As the United States continues to fight to slow the spread of COVID-19, Worklio is constantly monitoring the situation to stay on top of the legislative developments in order to help our customers and their clients deal with the ongoing changes to federal regulations.
Hotfix releases continue to be made. Forthcoming legislative changes are being addressed in real time to provide customers and their clients with solutions as quickly as possible.
Worklio understands the uncertainty that the battle against the spread of the coronavirus has caused. We are available and we will do everything we can to help you navigate these truly unique circumstances that affect us all.
Most importantly, know that Worklio is here to support our customers and their clients and the many worksite employees who make business happen in the United States.
California, which has close to 40 million residents, is the most populous state and possibly the most complex when it comes to Payroll and Human Resources.
The “Eureka!” state has many laws and regulations to safeguard employers and employees. Almost every aspect of the workplace is covered, including meal and rest periods, vacation policies, itemized wage statements and final paycheck requirements.
Need another reminder for why you need to dot every “i” and cross every “t”? Here it is: the Department of Labor increased its civil penalties.
Pretty much every violation has been adjusted for inflation, including failures to comply with the Occupational Safety and Health Act (OSHA), the Fair Labor Standards Act (FLSA), the Family & Medical Leave Act (FMLA), the different versions of the Immigration & Nationality Act and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).
One of the first documents that new-hire employees fill out when they get on the job and one of the documents that should be updated every year is the Form W-4. For more than three decades, it has remained largely unchanged.
Not any more.
This year, the W-4 has gone through a significant update to make the withholding system more accurate and more transparent. As the IRS says, it will “ensure (a) smooth taxpayer experience.”
Whenever you make a big decision it is best to weigh the positives and negatives. Outsourcing your company to a Professional Employer Organization (PEO) or an Administrative Services Organization (ASO) would qualify as a big decision.
So which way does the scale tilt?
Every business is different so every situation is unique. For the positives, click here for a blog post with general information about about PEOs and ASOs and click here for a blog post with more specific benefits about using PEOs and ASOs.
For the negatives, read on because there are some potential rough spots that should be clearly understood prior to hiring a PEO or an ASO.
Some Loss of Control
The person who runs the company makes the final decisions. Often that person also wants to make all of the decisions. Outsourcing is, by definition, the delegation of a significant portion of the daily operations of a company. Even though supreme authority is maintained by the client company, it is not always easy to relinquish the day-to-day control.
Possible Insurance Alterations
One of the biggest strengths that PEOs and ASOs bring to the table is also a weakness. Economies of scale lead to good deals on health insurance, but that could mean that there may be carrier changes. Some companies choose to handle their health insurance separately to keep consistency. Also, savings are passed on to the clients, but there may be extra fees that cut into it.
PEOs and ASOs use two basic pricing models: an itemized plan and a flat fee. Once a client has gone through the time and energy of partnering with an outsourcing company, it may be difficult to adjust when business success justifies a change. The flat fee model, which can take up to 10 percent of salaries, may not make sense when your success results in quickly rising salaries. Paying for individual aspects of an HR outsourcing company would be more predictable and not subject to salary fluctuations. Of course, often services are bundled, joining valuable and unimportant aspects together.
Reduced Personal Contact
The fact of the matter is that many problems will not be resolved face to face. Information websites, automated emails and phone calls are the more likely forms of communication. Response time will be longer than walking to the HR department down the hall to ask a question.
Reduced HR Intangibles
There is some value in having Human Resources on site. The department is often tasked with spreading holiday cheer and establishing relationships in the local community. Of course, using an outsourcing company does not mean that local HR cannot exist.
No On-Site Crisis Help
Times of crisis or chaos will, perhaps, be made more complicated. HR is where complaints — legal or otherwise — are officially lodged. Writing an email about sexual harassment is not the same as closing the office door and telling a real person about it.
Sharing Sensitive Data
Because business is so competitive, some companies may be justifiably wary about sharing payroll data and information about internal mechanisms. Outsourcing companies appreciate this concern and have high-level security with proper certification to prove it.
If you can live with these points and if the positives outweigh the negatives, then check out PEOs and ASOs.
Worklio is a software company that works hand in hand with PEOs and ASOs, providing the modern technology that leads to success.
There are hundreds of Professional Employer Organizations (PEOs) that take on all Payroll, Benefits and HR responsibilities, and there are hundreds of Administrative Services Organizations (ASOs) that handle parts of a company’s day-to-day workload.
A PEO or an ASO could help any company immensely.
However, every change comes with an inherent risk. Would it be worth the trouble to outsource your Payroll, Benefits and HR? Just how difficult would it be for a company to make the switch to a PEO or an ASO?
The glib answer: It’s easy.
The honest answer: Corporate and personal data is sensitive so an unprofessional migration would not be appropriate.
For more detailed information about the benefits of PEOs and ASOs, go to the following comprehensive blog post. Below is a rundown of some of the steps that such a change would involve.
The Migration Process
The actual nuts and bolts of outsourcing a small business are not complicated: Payroll, Benefits and HR are simply taken care of by an outside company instead of a fellow employee on the other side of the open-space office.
Nevertheless, the first time through any process has bumps. Fortunately, PEOs and ASOs have gone through the process of setting up new companies many times before.
There is a lot of data that needs to migrate. Each company has a lot of facts and figures and official paperwork, starting with the simple (e.g., physical and mailing addresses, email addresses, phone numbers) and progressing to the complex (e.g., Workers’ Compensation, Job Codes, General Ledger). The number of employees needs to be established. An allowance for growth should be prepared, and a naming scheme designed. A billing structure needs to be set up. Archives for older documents need to be established. Relationships need to be created and/or adjusted with insurance companies and benefit providers. COBRA needs to be set up. Contractors need to be introduced into the system. Simply establishing the initial automated emails will be time consuming. And this is just a quick, general list.
In the long run, everything will be more efficient, but the short run will require some adjustment.
Each employee is involved in the change, too, from providing personal information to learning to use new software. Each employee needs to add their own data, and some of it is sensitive. Addresses, email addresses, phone numbers are still there, but there is also Payroll and Time Off information, and each has a different level of Benefits that need to be transferred.
Outsourcing companies have done it all before and, like the eventual day-to-day benefits, the initial setup is streamlined and simplified to minimize errors.
Clearly there is a lot of work. But given the advantages of using an HR outsourcing firm, the initial migration and learning phase will grow into an efficient and effective system.
The good news is that the best PEOs and ASOs have embraced technology. Computers have made business transactions quick and painless at the bank, and it has done the same for Payroll, Benefits and HR.
Worklio, for example, is a cloud-based platform that makes the transition efficient with a comprehensive data transfer and help with every additional step. The Worklio system connects the PEO, the client company and the worksite employees into one compatible and secure framework. Plus, customer service is always available to help.
There are many benefits to working with one of the hundreds of Professional Employer Organizations (PEOs) or Administrative Services Organizations (ASOs).
Just to name a few:
More time to focus on the core revenue-generating side of your business;
Enhanced benefit offerings;
Bulk purchasing power;
Mitigation of risk;
Simply streamlining the mundane tasks of employee administration is a significant step in the right direction for any company.
When deciding upon an outsourcing model, you must take into account several factors, including the type of business, the number of employees, the current HR administration costs, employee turnover, employee issues, lost opportunity costs and compliance issues. Then you will be able to reap the many additional benefits by using a PEO or an ASO.
Below are some additional detailed benefits that your company may enjoy by partnering with a PEO or an ASO:
Young companies often grow faster than expected. Hiring a person dedicated to payroll or benefits or human resources is not always cost effective. Yet, nobody in the office has any background in employment law nor have they ever established a 401(k) plan or even a vacation policy. Outsourcing fills this gap, at least until the company grows to the point where it would benefit from an on-site specialist.
An established company can reorganize and streamline operations by outsourcing HR. It may be a radical move, but saving or reallocating salaries puts the focus on the company.
Less Paperwork, Fewer Errors
You are an expert in your business. Outsourcing firms are the experts in their roles. PEOs and ASOs are designed specifically to take care of back office operations and they have established systems to streamline the flow of paperwork, anticipate problems and questions, and, therefore, limit mistakes.
Enhanced Legal Protection
When a company joins a PEO, it enters a co-employment relationship that provides shared responsibility for employees. According to the National Association of Professional Employer Organizations (NAPEO), the definition of co-employment is the contractual allocation and sharing of employer responsibilities between a PEO and its client. By partnering with a PEO and relying on its expert guidance, client companies transfer a substantial portion of the employee risks to the PEO. Many PEOs also typically provide their clients with an added layer of protection with their Employment Protection Liability Insurance (EPLI), in case a former employee, for example, sues for discrimination or wrongful termination.
Typically, outsourcing companies are able to reduce, contain and offset many employee-related costs for their client companies. For instance, PEOs enjoy large-group purchasing power by aggregating their client companies for the purposes of getting a lower rate for workers’ compensation and health insurance. This provides access to group rates that would be unavailable to small and mid-sized companies that make their own deals. Professional companies are also constantly looking for better deals, and they are often willing to change from one insurance carrier to another.
Outsourcing companies keep tabs on the general workings of their client company to make sure that nothing falls through the cracks, from important details like contract expiration dates and insurance renewal periods, to something as simple as birthdays and anniversary dates for employees.
Outsourcing companies assist in maintaining payroll, benefits, HR and tax compliance for their client companies so that they can focus on growing their business.
PEOs and ASOs stay on top of the changing landscape of federal, state and local regulations to provide timely and expert information about requisite changes. The Affordable Care Act. Occupational Safety and Health Administration laws. Equal Employment Opportunity Commission regulations. Should management spend time keeping track of all of the changes? Professional outsourcing companies even exert lobbying power in order to shape beneficial legislature.
Outsourcing companies have extensive experience. They have started and established many companies and they have seen it all. Fledgling companies benefit from this guidance to avoid the pitfalls that have stalled or finished lesser projects.
When a company is growing fast, adding the hiring process overburdens management. PEOs and ASOs can coordinate head-hunting for executives and scouring the workforce for employees so that company growth is not stunted by empty desks. Client companies, of course, are able to influence any part of the process and are brought in to make the final decisions.
Once the decisions have been made for new hires, the many steps of getting the new employee situated within the company starts: the paperwork, the rules, the office tour, the introductions. Much of this must necessarily be done on the job site, but a lot can be completed online with customized company administration software. Companies who hire a lot of people stand to save a lot of time and energy with online employee onboarding.
Those first few days are when the new, wide-eyed employee is trying to figure out how things work. Very little of this helps the company move forward. Allocating an established employee to serve as a tour guide is even more of a loss of production that hampers the company. Outsourcing companies that are part of the hiring process are set up to provide the basic training that new employees need in order to get them through the learning process quickly and efficiently.
Attract and Retain Talented Employees
Leveraging size to get the best possible insurance leads to savings for the company but also better quality for the employee. There may be specific aspects that could be used as perks for higher level employees. Orthodontia, for example, is not often covered by basic insurance, but braces for Junior are very expensive. That coverage may mean the difference between getting an expert employee or losing her skillset to the competition’s better dental plan.
Employee Manuals and Forms
As a specific example, established outsourcing companies have created many manuals to outline procedures and regulations for companies. New companies shouldn’t have to reinvent the wheel when customizing existing manuals or forms is easier and faster.
It’s definitely worth taking a look at partnering with a PEO or ASO.
Worklio is a software company that works hand in hand with PEOs and ASOs, providing the modern technology that leads to success.
Facebook has millions of daily users — yet it creates no content.
Uber transports millions of people in cities around the world — yet it owns no taxis.
Airbnb provides accommodations in thousands of cities and dozens of countries — yet it owns no hotels.
NetFlix provides online video for countless users around the world — yet it owns no theaters and only recently started to create its own content.
Facebook, Uber, Airbnb and NetFlix have all found a place between the consumer and the provider. They concentrate on what they do and they do it well.
Outsourcing is similar. There are hundreds of Professional Employer Organizations (PEOs) that take on all Payroll, Benefits and HR responsibilities, and there are hundreds of Administrative Services Organizations (ASOs) that handle parts of a company’s day-to-day workload. Both PEOs and ASOs provide the bridge to help client companies and their worksite employees concentrate on their core business and provide for their end customers.
Outsourcing is not the only available option for contemporary companies. The most common options are 1, Do It Yourself or 2, HR Outsourcing with a PEO or an ASO.
The DIY Approach
It is not so long ago that large corporations had career employees, hosted annual picnics and provided full and generous pensions, all under the supervision of a hands-on Human Relations department. Today’s companies — technology startups, restaurants, law firms — don’t have the luxury of creating and staffing an in-house HR infrastructure. The intense competition inherent in today’s business world requires focus on the final product. That is why small and mid-sized companies forego worrying about many time-consuming tasks, like health insurance; withholding and paying employment-related taxes; complying with hundreds of employment laws, rules and regulations; obtaining Workers’ Compensation insurance coverage; dealing with COBRA, ADA, OSHA, EEOC, FICA and FUTA. Many small and mid-sized companies use HR Outsourcing instead.
The Outsourcing Approach — PEO or ASO
Clearly, HR takes care of a lot of essential parts of a company. There are questions, however. How many resources should be dedicated to that expertise? Who should become the expert in liability and compliance? When should a company start a retirement program? Should it be just a 401(k) option? Will the company match employee contributions? Can an employee have an Individual Retirement Account, too?
When does a company become big enough to hire a dedicated HR person? Ten employees? 20? 50?
Most are not expert in workplace best practices, nor do they want to be. That is where professional help makes sense. PEO and ASO models enable companies to rid themselves of many in-house tasks in order to concentrate on their field of expertise.
There are more than 900 different HR Outsourcing companies in the United States alone. These provide access to the comprehensive benefits that much larger companies enjoy without using up too many resources. As mentioned, HR Outsourcing companies fall into two basic categories: PEOs and ASOs.
What is a Professional Employer Organization (PEO)?
The Professional Employer Organization model is an all-in-one solution, including Human Resources, Benefits, Payroll, Compliance, Workers’ Compensation and more. PEOs take care of the whole spectrum of services in order to increase employee productivity and engagement.
Startup technology companies are a perfect example of those who would benefit most: The general office work is outsourced so that these companies can focus on their own growth and their own effective revenue generation. Management has the final say, but the PEO removes burdensome tasks by handling the daily back-office work.
As companies grow, the PEO also acts as a co-employer, absorbing a lot of responsibility and liability.
Technology has made the PEO relationship even more efficient and effective. Company administration software enables PEOs to help clients consolidate their operations with a solid technical foundation for all of their many moving parts, including seamless communication, centralized operations, standardized procedures, the efficient handling of benefits, comprehensive HR support, the maintenance of a reliable Payroll system, the elimination of the inefficiencies of manual processes, transparency and superior service for management and employees.
There is nothing new about this arrangement. The PEO industry is already huge. There are hundreds of PEOs that are being used by thousands of companies employing more than 3 million people in the United States and generating gross revenues of between $136 and $156 billion.
Industry reports show that, since 2010, the growth of businesses that use PEOs is 9 percent higher than among other small businesses (based on the Intuit Small Business Employment Index) and 4 percent higher than overall U.S. employment growth. Businesses that use PEOs have 10 to 14 percent lower employee turnover, and are 50 percent less likely to go out of business.
Every PEO is slightly different just like every business is unique, but they generally provide:
An HR department, including administration and support for the entire workforce;
Employer of record status, with a federal tax ID, for some of the company’s employees, thus allowing for a shared employment / co-employment system;
Protection against some risk, liability and occupational hazards, including Employment Protection Liability Insurance (EPLI);
Consolidation of state and federal unemployment taxes;
Retirement systems, including 401(k) and Individual Retirement Accounts;
Social Security management;
Access to technology that is not affordable for small companies, including company-management platforms, time and attendance counters and employee dashboards;
Payroll processing and the completion of Payroll taxes;
W-2 form preparation and distribution;
Management of a wide range of Benefits administration, including health, dental, vision, life and Workers’ Compensation insurance;
Verification that workplace policies are in compliance with federal, state and local regulatory standards;
Best practices gleaned from years of professional experience;
Direct and readily available support for all types of HR situations;
Numerous paperless options to save resources and money;
Fully licensed and regulated status in the states where it is necessary;
Business plan development and guidance;
Assistance with creating office policies, including attendance systems and paid time off policies;
Development of guidelines for home office privileges for employees;
Establishment of branch offices;
Soft skills instruction;
Career transition options for departing employees;
Grant writing expertise; and
Workplace safety regulations.
What is an Administrative Services Organization (ASO)?
The Administrative Services Organization model is a more traditional business relationship. It is basically an a la carte version of the PEO model: only some services are outsourced. Some companies, for example, only want help with Payroll. Other companies want to also establish a Benefits program. Ambitious groups want help with establishing vesting options. Even the old-school behemoth manufacturing companies used a Payroll processor instead of doing it all in-house.
Nevertheless, the basic principle is the same: management can outsource tiresome tasks to a professional organization in order to have more time to work on their core business.
Unlike PEOs, an ASO does not become the employer of record for any employees and does not take on any liability. ASOs take on specific tasks for their client companies, including every feature listed for the PEO model. General differences include:
The client generally outsources one or more services, oftentimes to multiple vendors;
Savings result from using strategic providers;
The client retains employees under its own Federal Employer Identification Number (EIN) for the purposes of Payroll taxes, Benefits and Reporting;
The client may negotiate its own insurance packages; and
The client uses its own policy and rates for Workers’ Compensation coverage, including the required down payment and liability for audits.
In a nutshell, HR Outsourcing companies provide the professional foundation so that companies can concentrate on their core product.
PEOs and ASOs may be the answer for your business.
Worklio is a software company that works hand in hand with PEOs and ASOs, providing the modern technology that leads to success.
Starting a business is exciting and inspiring. The momentum is powerful. The possibilities are endless. Perhaps it is even fulfilling a dream and validating years of preparation and struggle.
Then comes the paperwork.
Payroll. Benefits. Retirement. Form I-9. Workers’ Compensation. Garnishments. Time Off. An employee manual. On and on.
And, suddenly, your workday is consumed with day-to-day hassles instead of pursing the core of your business plan.
This pattern happens everywhere — law firms, restaurants, dog grooming studios and it is a particular problem in the cut-throat technology sector. According to Forbes.com, nine of out of 10 start up companies fail. Source.
Why? Because they took their eye of the prize. Many were distracted by the daily grind of running the business. Had they focused more on their product, would they have been successful? Hard to say. But something to consider.
Fortune magazine published an abbreviated list of answers given by 101 post-mortem explanations for why a startup technology company failed, although the reasons are applicable to many other sectors. Multiple answers were possible, just as multiple problems were probable.
Some of the reasons make sense — if nobody wants the product or the product is poor then you probably should fail — but some of the problems likely could have been resolved with a little bit of outside help.
Outsourcing is a popular and effective way to remove the daily duties from your schedule. There are hundreds of Professional Employer Organizations (PEOs) that take on all Payroll and Benefits and HR responsibilities, and hundreds of Administrative Services Organizations (ASOs) that handle parts of a company’s day-to-day workload — all to provide the bridge to help client companies and their worksite employees concentrate on their core business and provide for their end customers.
With small and mid-sized businesses, one person is the founder, CEO, COO and CFO all rolled into one. That means that they have a lot of work, responsibility and stress.
Invariably, the most complicated part of that multifaceted leadership role is dealing with Human Resources. HR is often overlooked in growing companies, but there are a lot of potential problems that can lead to direct costs (e.g., hiring replacements, litigation) and indirect costs (e.g., loss of efficiency, poisoned company culture) that can jeopardize the entire enterprise.
Everything in HR — recruiting, interviewing, hiring, paperwork, onboarding, basic policies, performance, company culture, compliance and more — starts and ends with people and how you deal with them.
1 Recruiting Talent
The cost of advertising, interviewing, screening and hiring can be excessive, and the process can take countless hours over several months. Don’t rush through the process. Make detailed and specific job descriptions to focus the search.
2 Interviewing Potential Candidates
It is essential that you are correct about your hiring decision. Replacing a salaried employee costs, on average, between six and nine months of salary. Establish a consistent interview process. Make sure to decide on some answers to these questions:
How much time will you spend with each candidate?
Who else will sit in on the interview?
What questions will you ask?
What skills does the position require?
3 Hiring the Best
Big companies may have a good reputation. Small companies can provide nice perks to lure top talent.
Work from home.
Flexible hours to take the kids to swimming lessons.
Relaxed dress code.
The chance to be there at the start of the company.
Exerting influence and making a difference are often more important than money.
4 Completing Official Paperwork
The classic three-file HR system — official paperwork, personal paperwork and medical documents — is time-consuming and inefficient. Company management software allows employees to fill in their own information and update it whenever necessary. A physical signature is old school; an electronic signature is more efficient, faster and just as binding.
5 Get the New Hires Up To Speed
Don’t skimp on training because investing in employees is an investment in the company. Plan ahead of time to be most efficient: Who will do the initial training? Who will double-check the early work? After the initial training, it is definitely important to keep people up on the latest know-how and trends.
6 Company Policies
Small companies may not have an official employee handbook, but they should at least establish policies for work hours, dress code, social media use and other aspects of daily life in the company. More important regulations must also be in place, including risk management, Workers’ Compensation, dispute resolution and safety inspections.
7 Assess the Performance of the Employee
Regular feedback, hopefully, will fix any problems. But sometimes you just have to give up on an employee. When do you pull the plug? Does it take several people to agree with the dismissal? Or three unsatisfactory performance reviews? Whatever the guidelines, thorough documentation is protection against a lawsuit.
8 Dealing with Company Culture
When people are not happy, their productivity decreases, co-workers feel it and customers sense it. Do whatever you can to keep everyone happy: a random Friday off; a pizza party; a small bonus; happy hour drinks. Turnover is a killer. Any change in personnel affects the bottom line and the overall mood of the company.
The government and different organizational bodies are constantly considering and reconsidering laws and regulations. Posting federal and state notices is required. Make a list of all of the regulations that you need to follow, and make sure to stay on top of them.
10 General Know-How and Experience
There are a lot of more complicated questions that always come up for growing businesses. Do extensive research and find an expert to help. Is it better to hire a contractor instead of a normal full-time employee? Which retirement system is the best? Do you need a dental plan? How do you create a vesting program? Can you reduce your tax burden? What software is best for company management?
These are all important aspects of making a company into a success. Help is available. Worklio is a company that works hand in hand with Professional Employer Organizations to take care of all the day-to-day tasks that can make or break a business.