With lawsuits on the rise, employers must do all they can to stay ahead of the employment curve and to make compliance with 2012 labor laws a priority in the new year. The challenge for small employers, however, is understanding and complying with the multitude of regulations that affect their business. Particularly in certain states, such as California, employment laws are overwhelming and can be significantly different than their federal counterparts.

Outsourcing Human Resources with a PEO

There is a solution! In a Professional Employer Organization (PEO) relationship, the business owner outsources human resources administration to the PEO and relies heavily upon the PEO firm to to stay abreast of changing laws and regulations. The PEO/HRO firm provides clear direction and support, assisting them in all areas of HR compliance. Typically, clients are assigned a Human Resources expert to personally help them understand the law, and how the law impacts their business and employment practices. HR consultants provide support in all of the following areas:

• Resolving employee complaints
• Fielding general inquiries
• Performing terminations
• Assisting in exit interviews
• Assisting with investigations
• Auditing employee files and records
• Conducting salary surveys
• Speaking confidentially with employees regarding complaints or grievances.

Studies show that businesses that offer an outlet for employees to speak to professionals not only experience a reduction in lawsuits, but also lower health insurance costs, turnover, and workplace injuries.

The PEO also assists businesses comply with HR forms, documents, and employee management. They review the client’s current Employee Handbook and Policy Manuals, and update it to enhance compliance with all mandatory state and federal guidelines. By taking a hands-on, proactive approach, clients enjoy increased protection against unnecessary and expensive employment litigation.

EPL Insurance

Finally, most PEOs offer Employment Practices Liability Insurance (EPLI). EPLI is a comprehensive insurance that provides protection to employers against a wide range of employment practices and is designed to cover certain claims and lawsuits brought by employees alleging wrongful termination, discrimination, unlawful harassment, and other related torts, including but not limited to:
• Discrimination • Wrongful employment decision or act • Comprehensive omnibus wording • Wrongful termination or demotion • Sexual and non-sexual harassment • Wrongful demotion • Assault and battery.

While companies have long recognized the value of General Liability or Errors and Omissions insurance, many now understand the importance of EPLI.

In short, a PEO relationship can help employers in all aspects of their employment compliance, significantly reducing the chance of being the victim of an employee lawsuit. Perhaps investigating how a PEO can help protect your business should also be a priority in 2012.

One solution to effectively manage employment costs is to outsource human resources administration to a Professional Employer Organization. A Professional Employer Organization, or PEO,  helps small employers reduce costs in all of these areas utilizing the following two methodologies:

• Accessing the PEO firm’s Economies-of-Scale
• Consolidating vendors and streamlining operations

Economies of Scale.

Economies-of-scale is the method through which a PEO pools resources, thereby procuring discounted rates and passing those rates onto their clients. It is the primary method through which a PEO can reduce an employers’ HR-related costs. Small employers, those with fewer than 500 employees, have limited buying-power for purchasing workers’ compensation, are often limited in the variety and scope of health insurance plans they can offer their employees, and overall have less flexibility and expertise when it comes to administering these plans. The PEO pools hundreds, sometimes thousands of businesses, and is able to aggregate workers’ compensation insurance, health benefit plans, and retirement plans. The PEO establishes close working relationships with large regional insurance companies and is in the position to offer more robust plans, with lower premiums.

The PEO is also able to provide insurance carriers greater stability to their insurance plans.  The pooled employees come from a broad range of industries and geographic areas which serve to stabilize and diversify the risk and premiums over the long-term. This provides the PEO greater negotiating power at renewal, enabling them to keep renewal rates below market averages.

Beyond rates and vendor relationships, PEOs can successfully support health and wellness programs that can help maintain low insurance premiums into the future. Most PEOs offer Work/Life balance programs, health and wellness incentives, or discounts to health clubs and gyms. A healthy lifestyle in and out of the workplace can make significant, positive impacts on the utilization and expense of future health insurance premiums.

Vendor Consolidation and Streamlining Operations.

Another method through which PEOs help employers reduce human resources overhead is by helping them streamline their internal administrative operations. When businesses join a PEO, they in effect combine many vendors under one roof, thereby eliminating the need to maintain relationships with multiple vendors.

A full-service PEO can provide all of the following services, often at a reduced cost:

• Assistance with labor law and employment compliance
• Creating and reviewing employee handbooks & policies
• Payroll processing and tax services
• Risk management and safety consulting
• Workers’ Compensation insurance
• Health insurance plans & administration
• 401 (k) and Cafeteria 125 Plans
• Management Training
• Recruiting services

These combined services streamline the client’s internal operations and enable their existing staff to more efficiently focus on core business functions. A single individual within the client’s organization is usually all that is needed to liaise with the PEO which reduces the need for multiple employees to maintain multiple relationships with different vendors. Some companies experience such a drastic reduction in administrative overhead that they are able to reduce headcount, or reallocate resources to more valuable, revenue-generating tasks.

In our next post, we will analyze HR strategy #2: Reducing Employment Risks

Over the past several months, dozens of new employment laws and legislative bills were signed into law that went into effect on January 1, 2012. These changes will directly impact the way employers conduct business, including areas such as payroll tax limits, new employment guidelines, and changing insurance markets.

Ari Rosenstein, CPEhr’s Director of Marketing, explains:

“Not only are employers throughout the country burdened by the weak economy, but they are confused and troubled by the seemingly unending flow of employment regulations. Many small employers recognize it is virtually impossible to stay up to date on a regular basis, especially at the turn of a new year when many new laws go into effect. It is for this reason we publish our annual HR Updates report.”

The report draws from CPEhr’s human resources experience on a wide range of employment, payroll, tax and insurance areas. Topics covered in the report include:

• New employment laws effective in 2012
• The IRS Voluntary Worker Reclassification Program
• Understanding the importance of correct employee/1099 classifications
• New 2012 Tax and 401(k) limits
• The value of employee training and development
• Rising Workers’ Compensation costs and how to mitigate them
• Creative approaches to reduce increasing health care premiums

“Our hope is that employers will read the report and, at the least, become aware of the important changes coming in 2012. At best, we hope they will take the time to investigate the new laws and adjust their business activities accordingly,” said Rosenstein.

#5. The Five Steps of Progressive Discipline

#4. 9 Lawsuits that are Changing the 2011 Landscape

#3. Important Changes to I9 Form Documentation

#2. California Labor Law Updates – 2011

#1. Maintaining Employee Personnel Files

In contrast to many other company videos out there, we won’t be throwing any industry-babble, marketing-laden messages at you. Instead, we will take you on a personal, inside look at the real-life people behind CPEhr that have made us a Human Resources Outsourcing and PEO industry leader for the past 30-years. Take a look!

The program was open to all public and privately held companies working in Los Angeles County.  The assessment involved a confidential Employee Engagement and Satisfaction Survey which was used to evaluate the workplace experience and company culture.

Harold Walt, CPEhr’s CEO, states, “I genuinely believe in our people and we will do everything that we can to ensure success by promoting an environment that celebrates diversity, collaboration and achievement.  We know that by empowering the right people with talent, dedication and extraordinary can-do attitudes, we will always come out on top.”

CPEhr offers a wide range of benefits and programs to its employees in an effort to promote a positive and productive work and life balance.  Many of the benefit offerings are also available to the organizations to which CPEhr provides Human Resources services.  Corporate employees enjoy activities such as the CPEhr Olympics, a softball team, annual fitness challenges, weekly yoga classes, and monthly employee celebrations for birthdays, anniversaries, personal milestones and achievements.

“We feel very privileged to be recognized alongside such wonderful and innovative Los Angeles employers,” says Faith Branvold, CPE hr’s President.  “I am motivated and inspired each and every day by the team of professionals that I have the opportunity to work with in providing outstanding value to the cherished clients we serve.”

The survey, conducted by HfS Research and the London School of Economics, finds that 31% of business already outsource human resources and are looking to increase outsourced services over the next year. An additional 15% do not currently outsource, but are looking to begin outsourcing various HR functions in the coming twelve months.

What is the driver for these businesses to outsource human resources?

It is no secret that in lean economic times, business owners are pressed to identify expenses within an organization that can be reduced or minimized. Employment overhead (payroll, taxes, workers’ compensation insurance, employee benefits, governmental compliance, and other employee-related cost centers) typically comprise the single highest area of expense within a company. More than rent, or facilities operations, or equipment, or compliance, human resources administration and expenses weigh heaviest on the business’s bottom line.

By engaging a human resources outsourcing firm, the business owner is able to reduce employment costs in three primary ways.

Streamlined HR Systems

HRO firms offer streamlined human resource systems to their clients, significantly minimizing management’s time in overseeing daily administrative tasks. Non-productive “paper pushing” can be outsourced to the HR firm, enabling key staff to focus on their core competencies. Processes such as payroll processing, tax filing and compliance, Unemployment Claims administration, workers’ compensation management, and employee benefits enrollment and management can all easily and efficiently be outsourced. The HRO firm rolls the client’s administrative processes into their existing systems, offering seamless management at a fraction of the cost.

Cost effective insurance products.

Small businesses are at a significant disadvantage when it comes to purchasing insurance products for their employees. Both workers’ compensation insurance and employee benefits have become a significant financial burden on employers. While a small employer is limited in the range of benefit plans and insurance offerings they can provide, HR Outsourcing firms forge relationships with large regional and national insurers. Through these relationships, and the resulting economies-of-scale, HROs offer their clients richer, more cost-effective insurance plans.

Reducing employment risks

Government compliance and regulations continue to grow in complexity and scale. Month after month, new case law is created and many of these decisions directly impact employers on the ground. From wage and hour issues, to discrimination restrictions, to protected classes of employees and new disability guidelines, employers often walk through a minefield of risk. Without dedicated human resources personnel or legal counsel, it is likely a business will be faced with some form of an employment lawsuit in the coming years. With close to 100,000 employment claims filed in 2010 (the highest on record!), employers recognize the risk and are turning to Human Resource Outsourcing firms to assist them in managing these risks. HR firms employ teams of experts in a wide range of disciplines and are able to provide accurate and timely advice to assist their clients avoid expensive employment lawsuits.

Human Resources Outsourcing may not be the solution for every employment need. However, for most employers with less than 200 employees looking to reduce employment expenses and overhead, outsourcing human resources may be exactly what their organization needs.

The obstacles faced by many businesses in achieving these goals are the limitation of time, resources, and manpower to effectively improve their HR infrastructure. The level of expertise and know-how required to impact the HR systems is usually beyond their means. More often than not, these critical areas are left by the wayside as other tasks dominate management’s time and energy.

The HR Outsourcing Solution

A solution that has been growing in popularity over the past decade has been to bypass the conflict completely, by outsourcing the complex, time consuming, or unproductive tasks relating to employee administration. The Human Resources Outsourcing industry has continued to grow in recent years, despite the global recession.

Human Resources Outsourcing can take on many appearances, from complete end-to-end processes, to specific, discreet functions. But in the end, they all share the same principle: by entrusting non-core, non-revenue generating tasks to an outside expert or firm, the business can comfortably focus on other critical areas, assured their human resources systems will be managed professionally and efficiently.

**Just Released** – 7 Client Success Stories

Over the past 3 decades, CPEhr has successfully helped small employers throughout the state of California, and across the nation, manage their employee administration more efficiently, and cost effectively. We encourage you to read seven real-life stories of businesses that were ready to think out-of-the-box and utilize HR Outsourcing in their company.

Download your free copy of:

“HR Outsoucing: 7 Business Success Stories“

Motivated Employees

Despite the common perception, increases in salaries or financial bonuses are NOT the number one motivational factor for employees. Study after study proves that employee development, training and recognition programs are the primary motivators in the workforce. Most employees understand their employers may have gone through a difficult financial time and will allow them a “pass” if they skip this year’s bonus, but not if they feel under-appreciated. Recognize and appreciate your staff, and they will continue to give you their all, despite the tough economic times.

Employment Challenges and the HRO Solution

Yet, despite the noblest intentions, most small employers find their time and resources too limited to research, create, and implement effective programs. Their management team is already tasked to just “get the job done” and motivational programs are often view as extraneous or expendable. This is where an HRO firm can help! Human Resources Outsourcing firms employ a team of HR experts in a wide range of disciplines, from employment compliance and HR policies, to employee benefits administration and safety consulting. Most importantly, HRO firms work with a wide range of businesses and are able to collect, review and implement the most effective motivational programs that have been proven to work. More importantly, these programs can be implemented quickly and at a substantially lower cost than if they employer attempted to manage it themselves.

Below are four fundamental elements of an employee recognition and motivational program: with which an HRO firm can assist:

1. Management Training – Some trainings are required by law, such as Unlawful Harassment Training. However, many courses empower supervisors to reach higher levels of confidence and commitment to their employer. With advanced management courses in their pocket, they can more readily motivate, train, and lead their staff.

2. Employee Development – An educated employee is a dedicated employee. Numerous trainings motivate and empower staff to reach their full potential. Time management, Positive Motivation, and Managing through Difficult Times are just a few examples of training that motivate employees to excel.

3. Incentive Programs – In a tight economy, most employers don’t have the financial resources to provide large bonuses or cash incentives. However, with a little creativity, employers can find alternatives to incentivize and motivate their staff. Birthday parties, small gestures of appreciation, public recognition, and minor gifts go a long way in keeping your staff supportive of your efforts in tough economic times.

4. Employee Benefit Packages – A key motivator for employees to work hard and remain dedicated are good benefit programs. While insurance can be costly, many low-cost alternatives exist, including voluntary benefit and retirement plans.

If you have been struggling with low employee moral and an under-motivated workforce, perhaps it is time to consider turning to a Human Resources Outsourcing firm for help. The HRO will review your needs, create a comprehensive motivational program, and see that it is administered effectively. Look forward to an active and motivated workforce in no time!

Let’s take a look at one feature of HR – payroll. Of all employee-related processes, there is no doubt that the laws surrounding payroll processing and payroll tax submission are some of the most difficult to master, even for the tax accounting specialist. Consider the following statistics:

• The tax code (the basic law written by Congress) is 2,840 pages.
• The IRS regulations add an additional 46,000 pages.
• The combined number of forms for businesses and individuals is now over 480

Internal Revenue Code (IRC) 6656 reviews penalties for late payments of payroll deposits. A deposit only ONE day late will result in a penalty equal to 2% of the delinquent amounts. It jumps to 5% for payments made 6 days late, and doubles to 10% for payments made 16 or more days late. A recent report states that over 1 MILLION tax penalty statements are sent out quarterly.

Common Payroll Tax Mistakes

Simple attention to the details can often reduce the risk of missing a tax payment, or making an incorrect deposit.  Below are three common mistakes that Human Resource Outsourcing services can help prevent:

1. Submitting Late Deposits

Once you have withheld taxes from the employee, it is important to know when and how these taxes, along with the employer contributions, must be paid.  There are many regulations at the Federal and State levels that dictate when and how payments are to be remitted.  If payments are late, penalties and interest can be assessed. Contact your accountant, bookkeeper or payroll vendor to find out your payment obligations.

2. Late or Incorrect Payroll Tax Return Filings

There are numerous Federal and State returns that must be filed for payroll taxes, including withholding, unemployment, local and school district taxes.  All have different reporting requirements (paper, e-file, mag media, etc.) and due dates.  If proper procedures are not followed, penalties and interest can be assessed.

3. State Unemployment Insurance Rates not updated

Most States update employer SUI rates annually.  It is important to update the payroll software with the new rates, so taxes are properly paid.  Underpayment of taxes can result in penalties and interest. Once again, contact your CPA for this information.

Avoid the Obligations Altogether – Outsource it

Most small employers recognize they are unable to stay abreast of all their payroll tax obligations. Many already outsource payroll to an outside payroll vendor. However, many employers are now outsourcing this HR function to a Professional Employer Organization (PEO). A PEO “co-employs” the client’s worksite employees and assumes the payroll and tax obligations of the client. The payroll is reported under the PEO’s Federal Tax ID Number, which in turn provides a layer of compliance to the business. IRS audits, payments and inquiries are directed to the PEO, which has teams of payroll and tax specialists on staff. Thousands of employers have found that a PEO is precisely the cure to the payroll tax headaches they have been looking for.

Discover today how outsourcing human resources can help your business keep its payroll running smoothly!