compliance and training; 2. Providing economies-of-scale to reduce insurance premiums, cut employment overhead and simplify administrative processes; 3. Guiding and directing business through Health Care Reform compliance; 4. Offering robust employee benefit and health care plans; 5. Helping create safe and productive work environments.If you want to prepare your business for the future, it is time to take a long, serious lookat the PEO industry and uncover the benefits that await your company. CPE HR, Inc. All Rights Reserved. 201313
  14. 14. About CPEhrCelebrating its 30th anniversary this year, CPEhr is one of California’s leading HumanResources Outsourcing and PEO firms. With corporate headquarters in Los Angeles, CPEhrprovides human resources solutions to over 75,000 employees throughout California, andin over 20 states nationwide.CPEhr began as a small payroll and HR provider, with 10 corporate employees. Over thepast thirty years, CPEhr has grown to employ close to 100 corporate professionals in theareas of:  Employment Administration  Labor Law Compliance  Management Training  Safety and Risk Management  Employee Benefits  Retirement Planning  Payroll and AccountingUnlike many other firms, CPEhr offers a flexible HR Outsourcing solution, wherein clientsselect the service model most appropriate for their organization:The PEO Solution offers a consolidated solution providing payroll and tax administration,access to large insurance products for benefits, workers’ compensation, EPLI, and a widerange of human resources and employee relation services to meet your employment needs.The HRP and HRO Solutions are a more flexible variation of the complete PEO solution.These allow clients to pick a pick-and choose which services make the most sense tooutsource, and which they wish to keep in-house. CPE HR, Inc. All Rights Reserved. 201314
  15. 15. Contact CPEhrWe encourage you to contact us and schedule a complimentary HR consultation.In this no-obligation consultation a senior consultant will analyze your current humanresources practices and offer a customized HR Outsourcing solution.Call us: 877-842-4987Email Us: info@cpehr.comOn the web: www.cpehr.comCorporate blog: www.cpehr.com/blogTwitter: www.twitter.com/cpehrFacebook: www.facebook.com/cpehrCorporate Address: 9000 Sunset Blvd. Suite 900 West Hollywood, CA 90069For more information: CPE HR, Inc. All Rights Reserved. 201315

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