Article

Can A Business Afford Not To Offer Benefits?

May 2007, Auto Dealer Today - WebXclusive

by Carlos Rodriguez - Also by this author

Every week a new survey is published that confirms what owners of small to mid-size businesses already know: benefits are getting more expensive, insurance carriers are becoming more selective and employees are demanding more options. Caught in the middle are small business owners who must pay for health insurance and other benefits for their employees.
Small and mid-size businesses often find it difficult to compete with larger companies and are usually at a disadvantage when it comes to providing competitive benefit packages.  Health insurance has become the number one benefit for attracting employees. Few, if any, small and mid-size companies can afford to provide or administer the same kinds of benefit packages that large organizations do. In addition, the benefit programs offered by small to mid-size businesses are usually limited in their coverage and program options.  

All this may seem discouraging. However, an increasing number of small business owners have found a solution that enables them to offer competitive employee benefit programs while freeing them from the time-consuming burden of administration, compliance and government reporting – Professional Employer Organizations (PEOs).     

The expertise required to manage the human resources of a small business quickly outpaces the experience and training of most professionals. When an owner first starts a business, “human resources” usually means little more than calculating weekly payroll and preparing paychecks for employees. 

As a business grows, the process becomes more complex and involves maintaining payroll records, calculating withholding, producing W-2 forms and other tax forms. Add the requirements to comply with a myriad of employment laws and regulations to this list, and a small business owner can easily become consumed by administrative tasks. In fact, the Small Business Administration estimates that business owners spend up to 25 percent of their time handling employee-related paperwork. 

These are just some of the reasons more small and mid-size businesses are partnering with PEOs to provide professional, effective human resources and benefit programs for their employees. PEOs are full-service human resources organizations that manage the daily administrative headaches business owners encounter. Business owners and PEOs establish a co-employment relationship and become partners in the management of employees, sharing certain employer responsibilities and liabilities. While the small business retains the day-to-day management of its employees, the PEO assumes many of the human resources responsibilities. A PEO is, in effect, an off-site human-resources department that helps to ensure employees have a safe workplace that is operated in compliance with employment laws and regulations. 

When a company forms a relationship with a PEO, it receives access to a highly experienced human resources staff, including human resources managers, risk managers, compliance managers and benefits specialists. By providing these services, a PEO enables the owner to concentrate on growing his or her business.

While paperwork reduction and time savings are important to running a successful office, a PEO can provide even more benefits. To help attract and retain employees, PEOs offer clients distinct competitive advantages. By partnering with a PEO, small and mid-sized businesses can benefit from the PEO’s expertise in managing and negotiating with insurance carriers. Through a PEO, small companies can offer flexible benefit options that allow employees to have access to retirement savings plans, health-benefit programs and employee-assistance programs at an affordable cost.

There are many benefits to hiring a PEO. The most difficult decision is often deciding which PEO to choose. A business owner should conduct a complete background check before entering into any agreement with a PEO and look for answers to the following questions:

  • How long has the PEO been in business and does it provide references?
  • Does the PEO have a stable financial history? 
  • Are the benefit plans offered properly funded and backed by a reputable insurance company?
  • Does the PEO have a license if it operates in a state with licensing laws?
  • Is the PEO accredited by the Employer Service Assurance Corporation? (This is an independent body that is nationally recognized for its establishment of professional responsibility standards in the PEO industry.) 

Achieving business success requires a relentless focus on the basics: core products and services, customers, and the bottom line. Using a PEO to handle human resources can help business owners focus on what matters. 

Vol 4, Issue 2

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