In this article, PEO Services 103 -HR Services, we will review perhaps the most comprehensive service offered by Professional Employer Organizations; Human Resources. If you have not read PEO Services 101, or PEO Services 201, feel free to check it out as they contain information about other core PEO services; payroll & tax administration, employee benefits, and workers comp insurance.
Like many other articles we’ve produced regarding Professional Employer Organizations, this will be a broad brushstroke of the offering, rather than granular detail. We just want to familiarize you with what you can expect if you decide to investigate the idea of a PEO service further. Every PEO is arranged differently, and therefore how they deliver HR services varies.
For the purposes of this article, we split Human Resources into two separate categories; the first is HR Best Practices, the second is HR Compliance.
HR Best Practices refers to services that help businesses get the most out of your employees, specifically, how to attract, develop, and retain your people. HR Compliance refers to complying with employment regulations set forth by federal and state government.
Some employers, and this is highly related to what industry they are in, don’t utilize HR Best Practices in their business, and for the most part this is a matter of choice. For example, if you don’t want to perform employee performance evaluations, the Department of Labor is not going to come after you.
Conversely, HR Compliance is not a choice, it’s more aligned with following the law than anything else. For example if you know about and therefore don’t comply with FMLA or ADA, you had better have your labor attorney on speed-dial.
HR Best Practices
Finding the right people:
Many Professional Employer Organizations provide services that help with employee recruitment. They help draft professional job descriptions, offer salary tools to find the right level of compensation, provide discounts for job postings online, some PEOs will even help screen the inquiries you receive from your ads.
PEOs also offer interview training for management, and almost all PEOs will help administer background & reference checks as well as drug screens. When it is time to hire, PEOs will deliver an employee enrollment kit that rivals that of a Fortune-500 company. This is an excellent value for employees spread across multiple states.
Getting the most of your people:
Professional Employer Organizations help their clients understand what it takes to get the most out of their people. They offer services such as employee performance reviews that can be integrated into policies for employee milestones, promotions, and bonuses. PEOs also offer various training seminars for managers to learn about employee motivation, communicating with employees, supervising coaching, etc.
Retaining your people:
Many studies, find that the strongest link to overall employee satisfaction with their jobs is employee satisfaction with their benefit plan. So although the HR specific services PEOs provide help keep your employees satisfied, there is no doubt that the benefit packages offered by PEOs are the strongest facet in retaining employees.
If you are in an industry with high competition for quality employees, and some of those competitors happen to be huge corporations, a PEO is a great way to even the playing field.
HR Compliance With PEO Services
When we perform help our clients with PEO Reviews, this is the area of HR service that most PEO clients utilize the most, and for very good reason. PEOs will help keep their clients in compliance with employment regulations such as ADA, EEOC, FMLA, HIPAA, and ERISA, to name a few.
To kick off a relationship many PEOs offer a highly valuable service known as an HR audit, which is a proactive measure to identify and resolve HR compliance issues before problems arise. They will also review/create employee handbooks, and most PEOs provide a variety of trainings for employees to learn about discrimination and harassment in the workplace.
Employee Relations is an integral part of HR compliance, many PEO clients attest that if they are having an issue with an employee, they first consult their PEO before taking action. This saves clients thousands on fees usually earmarked for employment lawyers and can prevent much worse, an employment litigation lawsuit, which are on the rise.
What happens if we do get sued by an employee? Most PEOs offer EPLI Insurance, which stands for Employment Practices Liability Insurance, with coverage ranging anywhere between $1M – $2M. This policy will cover any legal costs and/or settlements that arise from employee litigation.
EPLI insurance is expensive for businesses shopping on the open market however for PEO clients it is inexpensive, as the premium is usually rolled into their fees. Beware, there is usually a $10k-$25k deductible should this insurance have to kick in!
Co-employment has the much more to do with HR Compliance than HR Best Practices. Remember, the Professional Employer Organization is the employer of record, meaning their clients’ employees are technically employees of the PEO. This means that HR Compliance is not just part of the HR services that PEOs offer, it is in their best interest to maintain compliance because any issue that arises will mostly fall on their shoulders.
The downside of co-employment in this case is that because PEOs usually have thousands of employees, they must comply with various regulations that only apply to large companies, such as FMLA, which only applies to companies with 50 or more employees. Because the PEO must remain in compliance with FMLA, their work-site employees (all of their clients’ employees) have rights to the provisions set forth in FMLA, and this means the worksite employer (your business) must accommodate this.
This fact is often left out of the sales process, and for some companies it is a serious concern. However many companies find that by following regulations aimed at protecting employees, it creates an atmosphere where employees feel more comfortable with their workplace. The security large corporations offer to employees is now found at your small business, if employee retention is a company goal, you’re in a good place.