AGuidetoOutsourcingHuman

ResourceFunctions

TBA
PEOASOStaffLeasing
2009

Faced with challenges such as:

1. Decreasing revenues and uneven cash flow
2. Increasing layoffs and rising lawsuits
3. Increasing insurance premiums and operating
expenses
4. Reduced productivity and lower morale

Today, over
70% of all
businesses
outsource
one or more
elements of
their
business.

Small-to-medium sized businesses are trying to find

ways to stay afloat. In todays ultra competitive
economy, businesses are actively looking at ways to
gain a competitive edge; streamline business
operations and increase profits while maintaining or
lowering risk. Outsourcing non-revenue producing
activities that are not core to the business is
something that most business owners/managers and
C level executives are taking a close look at. While
employees are a necessary component of conducting
business, Human Resources Administration and
Payroll hold the unique honor of being both a non-revenue producing and inherently
risky element of any business.
Today, well over 70% of all small businesses outsource at least one business function not including the
ones that we normally overlook such as legal and accounting. Why? Because outsourcing certain
business functions will allow you to streamline your business, making you more productive and allowing
you to focus on your core business activities. Outsourcing Human Resource activities provides you with
additional benefits such as avoiding unwarranted lawsuits and assurance that you are in compliance with
all state and local HR related government regulations.
Outsourcing the entire HR function has also been gaining popularity in recent years. Administrative
Services Organizations (ASO/HRO) and Professional Employer Organizations (PEOs) are now routinely
used by all industry segments. Now, even Fortune 100 businesses are using PEOs to streamline their
business.
The purpose of this report is to try to provide the reader with a basic understanding of the various options
for outsourcing some or all of Human Resources, along with the pros and cons of each service model.
Before we begin, lets try to clear up a few misconceptions about HR Outsourcing
Myth #1 Outsourcing HR would mean that I would have to fire our current HR staff.
Answer: Not necessarily. While that might be an option or even a goal for some business
owners, most businesses would rather re-focus their HR staff out of transaction mode into
something thats more consultative and involved with long-term strategies.
Myth #2 Outsourcing implies sending services to another country with jobs being lost in
the US
Answer: While off-shoring is certainly a popular strategy to reduce costs, HR
Outsourcing hits much closer to home. Outsourcing is defined as the procuring of
services or products from an outside supplier or manufacturer to cut costs and/or to focus
more resources on core competencies. Almost every major employer engages in one form

of outsourcing including payroll processing, accounting, legal services, I.T. support, sales
and recruiting.
Myth #3 We will lose control over our business
Answer: Its important to do your homework; decide what if any functions of your
business that you might want to outsource; carefully choose your partner(s) and work out
a solid agreement. Even then there are no iron clad guarantees that you will not
experience some bumps in the road. BUT, in most cases, the opposite is true. You will
actually gain MORE control over your business by spending more time on revenueproducing, core competency business functions by letting experts handle the mundane,
risky stuff.
Myth #4 As it regards a PEO relationship: We dont like the idea of entrusting another
company with the responsibility of paying payroll taxes and filing IRS reports and We
have heard several horror stories about some PEOs that have taken payroll taxes for
their own use.
Answer: Like any industry, the PEO industry has their number of bad eggs. There are
well over 700 PEOs operating in the U.S.; most with an excellent, unblemished track
record. A few bad eggs have received an enormous amount of press which has raised
concerns from an increasing number of prospective PEO clients. One thing we should
point out is that a like number of accounting and payroll companies have done similar
things. The same can be said for company employees that have defrauded their
employers. The fact is that as business people we all must do whatever we can to set up
checks and balances and to verify that these processes. Any reputable PEO/ASO or
payroll company will be able to show their clients how to verify that taxes are being paid
and reports filed.

HR Outsourcing A Growing Industry

According to IDC, a global research firm, outsourcing HR functions has become the fastest growing
segment of the broader business process outsourcing (BPO) industry. HR outsourcing grew to close to
70% over the past six years, with companies worldwide spending more than $103.9 billion in 2007, up
significantly from previous years. Despite the recession, HR outsourcing is expected to grow as
employers look to cut costs and reduce overhead. While industry growth slowed in 2008 due to the
recession, IDC still forecasts the market to increase compound annual rate of almost ten percent in the
U.S. through the 2010.
The market for HR Outsourcing services may benefit from a weakened economy as small-to-medium
sized businesses look to lower costs and trim staff said Lisa Rown, program director, HR and Talent
Management Services Research.

HR Outsourcing Industry Drivers

According to Hewitt Associations, a world-wide provider of HR consulting services and research data; the
most common (52%) reason for engaging and HR Outsourcing company is to reduce overhead. Other
reason to outsource is as follows:

Access to expertise 41%

Concentrate on core competencies 33%
Reduce overall headcount 30%
Reduce risk 22%

So, you MAY be encouraged to look at outsourcing for one or several of the reasons
stated above. BUT, what HR function should you consider for outsourcing. AND, as
pointed out below, there are various variations of out sourcing to consider.
Payroll Processing - Payroll is the most commonly outsourced HR function. Payroll is a
high-risk, low reward part of doing business. It is very difficult for small business owners
to stay on top of ever changing federal, state and local regulations and taxes. Penalties
for not properly preparing payroll and filing taxes can be very high and having outside
experts do this for you is a very inexpensive option. For many businesses, outsourcing
payroll offers an attractive and valuable alternative to in-house processing. Payroll
services can provide a less expensive, simpler means of paying employees, filing taxes,
and performing other essential but mundane tasks.
HR Administration/Compliance managing employees under these economic
conditions and in a litigation crazed society is dangerous. Just one major lawsuit can
bring your business to a halt. Unless you employ a well-trained HR staff to provide HR
administration & Compliance services, you should consider outsourcing this mine-filled
activity.
Workers Compensation & Risk Management If you have (W-2) employees, you
must carry workers compensation insurance. Depending on the type of business you are
running, workers compensation can be expensive and unless you mitigate risk as much
as possible, premiums will continue to go up. A PEO or ASO will help you to avoid
problems and if you do have claims; manage the claims properly.
Recruiting & Staffing Consider how much recruiting, employee turnover and badhires cost you business each year. Have you hiring the best possible candidates? Have
you hired someone during the last year that turned out to be a criminal and/or a drug
addict?
____________________________________________________________________________

Payroll, ASO/HRO, Employee Leasing, Staffing and PEO

Services Defined

Payroll Service Providers Focused on processing payroll. Some vendors may also provide
tax payment and filing services, time & attendance, HRIS systems and integrated workers
compensation. Online payroll processing is becoming increasing popular. Payroll processing
services are provided by accounting firms and companies that specialize in payroll such as ADP
and Paychex to name two.

Administrative Services Only (ASO; aka HR Outsourcing) These providers will offer
to take on the responsibility of one or more HR activating including payroll, recruiting,
compliance and HR Administration. Employees would continue to fall under the client
FEIN.
Professional Employer Organization (PEO; aka the Co-Employer service) PEOs
fall basically into two categories; full-service and basic PEO. A full-service PEO will offer to take
over almost all HR related activities including payroll, workers compensation, health &
supplemental benefits; HR Administration, unemployment administration and more. A basic PEO
will offer to take responsibility for payroll and HR Administration. Under both circumstances,
employees will fall under the FEIN of the PEO which means that the PEO will take on most
responsibility regarding compliance tax payments and tax filing.

Staff Leasing/Temporary Staffing Staffing companies will typically offer to recruit,

conduct background checks and place employees. Employees would fall under the FEIN
of the staffing company which means that all taxes, tax reporting, workers compensation
and any benefits would be the responsibility of the staffing company.
Recruitment Process Outsourcing (RPO) This is different than a staffing company in
that an RPO provider acts as the recruiting department of the client, on behalf of the
client.

PAYROLL SERVICE PROVIDERSWhat do they do?

Small business payroll services typically handle a range of payroll tasks, including calculating
paycheck and tax obligations for each employee, printing and delivering checks, and providing
management reports. Paychecks can be issued on a weekly, bi-weekly, monthly, semi-monthly
or yearly basis.
Additional payroll-related services that may carry separate fees include automatic check
signatures, direct deposit, and handling of W-2s. Many services now offer tie-ins with 401(k) and
Section 125 mutual fund plans, allowing employees to set up automatic deductions from their
paychecks.
The IRS reports that one out of every three employers has been charged for a payroll
mistake, with total penalties reaching into the billions of dollars
Many small business payroll services offer the option of filing state and federal payroll taxes for
your business, as well.
How does it work?
Each pay period, payroll data has to be "called in" to the payroll service provider. While this
used to be done via a phone call or fax, almost all data is now transferred electronically.
The standard method is by modem. The provider will supply software for tracking each
employee's pay rate, deductions, and vacation time. You simply enter the relevant information
for that pay period, and information is automatically transferred to the payroll service provider.
Some providers also offer Web-based payroll data entry or a more extensive online Human
Resource Information System (HRIS). You enter employee information on a secure Web page,
which feeds directly to the provider. This method is gaining acceptance, but is still less popular
than modem-based communication. Most HRIS system offer the ability to produce customized
reports, track and manage benefits, create job postings and allow employees access to
personal information including pay stubs.
How much does it cost?
Basic small business payroll services typically cost between $3 and $5 per check, including addon fees for direct deposit, tax filing, and check delivery. Services such as tax filing and delivery
can cost between $4.00 and $9.00 per payroll. Add-ons such as direct deposit often carry a
nominal per-check fee.

There are often fees for adding or dropping employees, adjusting employee information, and
setting up your account, and these fees can differ dramatically from provider to provider. Make
sure you are looking at comparable pricing when
evaluating different providers.

Administrative Services Organization

Also known as Application Service Provider (ASP) or
Human Resources Outsourcing (HRO) organization.
Essentially, ASOs offer to take over many common HR
functions in addition to payroll. Some of the more
common HR functions might be HR Administration,
workers compensation and unemployment claims;
managing benefits, sourcing insurance, risk
management, recruiting and providing advice on
compliance issues. ASOs basically extend the level of
service that a payroll processor provides.

Theaveragemediancostto
administerHRinternallyfor
companieswithfewerthan250
employeesis$1,469per
employee,peryear
USSmallBusinessAdministration

PEO vs ASO/HRO As you consider ASO providers; you are likely to run across PEOs. Like
ASO vendors, Professional Employer Organizations (PEOs) provide HR services but actually
become the employer of record for your staff. For more information, please see chart on
following pages.

Benefits of using an ASO

9 Provides HR expertise; making sure you are compliant with all federal, state and local
regulations which, may, in turn, limit your exposure to HR related lawsuits
9 Reduces administrative burden. As we have already pointed out, HR does not produce
even one cent in revenue and represents tremendous risk. Putting this activity in the
hands of outside experts means that you can spend much more time on building your
business.
9 Using an ASO will save you money as compared to sustaining your own HR staff
The downside to using an ASO is that some business owners may think that they are losing
control. The opposite is closer to the truth. Imagine not having to deal with HR issues (some
SBA reports indicate that small business owners spend as much as 25% of their time on HR)
and spending 100% of your time on building a profitable business. You will find that you end up
actually having more control.
What about pricing?
It's difficult to pinpoint specific costs for human resources solutions since the offerings are so
varied. However, the pricing model is pretty consistent -- in general, you pay either a fixed dollar
amount per employee per month or a percentage of their individual monthly salaries.
ASO/HRO providers who work on a fixed fee model will charge $20-$200 per employee per
month. The exact pricing varies on the human resources solutions you require and the size of

your organization. You may receive a volume discount on the per employee rate as the number
of employees increases. Billing typically occurs on a monthly or quarterly basis.
If your HRO provider charges a percentage of individual employee salary, expect to pay about
2%-10% of each employee's annual salary. Some HRO providers offer specific services on an a
la carte basis. You can expect to pay a few thousand dollars for developing and placing
recruitment advertisements. An audit of your current HR policies and manuals can cost $200$500. Background checks, drug screenings, and psychological evaluations for potential
employees will run $25-$50 per person.

What is a PEO?
A Professional Employer Organizations or PEO serves as an extension of your
businesssimilar to an outside accounting or legal firm; assisting in HR administration,
compliance, payroll and risk management. The PEO will partner with clients to manage the
risks, compliance issues and costs associated with human resource activities so that the client
organization can avoid unnecessary risks and focus their attention of their core business
activities.
PEOs are NOT an employee leasing company, temp firm, staffing agency, a simple payroll
service or placement agency! Employee Leasing is based on a sole employer arrangement
whereas a Professional Employer solution is based on mutually beneficial Co-Employer
agreement! The client maintains the day-to-day management of their employees while the PEO
handles compliance, payroll, HR Administration and risk management.
What is Co-Employment?
A PEO, shares employer responsibilities with clients and assumes employer rights,
responsibilities and risks. Under its contractual relationship, the PEO:

Co-employs workers at client locations, and thereby assumes responsibility as an

employer for specified purposes of the workers assigned to those locations
Shares or allocates with the client employer responsibilities in a manner consistent with
maintaining the client's responsibility for its product or service
Pays wages and employment taxes of the employee from its own accounts under the
PEOs FEIN.
Reports, collects and deposits employment taxes with state and federal authorities
Establishes and maintains an employment relationship with its employees that is
intended to be long term and not temporary

Client Service Agreements (CSAs): Defining the Professional Employer Organization PEO Terms
A Profession Employer Organization (PEO) uses a contract called a Client Services
Agreement (CSA) to delineate the roles and responsibilities between the client company and
the PEO. This is a critical document for all PEO customers to understand. The CSA will
define each partys roles and responsibilities in the business relationship. Please keep in
mind that every PEO has different terms and provisions in their agreements.

How does the PEO arrangement work?

A PEO contracts with a client to assume certain employment responsibilities, such as payroll,
taxes, workers compensation, and significant benefit and employment compliance
responsibilities. The client retains control over employees worksite activities that contribute to
the bottom line, the production of product and the delivery of service.

The PEO and the Client enter into an agreement (Client Service Agreement or CSA). The CSA defines the roles of
both organizations relating to co-employees.

Benefits of using a PEO

1. Safety and risk management: This is the bread and butter of the PEO industry - they
assume liability if somebody gets injured on the job or accuses a co-worker of harassment. PEO
services ensure compliance with all employment laws and OSHA regulations and assure there's
no discrimination of age, sex, or race in the workplace. Also, since the IRS considers a PEO the
employer of record for your workers, they are liable for all related payments.
2. Payroll processing and taxes: The PEO vendor distributes paychecks, processes direct
deposits, withholds payroll taxes and wage garnishments, sends out year-end tax statements,
and oversees any required audits. All payroll taxes and potential liabilities are also paid by the
PEO service.
3. Benefits administration: PEO vendors can procure competitive rates for a variety of
employee benefits including health and dental insurance, short-term and long-term disability, life
insurance, 401(k) plans, COBRA, and unemployment insurance. They also handle all the
paperwork associated with managing these benefits. You can also consider Administrative
Services Only (ASO) - a third party administrator that manages health benefits and processes
claims for businesses with self-funded health plans.
4. HR management: A PEO vendor works with you to ensure your compliance with federal and
state labor regulations. They also apply their HR expertise to help you create detailed employee
handbooks and training documentation; provide updated labor law posters; and oversee
personnel development. PEO services also help in the recruitment process by placing
advertisements for open jobs, prescreening candidates, and conducting background checks and
drug screenings.

Who uses PEO services?

The PEO services companies of any size and in a range of industries from law firms and
Internet businesses to manufacturing and medical offices. The typical PEO service customer
has 1 to 500 worksite employees with little to no HR experience. PEO vendors offer these
smaller companies the cost savings and comprehensive benefits that are typically reserved for
larger companies.
For larger companies with in-house HR staff, PEO vendors remove some of the administrative
burden from HR staff. A PEO vendor can also help you cut expenses: hiring a PEO service
costs significantly less than a full time HR staffer. Companies in high-risk industries like
construction can also find cost savings with PEOs since they share a benefits pool with lowerrisk industries.
If you feel that you'll lose control of your company with a PEO vendor, you're not alone.
Many companies get confused by the co-employer relationship. It's important to recognize that
you always run the show. You have control over all business operations and the work that
your employees do. You are simply contracting a PEO company to take over administrative
duties, employer responsibilities and liabilities. The terms to remember are that the PEO vendor
is the "administrative employer," while your company is the "worksite employer."
A common concern for companies who are hesitant to employ PEO companies is whether they
can trust an outsider with full responsibility for their employees. You may also worry that that
PEO companies could lease your staff to another company. However these concerns are
unfounded: PEO vendors work very hard to avoid conflicts of interest and keep your business
practices confidential.
For many, giving up official employment of staff is a difficult conceptual hurdle to overcome. If
you can't look past it, PEO services may not be for you. Remember, too, that if you ever feel
that a PEO vendor is challenging your position of power, you can simply give 30 days notice and
look for another option.
If a PEO vendor gives you advice on how to handle a situation - dismissing a disgruntled
employee, for example - and you choose to ignore it, the vendor can give elect to end your
working relationship. The PEO vendor complies with various regulations and knows how to
approach delicate situations to prevent a lawsuit. Without their expertise, you'll be on your own
to defend the claim using your own resources.
Professional employer organization pricing
Pricing for PEO services starts with an initial setup fee - typically $1,000-$5,000 - before the
PEO vendor becomes your co-employer. This is a one-time charge you pay regardless of how
long you work with the PEO.
You then pay the PEO organization a percentage of gross payroll. The standard rate is 2-6% of
each employee per pay period. The actual rate can vary based on the number of services you
use and what industry you are in; restaurants with low salaried employees may charge a higher
rate, for example. PEO vendors also have to factor in their workers compensation costs that can
range from 1-10% of every employee's salary - clerical industries are at the low end with

manufacturing sectors coming in much higher. Most PEO vendors will provide volume discounts
for large companies.
There are PEO providers that will bundle all services - everything from payroll and workers
compensation to assisting with writing offer letters to prospective employees. That could cost as
much as 2-5% of gross payroll, but it can be worth it if you take full advantage of all the services
offered.
Some PEO vendors may offer fixed pricing based on your total gross payroll. This is essentially
the same idea as percentage-based pricing - only they factor in the percentage and express it in
dollar amounts. The one advantage to fixed pricing is that it's constant and isn't subject to salary
increases and bonuses. However, a PEO provider will typically account for such changes when
working on an agreement.
Are PEO/ASO services worth the additional expense? Many PEO and ASO salespeople will
immediately tell you that they will save you money without ever having consulted with you or
analyzed your business. This MAY or may not be the case but we would suggest that you be
wary of anyone that tells you that they are going to save you money without learning about your
business. If you are having trouble with increasing unemployment, health benefits and/or
workers compensation; you may be able to plug into the PEOs plans to save money overall or
you may work with a PEO/ASO to drive down costs over time through best practice efforts.
Even if you end up spending additional money for the services of a PEO or ASO, is it worth it?
We think so. Consider the following:

How much time are you currently spending on HR? How much is your time worth?
If you were able to spend less time on HR, what could you do with your time to make
your business more successful?
What is peace of mind worth knowing that you are 100% compliant with all federal, state
and local regulations?
Using a PEO will allow you to transfer most of your HR related liabilities over to the PEO.
You wont need to worry about being sued for EEO violations. How much is this worth to
you?
How much are you currently paying for services that might be included in a PEO/ASO
proposal such as payroll and TPA (Third Party Administrators)? These costs would need
to be deducted from the PEO/ASO costs.
How much are you paying for workers compensation? Are you able to use a Pay-asyou-go program? How much does it cost you in terms of time and resources to go
through an audit?

PEO Buying Considerations

Are there benefits your employees are asking for that you can't currently offer?
Are you paying too much for certain benefits?
Are you spending a majority of your time managing your employees instead of your
business?
Is your office compliant with state and federal employment regulations?

Do you have documented workplace policies and employee handbooks?

Are your employees protected if they have an accident or a conflict with another
employee?
What hiring needs do you have for the next 12-18 months?
Do you know enough about prospective hires before you make them job offers?
Can you develop programs to retain employees?

Types of HR
Arrangements
Employer of
Record
Responsibilities
Workers
Compensation
Insurance

Payroll Only

PEO
with "CarveOuts"(2)

Full-Service PEO

Employee taxes
reported and
deposited under
clients FEIN

Employee taxes
reported and
deposited under the
Clients FEIN.

Employee taxes
reported and deposited
under the PEOs FEIN.

Employee taxes
reported and
deposited under the
PEOs FEIN.

Not applicable (1)

Coverage provided by
policy in client's
name.

Coverage may be
provided by policy in
client's name.

Coverage provided
under PEOs master
policy.

Not applicable (1)

Claims management
provided by PEO.
Safety guidance
provided by PEO.

Claims management &

safety guidance may
be provided by PEO.

Claims management
provided by PEO.
Safety programs
compliance
administered by PEO.

Not applicable (1)

Coverage provided by
policy in client's
name.

Coverage may be
provided by policy in
client's name.

Coverage offered
under PEOs master
policy.

Not applicable (1)

Supplemental benefits
offered by policy in
client's name. 401K
provided by policy in
client's name.

Supplemental benefits
may be offered under
PEO's master policy.
401K provided by
policy in client's name.

Supplemental benefits
offered under PEO's
master policy. 401K
provided by policy in
client's name.

Not applicable (1)

Multitude of services
offered in either a la
carte or bundled
pricing.

Multitude of services
offered in either a la
carte or bundled
pricing.

Multitude of services
offered in either a la
carte or bundled
pricing.

Clients
responsibility

ASO will provide

advice but
responsibility remains
with client

Provided by PEO.

Provided by PEO.

Safety and Risk

Management

Health Plans

Employee Benefits

Human Resources

Regulatory
Compliance

ASO/HRO

1. Payroll only service providers basically process payroll on behalf of their client. Deductions for healthcare,
insurance and other deductions may be made on behalf of the client and payments may be submitted to
the appropriate vendor/carrier.
2. Some PEOs will offer ala carte services which means that you can choose to use, as an example, the
PEOs health benefits or use your own. Some PEOs will offer to manage various third party services such
as your 401(k) plan, health benefits and other plans for you thereby eliminating the need for various TPAs.
On the other end of the spectrum; some PEOs will force you to use their bundle of services.

Staff Leasing/Temporary Staffing

Temporary employment services (often referred to as temporary employment agencies or
firms) offer client companies the services of temporary employees who possess specific skills.
This arrangement can provide a client company with needed help during peak demand
periods, staffing shortages, or the vacations of regular employees, without requiring the time,
expense, and long-term commitment of hiring a new employee. Temporary employment firms
typically undertake hiring and firing decisions, issue paychecks, withhold payroll taxes, and
make contributions for unemployment insurance, workers' compensation, and Social Security
for the employees serving in their client's places of business. Client companies simply
describe their staffing needs and time frame, then pay a set hourly rate to the temporary
employment agency for the services of a "temp." The business scenarios in which temporary
staff can be useful are virtually endless.
A large staffing service can bring in any number of temporaries to work days, nights,
weekends, or holidaysand not just to perform low-skill tasks. Specialized temporary
services can routinely handle specific, time-sensitive and highly skilled projects. In fact, very
often temporary workers are so qualified, employers end up adding them to the full-time staff,
saving the high cost of hiring and training. Additionally, a temporary employee allows you to
judge whether you need a full-time person for a particular job or if ongoing temporaries can
complete the tasks.
Changes in the nature of the work forcesuch as an increase in the number of working
mothershave contributed to the popularity of temporary employment arrangements. Parttime workers who are employed as "temps" enjoy a great deal of flexibility in setting schedules
and choosing assignments. For example, a mother with young children in school might opt to
work fairly consistently during the school year, but not at all during the summer months. Some
professional workers use temporary assignments as a way to add variety to their jobs, while
recent college graduates might view temp work as a stepping stone to permanent
employment. But even though temporary employment offers advantages for some workers,
many otherswho have been laid off or are unable to find permanent positionswork as
temps out of necessity rather than preference.
The economic and demographic forces that have stimulated growth in the temporary staffing
industry as an alternative to hiring permanent employees are not likely to change in the near
future. These forces include the shift from production of goods to processing of information;
employer reluctance to add permanent staff in the face of economic uncertainly and volatility;
technological changes that require special expertise to deploy and operate; a desire to avoid
seemingly ever more expensive benefit packages, and the availability of capable individuals
who either must, or prefer to enter the temporary labor market.
Nonetheless, there are potential drawbacks associated with going the "temp service" route
that must be weighed. One factor commonly cited is the greater allocation of time and
resources to training that may be necessary if a company receives several different temp
workers in succession for one job. Another criticism that is sometimes raised in conjunction

with reliance on temp services is that some temporary staffers do not feel a connection to the
company for which they are working, which can have a deleterious impact on effort and
effectiveness. Companies can do much to address these potential problem areas, however,
by establishing and maintaining a program that continually monitors and reviews the
contributions of temp workers.
CHOOSING A TEMPORARY SERVICE
Temporary employment services are a particularly attractive option for small businesses,
which often need help on a limited basis but lack the resources to recruit, screen, and pay
new, full-time employees. A small business considering the services of a temporary
employment agency should first consider several factors:
Gauge need. Business owners should examine production schedules, composition of
employee benefits (number of sick days and vacation days, etc.), and seasonal workloads
when weighing whether to pursue temporary staff. Shortcomings in specific areas of business
knowledge should be factored in as well. Another key factor that should be weighed is less
quantifiable but even more important: quality of customer service. "Check the quality of the
work not just during the times when employees are covering for another worker, but on a
regular basis," said Don Owens in Sacramento Business Journal. "Judge the way employees
react when asked to do more from each other and from managers. Most importantly, look at
how employees treat people outside the companyfrom the vendors and suppliers to the
customers themselves. Are they harried, short and tense?" If so, temporary additions to the
workforce may be in order.
Put an effective screening process in place. It is important to understand the temporary
services firm's screening process for temporary employees. Though minimal screening is
acceptable for low-level jobs, the process should include more sophisticated screening
methodssuch as personal interviews, computer testing, or psychological evaluationsfor
positions requiring specialized skills. Existing employee job descriptions can be used to
determine temp staffers' suitability for jobs and to measure their performance once they have
begun work.
Evaluate potential temporary staffing services. Experts urge business owners to seek out
recommendations for temp services from other members of the business community. Once
you have targeted specific services for consideration, conduct extensive interviews with
management to explain your company's needs and determine their ability to meet those
needs. "The natural inclination is to look for the lowest rate," observed Arkansas Business.
"Yet quality of service is just as important. A firm that carefully screens and evaluates the
skills of all its temporaries will provide you with workers who do the job right the first time."
Establish partnership with the temp service. The temporary services firm your company
selects should be able to evaluate the client company's project requirements, time frame,
budget, and working environment, and provide temporary employee who have the appropriate
skills, availability, and personality to meet its client's needs. Ideally, the temp services firm
should be flexible in accepting last-minute requests for temps or in changing temps in the

middle of a project if the first one does not work out. Payment rates should be negotiable,
based on the skill level required and the quantity of work.
Make you workplace one in which temporary workers can succeed. Companies should make
sure that temporary workers are made to feel welcome upon arrival, and that they receive
solid training. Do not abandon temporary workers to "sink or swim" on their own.
Monitor temporary staffing initiatives. Put programs in place to monitor and review temp staff
performance and determine the impact of the temp service on bottom-line financial
performance and customer service.
How much will I be charged to hire a temporary employee? The cost is contingent on the job
requirements and the experience of the temporary employee. The temporary staffing service will
bill only for the hours worked.
What is included in the hourly rate? The hourly rate factors in hourly wages, employee payroll
taxes, liability insurance, clerical costs, workmen's compensation, and unemployment
compensation.
How quickly can a position be filled? The time of coverage will have to do with the position to be
filled. Most providers will tell you that they can have a position filled by the next day (and some
may be able to fill the position the same day).
Can providers help with a long-term temp position or a maternity leave? Most providers will be
able to help you with longer-term absences.
What is the basic screening process like? Most providers will meet with a candidate for an indepth interview. Consultants will clarify skills, abilities, and career goals of candidates.
Appropriate skills are trialed and all references are checked.
What skills are tested when evaluating a candidate? Temporary staffing agencies check
candidates' math skills, basic grammar, and matching skills. Most providers will also evaluate
the skills applied to data entry, typing, and software proficiency.
A word about Human Resource Information Management (HRIM) systems
Almost all the major HR Outsourcing vendors provide an HR Information System as an added
value service to their clients. With an HR information system (HRIS), you can provide a
comprehensive management system for all of your organizations human resources activities.
This software is especially helpful for small and mid-sized businesses that want to streamline
their administrative functions, manage employee benefits, reduce paper-based documentation,
and track all employee data.
HRIS basic features
The advantage to HRIS is the way it helps you to automate many administrative responsibilities
in a central location. Here are the key features to look for in an HRIS solution:

Automate benefits: HRIS provides benefit management for your HR personnel and staff. You
can import payroll and benefits data from different sources and make revisions at any point in
time. Depending on the software, you may also be able to manage the entire hiring process
from recruitment to sending compensation packages.
Employee self-service: Employees can get instant access to their information through HRIS.
They can complete online forms and get critical information about their benefits. With a unique
log in ID/password combination, each employee can check vacation balances, update personal
information, and make life-event changes, all without having to talk to a live person.
Set permissions: You dont have to provide employees with complete access. HR managers that
will administer the software can control which screens employees can see and what data they
will be allowed to alter. You can also view changes that were made and revert back to the
original data if necessary.
Reporting: As with any valuable software program, you can get detailed reports for your
business. With standard report templates, you can manage the paperwork for employee
reviews, OSHA regulations, and employment history. You can create advanced reports based
on your customization with specific categories and data that can help you better manage your
business.
Tracking: HRIS allows you to track every employees accrued sick time, vacation balance, and
tenure so you always have accurate data. It can also manage long-term absences based on the
Family Leave Act or because of a serious injury. If an employee files a grievance or receives a
warning, you can manage what the next steps should be.
HRIS considerations
Before purchasing an HRIS solution, make sure you learn exactly what it can offer your
business:

How many employees can it support?

Can I upgrade to include additional employees as my business grows?

What will my total costs be?

Are there additional charges I should keep in mind?

Will the HRIS solution allow me to import current data from other software programs?

Is there an HRIS provider that has experience working with similar businesses?

Can I try out a demo version of the software before buying?

Is this software compatible with both PC and Macintosh environments?

What kind of in-house IT experience will I need to maintain the system?

Can I get full training for my staff?

Will I be able to get updates as they become available?

Summary
Managing Human Resources is a time consuming, risky
element of all businesses one that re-focuses attention and
resources away from core business practices and (possibly)
negatively affecting sales and profitability. More importantly,
managing your own HR department unnecessarily increases
risk and liability. Unless you just want to make your life interesting, outsourcing payroll takes the
hassles and headaches out of doing something that is fraught with risks. Your decision to
employ the services of a payroll only company as opposed to and ASO or PEO should be based
on your specific needs and requirements. Any good PEO or ASO organization will tell you that
PEO and ASO services are not for everybody.
Hopefully, this guide to HR outsourcing has provided you with enough information so that you
can make an informed decision about where you want to focus your time and energies.
About the TBM:
Our value proposition
TBM serves all types of businesses with anywhere from 1 to 2000 or more employees. We
operate as an extension of our clients business; managing HR activities such as government
compliance, risk management, HR administration, benefit administration and more. With TBM,
our clients are able to focus 100% of their attention on core business competencies.
Our unique processes; developed over the past 16 years have yielded an efficient, wellorganized approach to HR Administration. Utilizing TBM as their HR department, our clients
typically save 1-3% of gross payroll. In addition, our clients will realize such benefits as ZERO
workers compensation claims & audits, minimized risks, ZERO unemployment claims and a
streamlined, reliable outsourced HR department, resulting in substantial overall savings that will
flow directly to the bottom line.
Founded in 1993, TBM is a leading provider of HR Outsourcing services including:

Full-service Professional Service Organization (PEO)

Administrative Services Only (ASO)
Payroll
Risk Management
Health, Vision and Life benefits

Supplemental Benefits
Temporary Staffing (coming soon)

Call today for a FREE HR Assessment (877) 766-0859 or visit our web site at
www.TBMPayroll.com