The Benefits of Outsourcing HR


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This webinar will provide an in-depth look at the benefits of outsourcing HR to a Professional Employer Organization (PEO). John W. Allen, President and COO of G&A Partners, will discuss how small and mid-size businesses can take advantage of outsourcing their human resources and administrative functions. He will also answer some common questions in regards to PEOs and their services.

This webinar will explore:
What kinds of companies are outsourcing their HR?
What types of organizations should be outsourcing their HR?
Why are they outsourcing?
What HR or administrative functions are they outsourcing?
How & when are they outsourcing?
To whom are they outsourcing?

The webinar will conclude with a Q&A session between John W. Allen and webinar participants.

This webinar was posted on October 20, 2011 and presented by President and COO John W.Allen.

Published in: Business, Economy & Finance
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The Benefits of Outsourcing HR

  1. 1. John W. Allen, G&A PartnersThe Benefits ofOutsourcing HR
  2. 2. What do these companiesall have in common?•  ABB•  Bank of America•  Best Buy•  BP Amoco•  British Telecomm•  Cap Gemini•  Credit Suisse•  General Motors•  Goodyear•  International Paper•  Levi Strauss•  Motorola•  Proctor & Gamble•  Prudential Financial•  Sony•  Sun Microsystems•  TXU
  3. 3. And what about thesegovernmental entities?•  U.S. Defense Finance & AccountingService (DRAS)•  U.S. Office of Personnel Management•  United States Postal Services•  Transportation Security Administration•  State of Florida•  State of Texas HHSC
  4. 4. They all outsource HR
  5. 5. Agenda•  Who’s outsourcing?•  Why are they outsourcing?•  What are they outsourcing?•  How & when are they outsourcing?•  To whom are they outsourcing?•  Q&A
  6. 6. John W. Allen•  President and COO of G&A Partners•  25 years of management consultingexperience•  Has been responsible for providingsupport services to organizationsvalued up to $5 billion and with asmany as 46,000 employees.•  Specializes in providingadministrative services to emerginggrowth companies.
  7. 7. Amazing Facts•  In 2003 HRO transactions impacted anestimated 2.8 million employees, or 4% of theU.S. workforce•  In 2004, the Top 22 HRO deals covered over700,000 employees•  HRO revenues grew to $61 billion in 2005•  HRO Today reports continued growth in 2006and 2007
  8. 8. Why are they outsourcing?•  Reduce costs/Increase EBITDA•  Gain access to cutting edge technology•  Avoid additional investments•  Provide more self service tools to employees•  Focus HR on strategic vs. tactical
  9. 9. What are they outsourcing?•  Payroll•  Health and welfare administration•  Recruitment•  Compensation planning•  Performance planning•  Learning management•  Relocation•  Records management
  10. 10. To whom are theyoutsourcing?•  Accenture HR Services•  ACS•  ADP•  Aon Consulting•  ARINSO International•  Ceridian•  Convergys Employee Care•  ExcellerateHRO•  Fidelity Employer Services•  Hewitt Associates•  IBM Global Business Services
  11. 11. The trend is clear – the bigboys are outsourcing HR, butwhat about the rest of us?
  12. 12. The Million Dollar Employee
  13. 13. If growth in the PEO industryis any indication, smallbusinesses are outsourcingmore and more of their HRfunctions too.
  14. 14. •  Number of PEOs has grown from a handful in mid1980s to more than 800 today.•  Number of co-employees has grown from 10,000in 1984 to over 3,600,000.•  Gross revenues billed by PEO Industry grew from$5 billion in 1991 to over $51 billion today.•  Wall Street estimates annual growth rate of 20%
  15. 15. What’s driving businesses, large & small, tooutsource HR?Why the Growth?
  16. 16. Using a PEO helps you focuson what you do best!
  17. 17. Growing Burden of Regulation
  18. 18. $1,152 per yearAverage administrative costper employee($414 - $6,274 per year)Bureau of National Affairs
  19. 19. Average administrative cost peremployee•  6% - 12% of payroll (SBA & US Chamber ofCommerce)•  8.45% of payroll (UT-Austin)•  $600 to $750 per annum per employee (majorinsurance company estimate)
  20. 20. So what is a PEO?
  21. 21. How does a PEO work?1.  Service Contract2.  Employment relationshipwith/and responsibilitiesof the PEO3.  Shared relationship andemployer responsibilities4.  Employment relationshipwith/and responsibilitiesof the client
  22. 22. What services does the PEOprovide?•  Payroll Administration–  Provides time & attendance solutions–  Issues paychecks and W-2s–  Accrues vacation, sick and other leave–  Withholds and deposits taxes–  Withholds and remits garnishments & premiums foremployee benefits–  Files all payroll tax returns
  23. 23. What services does the PEO provide?•  Employee Benefits Administration–  Group Health Plans–  Group or Voluntary Dental, Vision, Life, AD&D, STD,LTD & LTC–  Section 125 Cafeteria Plans–  401(k) Retirement Plans–  HRAs, HSAs, FSAs, & Gap Plans–  Prepaid Legal, Purchase discounts, Wellness, EAP
  24. 24. What services does the PEO provide?•  Human Resource Management–  Compiles job descriptions & employee handbooks–  Provides recruitment assistance–  Conducts pre-hire background checks–  Advises clients on employee discipline or performanceproblems–  Educates clients on regulatory compliance issues–  Handles unemployment claims & COBRA and HIPAAadministration–  Conducts exit interviews
  25. 25. What services does the PEO provide?•  Risk Management–  Workers Compensation Coverage–  Master Safety Plans–  Site Inspections–  Safety Training–  Accident Investigation–  Workers Comp Claims Administration–  Drug Testing & Modified Work
  26. 26. What responsibilities do youretain?•  Management of business operations•  Use of facilities and equipment•  Safeguarding assets & people•  Employee compensation•  On-the-job supervision•  Quality control
  27. 27. How would your company benefit?•  Greater focus on your core business•  Broader range of affordable employee benefits•  Workers compensation insurance at competitiverates, with no deposit or annual audit•  Fewer compliance issues & employee lawsuits•  More time and money
  28. 28. How would your employeesbenefit?•  Better, more affordable benefits•  Higher “take home” pay•  Greater understanding of company policies andprocedures•  Improved safety awareness and fewer on-the-job injuries•  Happier, more productive employees
  29. 29. So how much does it cost ?•  The cost of PEO services is generally less than orequal to the cost to do everything in-house.•  Additional savings come by redeploying talent,reducing turnover, reducing workplace injuriesand avoiding employee lawsuits.
  30. 30. Service fee is a percentage ofpayroll & includes:•  FICA/Medicare•  SUTA•  FUTA•  Workers compensation insurance•  Employee benefits costs•  Miscellaneous charges•  PEO’s fee
  31. 31. PEO in Action –Aluminum Frame Manufacturer
  32. 32. PEO in Action –Freight Forwarder
  33. 33. For more information,•  “PEOs take load off companies by filling humanresource function”•  “Human resource outsourcing can boost bottom line”•  “PEOs can help small business grow”•  “PEO’s: help for small companies in good times andbad”•  “PEOs: the wave of the future”Source: NAPEO website
  34. 34. Guidelines for Selecting a PEO•  Lists available thru NAPEO or TDL•  Verify that PEO is licensed & in good standing•  Ask for banking & credit references•  Ask for client & professional references•  Visit their offices•  Review customer service agreement
  35. 35. Licensing Requirements•  Controlling person must be 18 years of age and ofgood moral character•  Controlling person must have educational,managerial, or business experience relevant to theoperation of a business entity offering staff leasingservices•  Must demonstrate net worth of $100,000
  36. 36. Q&A•  Who controls the workplace? Will the PEO betelling me how to run my business?•  What if the PEO fails to remit payroll taxes?What recourse does the IRS have?•  Does the PEO’s workers comp policy protectmy company against third party liability?
  37. 37. Who controls the workplace?•  The client controls who performs the work and howand when they do it.•  The client recruits and sets the compensation for allemployees. The PEO screens new hires and hasright to reject.•  The client disciplines & terminates employeessubject to PEO’s review to ensure compliance withappropriate statutes and regulations.•  The client implements safety programs. The PEOhelps them design, implement and train.
  38. 38. What if the PEO fails to remitpayroll taxes?
  39. 39. Any protection against thirdparty liability on WC claims?•  Texas labor code section 91.042(c) states that for workerscompensation insurance purposes, a PEO and its client are“co-employers.” As such, both entities are covered by thePEO’s policy. Alternate employer endorsement required.•  Law Again Supports This Position:–  Regalado v. H.E. Butt Grocery Co.–  Esquivel v. Mapelli Meat Packing Co.–  Aquilar v. Wenglar Construction Co., Inc–  Gibson v. Grocery Supply Co., Inc.–  Marshall v. Toys-R-Us Nytex, Inc.
  40. 40. For More Information:John W. AllenG&A Partners4801 Woodway, Suite 210Houston, Texas 77056(800)