Benefits Administration, EZ HR, Payroll Administration
It’s Time to Talk Real People Operations – PEOs and DIY HR are not the Resources Your Humans Need
We can’t help but notice that there are more and more Professional Employer Organizations (PEOs) and online HR support platforms being offered these days. Many of these are being offered by payroll companies, insurance companies, accounting firms, and other service providers as an “add on” service to their core business. It’s more than a little concerning to us that so many professional organizations are offering up a core piece of your business operations as something that can be supported as an afterthought to their service or as a simple “value-add.” We have to tell you, your people operations need to be treated with much more consideration than an added side to a value meal.
What are all the outsourced options being offered to support HR? It can be difficult to understand the difference among them, as what they offer sounds great, and sounds like they could surely give you what you need, especially for a small company.
Let’s look at the outsourced HR support options available to you, and what they do – and do not – offer your organization.
Option 1: Online HR Platforms — Do it Yourself HR
Here I’m referring to the online HR platforms that offer templates, guides, and all sorts of resources for companies to use to determine their policies and practices. Many even offer tools to build handbooks and job descriptions. First, please know that I am not against these. We have a subscription to one ourselves at HR Affiliates. We think that they are a great resource for keeping track of state law requirements for our clients. We can find all the laws within moments for our clients and for every state in which they have employees, and that’s a huge help to our consultants as they proactively keep track of these changing laws and requirements and make sure that our clients have action in place to stay compliant.
Here’s the problem with relying only on these platforms to support your organization:
There is an assumption of existing knowledge.
There is so much information on some of these platforms, and it’s great and accurate information. However, if you don’t know what it means it can’t help you very much. You have to have someone on your team who has the knowledge to use what is available to them. Otherwise, a little bit of knowledge can be a very dangerous thing.
For example, ours has a GPS Surveillance Policy and Employee Consent Form – it’s a great form with excellent content. Many fleet cars, and many cell phones, have GPS tracking, and both companies and employees are curious of the benefits and wary of the legalities. However, if you just look up the form, the form doesn’t tell you that some states require the form in order to implement tracking. It’s not just a “best practice,” it’s a legal requirement in these states. There’s an assumption that the HR practitioner using the platform knows this. Likewise, if you use the tool to create benefit documents, you can walk through how to create a POP document, which is incredibly helpful. However, if you do a search on POP documents within the platform, you can’t find a simple definition for “What’s a POP Document and does my company need one.” (If you are asking yourself this very question right now, you might want to call us after you finish reading.)
These platforms are great tools, but they are just tools, and if you don’t know how to use them, they can’t help you. They are not going to reach out and ask you what you need, and they definitely aren’t going to look at your organization and determine what you need. Just like any other tool, they need someone skilled to use them. I can tell you when you walk through my home, you can tell which rooms I painted, and which were done by a professional. My tools weren’t any different from theirs, but the outcome was shamefully different, despite my best intentions.
They are one size fits all.
No matter how thorough they might be, they are not customized to your organization. There is no review or assessment of your organization to develop a program that meets your unique needs. Will your managers know which options on the platform are required and which are optional? What is bare minimum and what is overkill? Again, the tools must fit the job. You don’t want a bulldozer to dig up a tulip.
Since the platforms are standardized, you may find yourself having to change your processes to fit the platform, rather than having a platform that supports your processes.
“HR Support” is a relative term.
Some do offer a top-tier level of service that permits a real person to respond to questions for an additional fee. However, this is usually not an assigned person that will always be your contact meaning you won’t get the same person each time you call causing you to constantly have to start over with your history each time you call. It’s kind of like going to a new doctor every single visit; you’re going to get a much better diagnosis and much better treatment with someone who knows your history.
It’s also not going to be proactive. You call and you get an answer. However, what if you need something, but don’t know that you need something? DIY HR is not likely to be reaching out to you to see that you have all the pieces in place. There may be email notices when there is new legislation or calendar reminders for federal due dates, however, you still have to know if it applies to you.
They aren’t likely to come onsite and meet with you or your employees. While a few may offer restricted “fractional” support onsite, those options are limited. Most are call centers with HR professionals available to answer calls. If you need someone to come onsite to mediate between employees, offer training or executive coaching, or help handle a difficult termination, you won’t get that level of service.
Be Aware of Hidden fees.
Many DIY HR platforms advertise a low rate of $99 per month. What a bargain! However, this doesn’t include implementation or data migration from your current system. And it doesn’t include training. And it’s probably just for one user. Most likely it’s for the base platform and extra functionality is an additional cost such as the ability to run reports, run performance management, track applicants, schedule training, etc.
Again, we think these HR platforms are great tools – but they are just tools. They can’t run an HR department without someone skilled to use them.
Option 2: The PEO — Co-Employer HR
Many companies join PEOs because they want the opportunity to gain access to “big business” benefits that they might not otherwise receive as a small company. They also like the idea of someone else managing the benefits, as well as payroll, and retirement plans, and workers comp. It seems like an easy choice to let someone else handle all of that while they focus on their business.
And, at one time, it might have been. However, the landscape of PEOs has changed. Participation in a PEO no longer guarantees great rates on insurance plans. Employers are often able to find comparable rates with more flexibility on their own group plans.
Legislative changes have also changed the PEO / Employer relationship, meaning that the PEO is no longer taking on the greater risk. Here are some of the challenges the current PEO environment brings to creating a great HR environment:
Who’s the Boss?
A PEO is a legal co-employer of your employees. While a co-employer, however, the PEO is officially the “employer of record”. Your employees will see the PEO’s name on their paychecks, not yours.
Since the PEO is now the employer, the service provider chooses the benefits for you, provides you with the employee handbook and policies it requires you to use, and can often make decisions on how you hire and terminate employees. Yet, it’s your services the employee is providing, your reputation they are upholding, and your money they are earning.
Compliance Isn’t Guaranteed.
While PEOs are designed to help you comply with labor laws, there’s not always a guarantee they will. There’s still a chance they might make a mistake or forget to do something that leads to consequences for you and your business. As a co-employer, your business could be held legally responsible if your PEO failed to do its job properly. However, since your business’s role and the PEO’s role are so separate, you may not know that they are doing something improperly.
For example, typically, a PEO will provide guidance to clients to support accurate employee classifications. However, the actual classification of the employee is the responsibility of the business. You have to tell the PEO if someone is exempt or non-exempt, and if they are an employee or contractor.
While you get guidance, ensuring wage and hour compliance is another responsibility that remains with the company when you enter a co-employment relationship with a PEO. PEOs don’t assume responsibility for wage and hour compliance because the PEO must rely on what their clients input into the HRIS system – and a PEO is not likely to notice a discrepancy and make a recommendation to conduct an audit and make changes to classifications.
Less flexibility.
One of the reasons employers like PEOs is access to benefits. However, the downside is that you don’t get many options for benefits. You’ll be required to use their providers and will be restricted to the plans they offer you, which permits fewer options for your employees. PEOs usually have relationships with particular companies to offer their benefits and will not go outside of these. If your employees have a bad experience with a particular provider, you don’t have the option to change – not unless you are ready to unwrap from the entire PEO. It’s another “one size fits all.”
You lose control over internal processes.
A PEO can manage nearly every aspect of your administrative HR. While PEOs will state that you will be able to keep your own processes and own way of managing employees, that’s only true to a point. Like the DIY platforms, your processes will have to fit into those of the PEO, and not the other way around. These arrangements are a poor choice for business owners who want to maintain control over their HR processes and culture.
PEO HR isn’t really the resource for the humans – it’s Administration.
In a PEO, employees have really limited access to HR. They will have a portal to access payroll information, much like with any other payroll company. However, it can be very unclear who their employer is and who they go to when they need something. Who helps with benefits? Who do they ask for time off? Where do they go if they have a problem they can’t talk to their manager about? While a PEO may offer a “hotline” for employees to call, that’s not the same as having a designated person that represents their organization and culture.
And speaking of culture – the PEO is not going to brand and support yours. You will still need culture ambassadors and someone internally to manage your culture and employee brand initiatives, and often these must offset the “generic” impact left by the PEO communications customized to fit hundreds of other organizations that are not just like yours.
PEOs actually might not be saving you money.
While they sound like they must be cost efficient since all these services are offered for simple monthly fees, it can be difficult to break down the actual costs of a PEO. Typically, your fee will be based on the number of employees you have and which services you use — or which services are available, whether you use them or not. It’s difficult to itemize the true cost of a PEO because all insurance and benefits and administration fees are bundled together.
Also, as companies grow, the cost savings change. Rates that were beneficial as a small company tip the scales as your company grows without the services increasing.
It’s not easy to walk away.
Let’s say you do go with a PEO for a while – you think you just want to get things taken care of while you get your business off the ground. However, once with a PEO, you recognize that they control your payroll, your benefits, your retirement plan, and your workers compensation insurance. They literally own your payroll history because it was truly their payroll history. In fact, all of it has been their history. It’s been their employees all along.
This means that when you are ready to get out, you have no payroll history, no benefits experience, no 401k, and no workers compensation loss runs. It will make you kind of like a start up again when it comes to procuring these offerings again, which can mean higher rates.
Ultimately, PEOs are not, and were probably never designed, to be a permanent part of a business. HR Strategy and People Operations is supposed to evolve as a company grows. “HR in a Box” doesn’t fit a growing company. Different industries and businesses have unique needs, so a customized and tailored HR support system is usually what grows with them.
Option 3: HR Affiliates – Your Partner HR
Okay –so maybe it doesn’t have to be us, but if you do not have the resources for an in-house HR department, we are undoubtedly the best HR partner for your business. This is because experts will tell you that the best alternative to DIY HR and PEOs is to have your own HR department, and by outsourcing with HR Affiliates, that’s exactly what you get:
It’s your company and your employees.
Only with us do you have the HR experts on your team. We aren’t limited to administration, and we aren’t going to wait for you to tell us what to do. We know what to do, and we will collaborate with you on your HR plan and strategy to ensure that your organizational and employee needs are being met.
However, we work with you – your employees don’t work for us.
You keep control over your HR policies.
We will work with YOU to determine what YOU want your employee experience to be, and we will put those goals forward along with any compliance requirements as well as help create the policies that shape your company. We don’t do “one size fits all.” We meet our clients where they are and we help them get where they want to be, each unique path they take.
You can choose your vendors.
We have a network of payroll, benefits, retirement, and insurance partners that we work with. You will not be locked into any vendor when you work with us. You will always make the decision with your vendors and with your plan options.
No call centers, no red tape, and no waiting lines.
While we may manage an HRIS for you, there’s no client portal or website for you to engage action with us. If you need us, you email us, text us, or call us. And we answer.
Just like an in-house HR department, our consultants can provide quick execution when action needs to be taken, such as policy and compliance changes. As your business grows and evolves, your HRA team will be proactive and agile to anticipate what needs to be done for your People Operations infrastructure to keep up. We will collaborate with your management team to make the necessary changes.
We can help maintain your company culture.
As your HR team, we are dedicated to your business. We are committed to helping your organization grow and be successful. We are here to understand your goals and will operate within your company culture and will cultivate employee experiences and policies that align with it. I
We can improve your employees’ experience.
We are available and eager to work face-to-face with managers and employees for training, development, culture events, and conflict resolution improving the overall employee experience with the company. We can also support with recruiting, interviewing, onboarding, and training new employees. We can do culture check-ins, engagement surveys, and exit interviews. On top of all this, in addition to doing these tasks, we can learn from them, interpret them, and make recommendations to you on improving the overall employee experience.
We can do anything you need in HR – we really are the resource for all the humans.
- Strategy and long-term planning? Yes
- Need us to set up an entire HR infrastructure? No problem
- Want us to run payroll and make sure everyone is paid? You got it
- Would you prefer us to work with the benefit brokers to make sure you have the right coverage, and everyone is enrolled? We can do that.
- Need to make sure that all of the state requirements are met as you hire employees across the country? We can manage that and have partners to help us with the taxes.
- Want us to source talent and hire employees for you? We have a stellar recruiting team that can do that and help build your employee brand.
- Do you need to develop a compensation strategy and ensure that you are paying your employees what they need to be paid? We’ve got the data for that.
- Need us to be onsite to be a visible HR presence for your employees? Of course, we can do that!
I could go on and on, because the truth is that we are here to serve as your HR department for your organization, with whatever needs to be done.
We really know what we’re doing.
We have a team of experts who will be proactively managing your HR function. We will not be waiting for you to tell us what needs to be done, so you don’t need to be the expert. We will make recommendations to you on what needs to be done, and because it’s your company, you’ll let us know that, yes, you want these things done, and then we’ll do them. If you call us with a crisis, we’ll be there to help fix it. If you tell us you’re opening a new operation in a new state, we’re there to help plan it.
It’s the most cost-effective way for you to get the most talented HR experts available.
While hiring someone internally to manage HR may seem affordable initially, you must account for how much one person will be able to do. Employing knowledgeable and experienced HR talent to develop strategy, ensure law compliance, administer benefits, run payroll, outline company policies and procedures, recruit, onboard, and manage day to day employee relations can cost business owners a considerable amount in employee overhead.
With HR Affiliates, your HR department will have a Chief People Officer, Directors of Human Resources, HR Managers, Recruiting Managers, Compensation Specialists, Payroll Specialists, Benefit Specialists, Recruiters, and HR Operations Support.
What’s more – you don’t actually have to pay the full annual salaries for all of this great talent. By outsourcing with us, you get all of this expertise and support, but only as much as you need, when you need it.
Need to leave a PEO (or want someone to take care of PEO things but also take care of more of the things — like culture, engagement, strategy, and answering the phone personally?)
How HR Affiliates Can Help You Break Up With Your PEO.
The team at HR Affiliates has the experience, partners, process, resources, talent, and knowledge to help you unbind yourself from a PEO. This will save you money, give you flexibility of services, and overall increase the quality of your people operations. We will develop a timeline and a process with checklists to ensure you have confidence and communication throughout the transition from the PEO system to our service partnership.
We’ll also collaborate on an HR strategy that will upgrade all of the service you had before from a “one size fits all” to a bespoke “made just for you” HR service team that elevates your organization.
May 22, 2024
Paula Agee, VP of Human Resources and Chief People Officer