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.
Worklio Harnesses Modern Technology to Improve Your Business
It used to be that humans carried everything. Then someone invented the wheel. For centuries, people ate berries. Then came fire. Words were chiseled into stone tables, then written on papyrus and finally printed by Gutenberg.
So it goes with the contemporary world: Technology is moving things so quickly that it is sometimes hard to realize how our lives have been changed since only a few years ago.
Worklio represents a new era for the PEO and ASO industry because Worklio is introducing the technology that will forever disrupt the status quo — in a good way.
Worklio is a modern platform that will move your company into the new age of technology. No more paperwork. No need for physical signatures. Everything is connected.
There are three ways that Worklio uses the latest in technology.
All three are connected. All three make your company more efficient.
Not long ago, businesses needed to install software on individual computers and keep racks of servers for data storage. Software-as-a-Service is the new way. You can keep everything on the premises, but now software is provided through the internet, data is stored in the cloud, and everything is secure.
Worklio is a SaaS company that maintains a comprehensive company-management platform for client companies to use. Worklio keeps up with technology trends. And Worklio keeps all of the data available and safe.
You simply go to an internet browser and log on. The platform is accessible from anywhere with an internet connection, including through Android, iOS, and Microsoft mobile apps. Documents can even be signed from the beach.
The normal functions of a business are faster and more efficient because of the SaaS system. The entire company shares resources. Paperwork is digitized. Repetitive tasks are consolidated. General emails are automated. Attendance and time off data is connected, so the regular payroll run is a turn-key operation. The initial set up and migration of company data is efficient and smooth, with safeguards for missing information. The learning curve is gradual because of the logical interface. The platform is scalable so that it grows as your company grows. Management has tools to keep tabs on employee tasks and activities.
SaaS systems exist because Cloud Computing enables solid and secure internet connections.
Cloud Computing is what eliminates the need to buy software and servers. It enables you to access Worklio from around the globe, via smart phones, tablets, laptops, and desktop computers — an internet connection provides access to anything on the system from any location and any time zone.
You are no longer bound to the office or traditional work hours.
Worklio exists in a private cloud so that all of your data is kept private and there are connections to the public cloud for updates on federal regulations, tax documents and other official paperwork.
In addition to freedom, Cloud Computing enables companies to store a huge amount of data. As you grow and data accumulates, you don’t need to add servers — the cloud absorbs it all.
SaaS systems and Cloud Computing are only possible because of security.
Worklio has a comprehensive security system similar to what banks employ. After all, money is being transferred from the company to vendors and employees, so the level of security must be the same. If you trust your debit card, then you can trust Worklio.
The Worklio security system is validated with ISO/IEC 27001:2013 certification. The International Organization for Standardization (ISO) maintains internationally respected standards for business and ISO 27001 provides requirements for an information security management system (ISMS) in order to enable organizations to manage the security of assets, such as financial information, intellectual property, employee details and information from third parties.
Worklio respects the security and quality of all of the data that customers provide and uses multi-layered encryption of the highest standard available. There is constant monitoring, both in-house and through third-party cybersecurity firms, which meets and exceeds the industry standard.
There is a stratified system of access rights to restrict the number of people who have access to client information. All changes are logged so that all data alterations can be recreated. Data is backed up regularly. It is kept in numerous physical locations, with N+1 or greater redundancy to establish resiliency for all components.
Worklio™ is a new source of power and capability for the PEO industry. It is the dawn of a new era.
The Worklio™ system connects the PEO, its client companies, and their worksite employees in a comprehensive Human Capital Management (HCM) solution. Everything is compatible. All of the data is consistent. And everything exists in an enclosed, secure system.
The Software-as-a-Service platform is custom-built on the latest Microsoft® .Net and MS SQL 2016 technology platform, designed and optimized for the Microsoft® Azure Cloud, and available 24 x 7 across all devices. The Worklio™ solution is based on a solid foundation built exclusively for PEOs: Payroll Administration, Workers’ Compensation, Customized Reporting, Analytics and Intelligence, Benefit Management Tools, Human Resources, Electronic Onboarding, Billing, Job Costing, General Ledger and Accounting Integration, and Mobile Applications. The design is intuitive and user-friendly, making information easy to find and procedures simple to understand. Complicated functions are simplified with step-by-step instructions. Customization allows for streamlining daily tasks. Customer Support is always available and professional.
The Worklio™ system saves time through efficiency, saves money through consolidation and integration, and makes business more successful through collaboration.
Worklio™ — a new beginning for the PEO industry.
HR, Payroll, and Benefits
The Modern Teamwork Platform
* * *
Worklio will introduce its modern and powerful HCM platform to the PEO market at the NAPEO 2017 Annual Conference & Marketplace this week at the JW Marriott Orlando Grande Lakes in Orlando, Fla.
Old software and inconsistent support will soon be memories of the past. Prepare for a new way. Prepare for efficiency. Prepare for savings.
Prepare for a disruption:
A new era has begun for the PEO market.
Worklio will soon introduce its modern and powerful software at the NAPEO 2017 Annual Conference & Marketplace on Sept. 6 to 8 at the JW Marriott Orlando Grande Lakes in Orlando, Fla.
The Worklio booth is #706/708.
Life will never be the same and business will only be better.
The Worklio system connects the PEO, its client companies, and their worksite employees in a comprehensive Human Capital Management (HCM) solution. Everything is compatible. All of the data is consistent. And everything exists in an enclosed, secure system.
The Software-as-a-Service platform is custom-built on the latest Microsoft .Net and MS SQL 2016 technology platform, designed and optimized for the Microsoft Azure Cloud, and available 24 x 7 across all devices. The Worklio solution is based on a solid foundation of: Payroll Administration, Workers’ Compensation, a Customized Report Writer, Benefit Management Tools, Time and Attendance, Electronic Onboarding, Billing, Accounting Integration, and Mobile Apps. The design is intuitive and user-friendly, making information easy to find and procedures simple to understand. Complicated functions are simplified with step-by-step instructions. Customization allows for streamlining daily tasks. Customer Support is always professional and available.
The Worklio system saves time through efficiency, saves money through consolidation and integration, and makes business more successful through collaboration.