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Seven years ago, while wrestling with the rising costs of employee benefits, I stumbled across an unusual and somewhat daunting solution: Fire everyone.
Downsizing and outsourcing are buzzwords for meeting the challenge today in personnel management. How do you run lean but mean on a budget that's been squeezed bone-dry? For the Central Ohio Retail Grocers Association (CORGA), Columbus, the first step was eliminating the three-person staff (two full time, one part time).
Firing everyone--including the chief executive--may sound like a drastic and foolhardy way to cut costs, but it's actually an alternative staffing strategy that's catching on in the business world. The concept has also found favor among association executives who seek to save time, reduce paperwork, and lower costs by rehiring their staffs through a professional employer organization (PEO) that provides a service known as employee leasing.
Typically, a PEO helps manage a wide array of increasingly complex employee-related issues, such as medical benefits, workers' compensation claims, payroll, payroll tax compliance, unemployment insurance claims, and so forth.
Sometimes confused with PEO services is a practice in which an employer retains a former employee's services as an independent contractor. In the process, the employee usually loses benefits once provided by the employer. The Internal Revenue Service has been paying close attention to this practice for employment tax purposes.
In a client-PEO arrangement, on the other hand, the client continues to pay employment taxes, but they are rolled into one lump sum (invoiced each pay period) that includes payroll, benefits, and the PEO's professional fees. A PEO's value lies in its ability to provide integrated business services and manage critical human resource responsibilities more efficiently, and cost-effectively, largely because of its volume-buying capabilities.
The better PEOs are much more than dressed-up payroll services. They assume the role of your off-site human resource professional, performing the sometimes perplexing, often complicated and time-consuming duties of that office. Team America, the PEO that has served CORGA for the past seven years, has handled recruiting, rewritten job descriptions, and once provided guidance in a sensitive personnel dispute concerning scheduling.
When I began my investigation of PEOs back in 1988, I saw two primary benefits. Transferring human resource management responsibilities to an outside company would free up my time...