An Alternative Way to Hire Workers

Question: A new friend I met at a conference for women business owners says she uses a "co-employer" to hire the eight people who work for her and that the arrangement has saved her a lot of administrative hassle. At my own business, employment costs have become formidable. Is this something I should consider?

Answer: The hiring method your friend is talking about involves a "professional employer organization" or PEO. These companies help businesses manage personnel, health benefits, workers' comp claims, payroll, unemployment insurance and more. As a business owner, you contract with a PEO to assume these and other responsibilities, allowing you to concentrate on the revenue-producing side of your operations. PEOs establish and maintain an employer relationship with the workers assigned to you and assume many employer responsibilities and risks.

There are key advantages for growing businesses. The PEO, for example, provides experienced pros in human relations, benefits, payroll and OSHA compliance. It helps manage costs and can reduce turnover. And by bringing employees into a larger overall group, a PEO can offer your workers benefits that you'd be hard-pressed to afford on your own.

But this hiring option isn't for everyone. The PEO, as co-employer, retains a right to hire, reassign and fire employees. Some business owners prefer to keep control themselves.

Nevertheless, even small PEOs such as Chicago-based Employco Group are helping Main Street businesses control costs. With health insurance premiums skyrocketing an average of 13 percent last year for small firms, Employco clients got by with just a five percent bump.

Pre-employment testing is another area PEOs can help. Without a screening process, you risk placing the wrong person in the job, leading to lost productivity and costly turnover. PEOs tailor pre-employment tests to predict loyalty to you as well as success on a specific job.

"We test for traits typical of people who stay on the job," says David Fernandez, president of OEM America, a Connecticut-based PEO. "The tests aren't foolproof, but they can have a huge impact, even in industries with high turnover."

Oasis, a Florida-based PEO, has an entire division devoted to recruiting. "A job applicant's skills and stability are important; so are ethics and attitude," says Barbara Schneider, VP. "The biggest mistake many businesses make is failing to collect enough information before hiring."

Biz owners often dread the prospect of reading mountains of resumes and conducting interviews for prospective hires. PEOs reduce this burden and deliver candidates quickly, then handle the paperwork for the new hire.

"When a business owner wants to fill a position, our first step is to define what they need," says Mark Trimble, of Payroll Solutions, a Nevada PEO. "We create the job description and suggest pay levels. After placing an ad, we select and interview applicants, then present the best candidates to the client."

Many entrepreneurs who've used PEOs credit the choice with helping grow their businesses quickly. "We could not have come this far this fast without this kind of hiring help," says Robin Welch-Shaver, owner of Nebraska-based MedSecure, Inc. In less than two years, her company has grown from three to 23 people. "Working with The Alliance Group (her PEO) allows me to focus on what I do best, and that includes expanding my business."

These resources can help:

• NetPEO is an Atlanta, GA-based consulting and brokerage firm that can help you find the best PEO solution for your business. They will assess your needs and match you to an appropriate PEO in their nationwide network. Visit www.netpeo.com or call (866) 4-NETPEO.
  
  
• StaffMarket Services works on behalf of business owners to find the best PEO for their needs. They'll help you get competitive bids from nearly 400 participating PEOs. Visit the Web site at www.staffmarket.com.
  
  
• The National Association of Professional Employer Organizations (NAPEO) is an excellent source of information and help. The organization's Web site describes how PEOs work, the benefits of using one and guidelines for selecting one that's right for your business and industry. Visit the Web site at www.napeo.org.
  
  
• PEO.com is an online directory of professional employer organizations nationwide. Offers a search service and helpful information on understanding how PEOs work.