Congratulations!!! If you answered # 4 None, you had the correct answer. Did you get it right? What did you think of the answer? In part two, we compared the employee leasing proposals between companies A and B. Today, we are going to compare the rates of PEO C with our other two employee leasing companies.

Level the Playing Field Before Starting a PEO Rate Comparison 

In part 2, we learned that PEO’s A and B actually have the same rates by class. The format used to show the billing charges were different, but the rates by employee class add up to the same cost for professional employer services.

Our example on the right shows the employee leasing burden for employees by class. For office workers, the total rate for PEO A is 16.70% vs 116.70% for PEO B. The same is true for sales 17.50% vs 117.50%, and for delivery 26.45% vs 126.45%. The basic difference is in the way it is presented to a prospective business owner.

Since we now know that PEO A and B have the same cost, all we need to do now is compare  rates for employee leasing company C. Unfortunately, they are presenting our client with a blended proposal that shows a combined staff leasing burden for the entire company.  In this case, PEO C is charging 119.05% of payroll or 19.05% added to payroll. How will we be able to figure out which PEO has the best rates?

 Blending to Compare Employee Leasing Company Rates

We know that PEO C has, not only bundled their rates by class, as PEO B has done. They have gone a step further and “blended” or combined the three workers compensation classes into one. Let’s see what happens when we do the same thing with the proposal from PEO B. When we add up the payroll for office, sales and delivery, the combined payroll adds up to one million dollars ($1,000,000).

The next step is to calculate how much of the total payroll each employee class represents. Our example above shows that office employees total $300,000 in payroll. When divided by the total million dollar payroll, you get .30 or 30% of the payroll. Using the same formula, the sales department represents 50% of the payroll, and the delivery department makes up the remaining 20%.

Now that we have calculated the percentage of the total payroll for each employee class by workers compensation, it is time to multiply each rate class by their respective percentage of payroll.

In the example to the left, we have identified the three payroll classes, the PEO billing rate, and the percentage of total payroll. We know that office workers represent 30% of the total payroll, and that the rate is 116.70%. When we multiply the PEO rate by the percentage of payroll the answer we arrive at 35.01%. Let’s do the same calculation for the Sales and Delivery departments. Sales equals 58.75% and Delivery equals 25.29%. When we add up all three deparments together, the answer we get is 119.05%. As you can see, all three PEO quotes show the same total billing rates in three different formats. How many of you came to the same conclusion?

Does this mean that the cost for all three PEO companies will be the same? Not necessarily, but that is a topic for another post. Look for our next revealing installment about the secrets of the Professional Employer and HR outsourcing industry, and the games that some employee leasing companies play.

Can’t take the suspense any more?

The answer to our quiz was # 4, none of the PEOs offered the client a lower rate, all 3 PEOs would cost exactly the same amount. How can this be? Simple, but in order for you to arrive at the correct answer, you first have to analyze all of the parts.

Looking at the Parts of a Professional Employer Organization

Some professional employers and staff leasing companies may confuse you by bundling all of their costs together, while others will lay everything out in the open. If we look a the fee schedule for PEO A, you see that they fully disclose all of the charges that a professional employer organization is responsible for. They identify each of the employee classes by workers compensation code, as well as a breakdown of all payroll and unemployment taxes. Even their administrative fee is separated from the other costs.

Unfortunately, PEO B is showing our client bundled rates by worker comp class. To make things even more confusing, PEO C is blending all 3 classes together into one rate for the entire company. How can we ever come up with an answer? It would take a Wharton MBA? Not quite, let’s take a closer look.

The example above shows how challenging comparing PEO rates can be. In this case we have to level the playing field by calculating the lowest common factor. Since each quote in our example uses a different method, it will require a 2 step process to arrive at the answer.

Reverse Engineering

The first step is to compare PEOs A and B. Since PEO B is using a totally bundled proposal by class, we have to convert PEO A into bundled rates as well. As you can see, the quote for PEO A shows us all of the components totaled at the bottom. If you look closely, and compare each workers compensation class, they are exactly the same for each class, but PEO B is using a different format.

Let’s look at the clerical rate for PEO A, it is expressed as percentage of payroll, in this case 16.70%. However, this is the billing rate that is added to the payroll. The quote for PEO B clerical is 116.70%, which is also shown as a percentage of payroll, but in their case it includes the payroll. So in the final analysis, ASSUMING both companies are charging the exact same SUTA “State Unemployment Tax” rate, (the topic for a future post), the quotes from both professional employers are the same.

Step 2 - Leveling the Playing Field

Our next post will focus in on Step 2. This is where we compare the rates from PEO C, with the proposals from our other two professional employers. The challenge next time, is  to compare PEO charges from employee leasing company C, who is using a billing method that not only bundles the charges for all of the PEO components, but then blends them together into one consolidated rate for the entire company. Do you think you’re up to the task? Want to know how we arrive at the answer? Then check back or link a feed for our latest updates to learn more insider secrets about employee leasing, HR outsourcing and professional employer organizations. Till next time.

Are you shopping for employee leasing or professional employer services? Have you ever tried to do a comparison of the rates and fees charged by one PEO versus another? Very often, this can be a challenging task requiring the services of a Wharton MBA. The reason is that employee leasing companies and PEOs use different methods of charging and billing for their services.

The Whole is Greater Than The Sum of It’s Parts

Most small business owners use the services of a PEO because they integrate several employer services into a seamless cost efficient platform. I like to say that Professional Employer Organizations make managing your employees as easy as A-B-C. They save business owners time and money, and relieve busy executives from the hassles involved with tasks of employee Administration, Benefits, and Compliance.

Human resource outsourcing simplifies the delivery of payroll administration, employee benefits, HR compliance and workers compensation coverage for a fee that is usually based on a percentage of payroll.

The Parts

When you request a proposal for employee leasing services, it is not unusual to receive employee leasing quotes from companies showing a billing rate with only a total workforce factor or “burden”, without revealing what the cost is for the each individual component.

The chart below compares billing PEO rates from 3 different Professional Employer Organizations. In this example, PEO A provides a “full disclosure” proposal identifying the individual billing components. PEO B provides it’s prospective clients with a bundled proposal which combines their administrative fee, payroll tax rates, and insurance cost into a rate by occupation. In this example, creating 3 rate classes. PEO C  provides a single rate for the entire company blending all 3 classes into one.

 Take Our PEO Rates Quiz

Here is a little quiz for all of our readers. The chart above provides the billing rates from 3 different PEOs.

Which PEO has the lowest rate?

1) PEO A

2) PEO B

3) PEO C

4) None

The answer may surprise you. Check back for our next installment where we reveal what many employee leasing companies and professional employers don’t want you to know.

Question: What does a blog written to educate small business owners about employee leasing, human resource services and PEOs have to do with the social networking website Linkedin?

Answer  : Nothing … , and everything. 

The Reach of the Linkedin Network 

Linkedin.com is the popular social networking site which claims to have of over 50 million users worldwide, and is visited daily by millions of members who network by posting comments and “connecting” with people across the globe.

Members establish a profile page which includes a short bio of your education, background, and work history. An online resume. The site allows registered users to maintain a list of contact details of people they know and trust in business. Users can invite anyone to become a connection.

Linkedin can be used in several different ways:

• To build a network of connections. Members can gain an introduction through a group or a mutual trusted contact.

• To find jobs, people or business opportunities in one’s contact network.

• Employers and Recruiters can list jobs and search for potential candidates.

• Job seekers can review hiring manager profiles and research potential employers.

• To market products and services to diverse groups.
  

Erik Vonk’s Intriguing New Venture

One morning, I came across the profile of Erik Vonk, the former CEO of Gevity HR. I noticed that Erik had started a new company called BOTH USA, LLC. He and his partners were launching an innovative new service for freelancers and solo practitioners called Back of the House. An exciting new platform for the solopreneur looking for a Fortune 500 solutions partner. It sounded very interesting, however, our focus is helping business owners with 5 to 500 employees. Why should I care about a service for independent contractors? After all, most of our clients have 50 employees and more. Why indeed?

Erik is one of the most accomplished and successful executives in the HR industry today. From  1992 - 2001, he built the North American division of Randstad Holdings, a Dutch staffing company.  Under his leadership, in 6 years, revenue grew from 0 - $1.5 billion dollars, creating a division that became larger and more profitable than it’s parent.

In 2002, Erik took over the helm of Gevity HR (formerly called Staffing Leasing), the nations largest professional employer organization at the time. He had boarded a ship that was taking on water and sinking fast. Erik quickly fashioned a capable crew who turned the ship around, and in 2006, Gevity HR earned the distinction of being named to the Business Week” List of 500 Top Growth Companies”. During his tenure at Gevity, Erik steered the company out of rocky waters into calmer seas.

He bid the company farewell in 2007, but like most restless entrepreneurs, Erik and his partners A. D. Frazier and Joey Reiman are at it again. This time, they are launching a new venture with the intriguing name of “BOTH” - Back of the House.

Nothing _ _  _ _ _ _, and Everything _ _  _ _ _ _

What are the odds of my starting a dialogue with Erik Vonk, captain of the HR industry, entrepreneur, and widely respected corporate advisor? On Sunday morning, January 3rd, 2010, I decided to send Erik an invitation to “Link up”. I had extended him New Years wishes, and asked if BOTH was similar to oDesk, another visionary platform for freelance artists, developers, and writers. To my surprise, not only had Erik accepted my invitation, but he responded back with a brief description of Back of the House, and the time saving benefits for professionals who operate their business on their own.

My reply was “It sounds like a one person PEO on steroids”. Something I “said” must have hit a cord, because before I knew it Erik was on the phone. Being a man of action, what else would you expect? Over the course of the following week, we made arrangements to meet and discuss his exciting new venture. I can’t say for certain what the future will bring, but my advice to you is this.

If your trying to find a job, seeking new opportunities, or trying to make a connection. Use Linkedin to reach out.

You have nothing to lose, …. and everything to gain.

This holiday season, a gift arrived in the mail that we will always treasure. Enclosed in a card  was a  letter of appreciation for implementing another successful PEO partnership. Our mission of matching clients with the “right” employee leasing company or professional employer service organization is relatively easy. After all, we are just consultants, we don’t actually do anything ….. we just take the credit.

The real work is done by the PEO. They are responsible for accurately processing your  payroll and direct deposits, administering your employee benefits plans, COBRA, workers compensation and risk management programs. It is their staff of HR professionals that assist with every aspect of human resource compliance and provide invaluable employment practice expertise.

Fortune Business Solutions Delivers on a Promise

Fortune Business Solutions does what great companies do. They deliver on their promises. Beginning with our client’s introduction, through employee orientation, enrollment and onboarding, they have provided excellent service, and the support I would expect from any leading PEO. In the case of FBS, they went above and beyond, proving that they really  wanted to earn our client’s business.

The Problem

Our story starts in September, when  we received a call from the HR Director for American Debt Counseling, Inc. ADC has been our client for almost 10 years, and in that time, they have grown from 10 to 60 employees. As the company grew, their challenges and needs changed, and ADC had enjoyed the services of 3 leading PEOs.  American Debt was very happy with their current PEO partner of 3 years. The HR Director loved the PEO’s friendly HR platform and routine visits by their HR consultants and support staff. Unfortunately,  their health insurance  premiums had increased beyond what the employees could afford. So once again, they reluctantly asked us to find them another professional employer organization for their growing company.

We knew that we had a challenge ahead of us. After weeks of searching, we  had narrowed the playing field down to 3 potential professional employer organizations. Fortune Business Solutions offered a terrific benefits package, a choice of four health plans from Blue Cross / Blue Shield, dental plans and disability insurance, all at affordable rates. They had the same HR platform that our client was currently using.  It looked like the perfect fit. Only one problem, their rates would renew in January, and we didn’t want our client to have the burden of another rate increase 3 months later.

The Promise

Most clients submit to a careful underwriting process when requesting a proposal for employee leasing or professional employer services. The PEO evalutes the potential risk that a prospective client may present. During this process, we have the opportunity to “sell” the potential of a long term relationship to the PEO. Our goal is to negotiate the best rates, terms and conditions for our clients, and this case was no different.

We explained our concern for the short renewal period to the principals at Fortune Business Solutions. After some  discussion, we agreed on terms that we felt was fair to both parties. As long as our client had no adverse changes or claims prior to renewal, FBS would honor the rates through to January 2011.

Great companies deliver on their promises.

Thank you Fortune Business Solutions for keeping your’s …

and making us look good.

Just when business owners and employers where saying goodbye to 2009, the New Year welcomes them with another government mandate. A new extension of COBRA benefits. Unemployed workers got a holiday gift of extended subsidies for health care benefits — but employers will have to front the money and spread the news. The move is expected to help thousands of unemployed workers to keep their health care insurance for another six months, but will cause cash-flow problems and more paperwork for business owners.

Fortunately for our clients, most are currently outsourcing their payroll and employee benefits administration to an employee leasing company or professional employer organization, and won’t have to worry about it. That responsibility falls on their PEO who must contact laid off employees, extend the offer of benefits, handle the entire enrollment process, collect premiums, and provide payroll tax administration.

Unfortunately, the vast majority of employers, still have not discovered how a PEO can help to relieve or eliminate these tedious government mandates. For those of you, read below to learn about the new COBRA rules you can look forward to.

15 Month Extension and Reinstatement of Benefits

President Obama on Dec. 19 signed a six-month extension to federal stimulus funding for health care subsidies for workers laid off since the economy went into free-fall in mid-2008. The maximum length of the subsidy was extended from nine to 15 months, and eligibility was expanded to include workers laid off through the end of February. The initial window was for those laid off from Sept. 1, 2008, through Dec. 31, 2009.

Small and Midsize Business Owners Will Be Hit The Hardest

Vinny Catalano, area vice president at Gallagher Benefit Services said “Employers will need to allow (former) employees who had rolled off the subsidy an opportunity to roll back on for a total of 15 months,” That means tracking them down and getting them signed up again if they choose, as well as telling newly laid-off workers about the extended time limit. It also could mean money out of pocket because employers get reimbursed via tax credits rather than cash for the insurance premiums they have to pay. Unemployed workers hang on to coverage longer, especially if they are sick and need services. This can crank up health care costs for everybody at the company.

Michelle Dimarob, a lobbyist with the National Federation of Independent Business stated “it’s understandable people want to protect access to health care benefits, but to extend and expand the COBRA subsidy in the way it was set up is probably not the (proper) pathway to achieve the goal. It really does increase costs and cause cash-flow problems”. She added “the policy looks good on paper, but there are unintended consequences on employers”.

It looks like 2010 is starting off with a real bang for employers across the country. If you are feeling overwhelmed by the complex maze of compliance, regulations and government mandates, then you should consider a qualified HR outsourcing provider or PEO for your organization.

Sources: Sacramento Business Journal

Credits: Prevent Child Abuse - New Jersey

For many of us, the holidays are a time to reflect. In business … and in life, it is a time for us to look back, as if in a rear view mirror, and see where we have been, and how far we have come. It is a time to take stock of where we are today, and chart a path for a brighter future.

2009 has been a very challenging year for many small and midsize business owners across the country. Employers Rx would like to take this time to welcome all of our new associates, clients, and the friends that we’ve made this year. We will always remember, and sorely miss the clients we’ve lost.

For one of those clients, 2009 could have been a very different year.

Reflections of the Past - A Client’s Story

It was the first week in December 2002 when I received a phone call from an accountant. He wanted to know if I could help his client Bill Webster, who with his brother Bob, owned and operated a sucessful sporting goods distributor called Webster’s Team Sports. Bill’s workers compensation carrier had just notified him that because of a large claim, his coverage would not be renewed. His broker looked everywhere, but come January 1st, 2003, at 12:01am, Webster’s Team Sports would no longer have coverage.

Webster’s Team Sports opened it’s doors in 1946, and had supported three generations of Websters. During that time, brothers Bill and Bob had built Webster’s into a industry icon among little league, high school and college teams across South Florida. They contributed generously and widely to community events as their business and reputation continued to grow. The brothers had followed a family tradition for providing customers with quality equipment, exceptional value and personal service. Now, the Websters’ were faced with few options. They could purchase coverage from Florida’s JUA, (the state insurer of last resort), but, paying premiums 3 times higher than what they were currently spending could put them out of business. Without workers compensation coverage, they would have to stop operations. They had less than 4 weeks to make a decision. When, and how would they tell their loyal staff and employees?

Introducing Employers Rx

Following a brief conference call, I met Bill and his brother Bob at their offices the next day. I discussed with them how a professional employer organization could provide a possible solution to their problems. I explained how employee leasing companies and PEOs purchase workers compensation coverage with large deductibles, how they manage claims, and implement risk avoidance programs to minimize incidents in the future. We told them about our RFP process, outlining the payroll and WC data we required, and how qualified PEOs would compete for their business. After an hour, we left with everything we needed. A few days later, we were happy to report back to Bill and Bob that we had secured three bonafide offers from leading PEOs, and we could have them enrolled before the new year.

It had been more than six years since Webster’s Team Sports decided to outsource their payroll, HR, and workers compensation resposibilities to Selective HR. In the beginning, Bill and Bob where impressed by the fact that Selective HR was owned by the Selective Insurance Company, an A+ rated insurer, who was providing their workers compensation coverage. As time went on, they realized the value of Selective HR’s technology platform, human resource services and ongoing support. This is why I was surprised when I received a phone call from Selective HR informing me of the loss of one of my clients. It was Webster’s Team Sports.

The Dream Lives On

After receiving the “bad news”, I tried reaching the Websters. I wanted to tell Bill and Bob thanks, and let them know how much we appreciated their business for the past six years. Unfortunately, the phone number I had was disconnected, and a new number only allowed me to leave a message. I wanted to learn more about the fate of Webster’s Team Sports. While searching the internet I came across this press release.

Sport Supply Group, Inc. (NASDAQ: RBI) today announced it has acquired substantially all of the assets of Webster’s Team Sports (A.K.A. Webster’s Sports Center) of Pompano Beach, Florida. Webster’s, founded in 1946, is South Florida’s leading team sports distributor to the school, college and youth league markets.

The announcement continued with a quote from Bob Webster of Webster’s Team Sports. He said: “We are thrilled to now be part of the Sport Supply Group family and excited to bring our customers the best in product, service and selection. This is the start of a wonderful new chapter in the long history of Webster’s. We are committed to making it a win for our employees and the hundreds of high schools, colleges and youth programs across south Florida.”

This holiday season we lift our glasses to Bill and Bob Webster and the employees of Webster’s Team Sports. We want to wish you a bright and prosperous 2010, and thank you … not only for your business, but for reminding us how important our mission is, and the impact we make in the lives of our clients. To you and all our friends and clients. Thank you.

Wishing you a happy and healthy 2010.

May you enjoy peace and prosperity through the year.