The Pros and Cons of Outsourcing - University Libraries: The
The Pros and Cons of HR Outsourcing
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The Pros & Cons of HR The Pros & Cons of HR Outsourcing Outsourcing Presented by John W. Allen, CPA, CMA Presented by John W. Allen, CPA, CMA
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John Allen takes an in-depth look at HR Outsourcing and discusses who should be outsourcing to a and why, how small and mid-size businesses can take advantage of HR outsourcing administrative functions and common questions and answers in regards to PEO services.
Transcript of The Pros and Cons of HR Outsourcing
- 1. The Pros & Cons of HR Outsourcing Presented by John W. Allen, CPA, CMA
2. What do these companiesall have in common? ABB International Paper Bank of America Levi Strauss Best Buy Motorola BP Amoco Proctor & Gamble British Telecomm Prudential Financial Cap Gemini Sony Credit Suisse Sun Microsystems General Motors Goodyear TXU 3. And what about these governmental entities? U.S. Defense Finance & AccountingService (DRAS) U.S. Office of Personnel Management United States Postal Services Transportation Security Administration State of Florida State of Texas HHSC 4. They all outsource HR 5. Agenda Whos outsourcing? Why are they outsourcing? What are they outsourcing? How & when are they outsourcing? To whom are they outsourcing? Q&A 6. John W. Allen President and COO of G&APartners 25 years of managementconsulting experience Has been responsible for providingsupport services to organizations valuedup to $5 billion and with as many as46,000 employees. Specializes in providing administrativeservices to emerging growth companies. 7. Amazing Facts In 2003 HRO transactions impacted anestimated 2.8 million employees, or 4% ofthe U.S. workforce In 2004, the Top 22 HRO deals coveredover 700,000 employees HRO revenues grew to $61 billion in 2005 HRO Today reports continued growth in2006 and 2007 8. Why are they outsourcing? Reduce costs/Increase EBITDA Gain access to cutting edge technology Avoid additional investments Provide more self service tools toemployees Focus HR on strategic vs. tactical 9. What are they outsourcing? Payroll Health and welfare administration Recruitment Compensation planning Performance planning Learning management Relocation Records management 10. To whom are they outsourcing? Accenture HR Services ACS ADP Aon Consulting ARINSO International Ceridian Convergys Employee Care ExcellerateHRO Fidelity Employer Services Hewitt Associates IBM Global Business Services 11. The trend is clear the big boys are outsourcing HR, but whatabout the rest of us? 12. If growth in the PEO industry isany indication, small businessesare outsourcing more and moreof their HR functions too. 13. More Amazing Facts Number of PEOs has grown from a handfulin mid 1980s to more than 800 today. Number of co-employees has grown from10,000 in 1984 to over 3,600,000 in 2006. Gross revenues billed by PEO Industry grewfrom $5 billion in 1991 to over $51 billiontoday. Wall Street estimates annual growth rate of20% 14. Why the Growth?Whats driving businesses, large & small, to outsource HR? 15. How many hats do you wear?Are you tired of the rat race? Are you overwhelmed with paperwork?Is this what you signed up for? 16. Using a PEO helps you focuson what you do best ! 17. Pop Quiz 18. Average administrative cost peremployee$1,152 per year($414 - $6,274 per year)Bureau of National Affairs 19. Average administrative cost per employee 6% - 12% of payroll (SBA & US Chamber ofCommerce) 8.45% of payroll (UT-Austin) $600 to $750 per annum per employee(major insurance company estimate) 20. So what is a PEO? 21. How does a PEO work? 22. What services does the PEO provide? Payroll Administration Provides time & attendance solutions Issues paychecks and W-2s Accrues vacation, sick and other leave Withholds and deposits taxes Withholds and remits garnishments &premiums for employee benefits Files all payroll tax returns 23. What services does the PEO provide? Employee Benefits Administration Group Health Plans Group or Voluntary Dental, Vision, Life,AD&D, STD, LTD & LTC Section 125 Cafeteria Plans 401(k) Retirement Plans HRAs, HSAs, FSAs, & Gap Plans Prepaid Legal, Purchase discounts,Wellness, EAP 24. What services does the PEO provide? Human Resource Management Compiles job descriptions & employee handbooks Provides recruitment assistance Conducts pre-hire background checks Advises clients on employee discipline orperformance problems Educates clients on regulatory compliance issues Handles unemployment claims & COBRA andHIPAA administration Conducts exit interviews 25. What services does the PEO provide? Risk Management Workers Compensation Coverage Master Safety Plans Site Inspections Safety Training Accident Investigation Workers Comp Claims Administration Drug Testing & Modified Work 26. What responsibilities do youretain? Management of business operations Use of facilities and equipment Safeguarding assets & people Employee compensation On-the-job supervision Quality control 27. How would your company benefit? Greater focus on your core business Broader range of affordable employeebenefits Workers compensation insurance atcompetitive rates, with no deposit or annualaudit Fewer compliance issues & employeelawsuits More time and money 28. How would your employees benefit? Better, more affordable benefits Higher take home pay Greater understanding of companypolicies and procedures Improved safety awareness and fewer on-the-job injuries Happier, more productive employees 29. So how much does it cost ? The cost of PEO services is generally lessthan or equal to the cost to do everythingin-house. Additional savings come by redeployingtalent, reducing turnover, reducingworkplace injuries and avoiding employeelawsuits. 30. Service fee is a percentage ofpayroll & includes:includes FICA/Medicare SUTA FUTA Workers compensation insurance Employee benefits costs Miscellaneous charges PEOs fee 31. PEO in Action Aluminum Frame Manufacturer Cost FactorsBefore AfterReasonsPayroll$522,000 $522,000 No change.Payroll Taxes49,564 43,231 Lower SUTA rate & Sec. 125 planWorkers Comp 36,725 21,317 Higher rate tier discountsEmployee Benefits31,200 31,200 Used client plan.Payroll Administration 17,460 18,720 Expanded services.Totals $656,949 $636,018Savings$20,931 32. PEO in Action Freight ForwarderCost FactorsBefore After ReasonsPayroll$1,371,550 $1,353,550 Eliminated one position.Payroll Taxes141,467 115,255 Lower SUTA rate & Sec. 125 planWorkers Comp 48,00432,806 Replaced accident plan with trueworkers comp.Employee Benefits0 34,884 Restored lost coverage.Payroll Administration 18,00041,147 Expanded services.Totals $1,579,021 $1,577,642Savings$1,379 33. For more information, visitwww.napeo.org PEOs take load off companies by fillinghuman resource function Human resource outsourcing can boostbottom line PEOs can help small business grow PEOs: help for small companies in goodtimes and bad PEOs: the wave of the futureSource: NAPEO website 34. Guidelines for Selecting a PEO Lists available thru NAPEO or TDL Verify that PEO is licensed & in goodstanding Ask for banking & credit references Ask for client & professional references Visit their offices Review customer service agreement 35. Licensing Requirements Controlling person must be 18 years of ageand of good moral character Controlling person must have educational,managerial, or business experience relevantto the operation of a business entity offeringstaff leasing services Must demonstrate net worth of $100,000 36. Questions & AnswersFor More Information: John W. Allen G&A Partners4801 Woodway, Suite 210Houston, Texas 77056(800) [email protected]
