When Is It Time to Leave a PEO?

Author: Saul Macias, MBA, PHR – Vice President of HR Services

When you were smaller, partnering with a professional employer organization (PEO) made sense. It shifted some tasks and liabilities off your shoulders and allowed you to afford to offer good health benefits to your employees. Most of all, outsourcing your human resources, benefits, and payroll gave you space to concentrate on growing your business.

Though co-employment had a role in the growth of your organization, many employers arrive at a point where it is appropriate to exit. Here are some key considerations as you decide whether to initiate that transition away from your PEO:

Benefits: Lots has changed in the world of benefits in the past couple of years. Offering benefits in-house would give you the autonomy to design, choose and manage your health and retirement benefits. The desire for greater flexibility in employee benefits can be a key driver to part ways from a PEO. (A lack of knowledge in this area, however, can often delay a PEO exit).

Service: As you grow, your business and your employees’ needs become more complex. In the midst of that complexity, you may find that your PEO lacks the expertise to drive and support your HR, benefits and payroll to meet your unique and evolving needs. Furthermore, a lack of onsite support or expertise to help you cover a multi-state or international expansion can be most challenging under a PEO model.

Cost /Scale: The average employer in a PEO has 15 employees. According to the Society of Human Resources Management (SHRM), the average HR professional supervises approximately 70 employees. Somewhere between 70 and 100 employees the economics may merit managing your benefits, payroll and HR in-house. But what will it take to build a team that can handle this role?

Co-employment: Under a PEO, one key area of managing your employees is done by a different company whose culture and identity could be very different from yours.

Once you have decided to exit, how do you make it happen?

PEO Transition: Working with an experienced partner like ABD can help you analyze and manage the critical transition away from your PEO. Our team of multi-disciplined experts can help you plan, select the best technology platform, build the required work flows, and transition into your new program while keeping daily operations running smoothly. We can also help you hire an internal team or uncover new options that offer more flexibility than a PEO, but still allow you to outsource some or all of your human resources function. Contact us today to explore the possibilities.

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Which Jobs to Automate – Which Must Stay Human

According to a recent article in Fortune Magazine, the brokerage firm USAA noticed that when the stock market recently plunged everyone stopped using their online services and called on the phone. How do you plan or staff for that?  What is the right level of automated services for efficiency v. losing the personal touch?  It is a challenge that faces virtually every industry.

Safety and Efficiency

One clear factor that argues for automation is safety.  For example, in manufacturing, an increase in workers’ compensation claims could be a symptom of an inherent risk in the manufacturing process that can be automated to reduce strains and accidents. Further, a business case can often be made that significant efficiencies can be gleaned from the right kind of automation.  Tesla is a shining example of how improved process design, the right level of human interaction, and robotic technology can efficiently produce a world-class automobile.  But what about service industries?

Three Cases Where Human Touch Matters

  1. The Customer Values It – In the service industry where advice is required, such as making a medical decision, a legal decision, or where to invest, the human touch is critical.  Experience, objectivity and wisdom are extremely difficult to automate and customers are not willing to accept an electronic answer in these situations.
  2. Where Multiple Factors Must Be Represented and Considered – In complex organizations where there are different factions, points of views and stakeholders, it is extremely difficult to automate decision-making or the process.  It is one thing to automate processes, it is another to gain agreement on the path forward.
  3. Holding A Single Person or Team Accountable – Once a system is automated it becomes a hardware or software issue.  Often, in order for there to be high customer satisfaction, there must be a group that is accountable.  Judges, managers, coaches – all these roles cannot be automated because someone must be ultimately accountable.  This holds true for top level decisions as well. Every successful organization knows that leadership matters.  It matters because some human must exercise good judgement and must inspire others to follow.  Automating that secret sauce is quite a way off.

So as business becomes more technical, automated, and enamored with big data trends, each organization will have to use some judgment about what can be automated and should necessarily remain human.  it is probably better to debate this is in a planning session (with other humans) before automating the wrong process and driving your customers to the competitor.

Paul Finkle SPHR, CMC – Executive Vice President, Practice Leader

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Ransomware Hits HR Departments in Europe

By Paul Finkle, CMC, SPHR – President & CEO/Principal

For those who are unfamiliar with “ransomware”, it is a common scam used by international cyber-criminals to extract money from hapless individuals and corporate users.  Basically, the perpetrator gets an unsuspecting user to click on malware, which then infects and locks the user’s system and/or data.  Once infected, the cyber gang is alerted and contacts the individual user for money (ransom payment) otherwise they threaten to erase or permanently disable access to data.  The particular threat, which has recently been used against HR departments, is called the Petya ransomware.  It is primarily spread using the above referenced technique known as “spear-phishing”.

Here is a typical scenario. The unsuspecting HR employee is sent an email (often disguised as from an internal employee) which includes a link to a file stored on Dropbox.  It says, for example, that an applicant’s resume can be downloaded.  The unsuspecting employee clicks on the file (which is actually an “exe” file named “portfolio-packed.exe”) if clicked upon it will crash the system leaving the user with the standard Windows blue screen.

According to reports from Europe, as soon as the user restarts the PC, the computer will enter a fake check disc process that loads the Petya’s lock screen at the computer’s BIOS level.  Rebooting the computer multiple times simply repeats the process and will not work.  Next, the user will be directed to the ransomware’s payment site hosted on Tor.  The user will be required to purchase a decryption key which can be entered at the DOS lock screen.


The sad truth is that a firm’s security is only as good as its least careful user.  This is the first case we have heard of ransomware being used on HR departments. Clearly, HR data would be an identity thief’s treasure chest, and as an internal department with a high volume of email, HR departments should take this as a warning to increase their guard, train their employees, and remind everyone to quarantine and refrain from clicking on suspicious files and emails. All employees should be trained never to click on files with exe extensions.  You should contact your computer network professional to discuss the use of Bitdefender or similar product to protect your network.

EEOC Proposes Mandatory Collection of Pay Data

By: Paul Finkle, CMC, SPHR – President & CEO/Principal

The Equal Employment Opportunity Commission (EEOC) recently announced plans to require employers with 100 or more workers (anyone subject to EEO-1 reporting) to report pay data and provide aggregate information from employee W-2’s. We normally do not write about proposed regulations, but this one appears to have legs. EEOC Chair Jenny Yang stated that the purpose of the new regulations would be to provide the EEOC with insight into “pay disparities across industries and occupations.” The pay information would be broken down by gender, race, and ethnicity across 10-12 broad job categories.

Data on 63 million employees would be covered by this proposed regulation. The regulation would be in addition to the current EEO-1 report, which applies to employers with 100 or more employees and federal contractors with contracts in excess of $50,000. (Federal contractors with 50-99 employees would be required to report race, sex, and ethnicity data, but would not be required to report pay data.)

This new EEOC proposal comes on the heels of California’s Fair Pay Act which became law effective January 1, 2016. This legislation requires equal pay for “similar” jobs.

In short, it behooves employers to get an objective review of pay structures so that their practices are defensible and logical – as well as being internally equitable and externally competitive.

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Recruiting Options for Small Employers

By Paul Finkle, CMC, SPHR – President & CEO/Principal

The topic of how to find talent in today’s challenging market was discussed at a recent CEO group meeting. With the improving business climate, combined with millennials staying about two years (and expecting to see growth and progress), it’s often necessary to have some sort of consistent recruiting tool. For employers too small to have a full-time recruiting function, the group agreed there were a few good options:

  • Contract recruiters – if several open positions need to be filled, or there is a high volume of searches required for a short period of time, a contract recruiter could be a good solution.
  • Traditional recruiting firms – the general view was that these firms were expensive and should be reserved for key position searches or as a backstop when other options fail.
  • Do it yourself – have the manager or an internal staff person post positions on your own site, LinkedIn, Indeed, Craigslist or others.
  • Alternate recruiting – sites like BountyJobs.com – this is a technology solution where employers can post job requirements, as well as what they want to pay a recruiter, and interested recruiters can bid on and fill the positions.
  • Internal referrals – The CEOs all confirmed that this is best source of quality talent. The consensus was that the referring employee should get at least $1,000 if the new hire stays more than 90 days.

While there are pros and cons to each option, and there are certainly more solutions than those listed, the group agreed that these are some of the most common options used by small employers.

This blog would not be particularly helpful, however, if it omitted basics of pre-recruiting preparation:

  • Start with your organization chart and be clear on where the position fits.
  • Develop a solid position description that outlines the skills and requirements needed to be successful in the job.
  • Create a position profile that effectively presents the advantages of working in your organization, as well as the skills desired.

Note: Talented candidates almost always have more than one opportunity and it takes salesmanship to get the top job seekers to consider your organization, particularly when you are small.

Lastly, check for negatives. Go to Glassdoor and see what your employees are saying about you and make sure there is nothing on the site that is incorrect. Also, check your own website – not only should you post your open positions on your own site (and remember to take them down once filled), but your site should be welcoming to potential candidates and hopefully give a glimpse into your culture and what it would be like working at your organization.

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Growth in Employee Population Stretching Average HR Staff

Malcolm Whyte, SPHR, Executive Vice President/Principal

On October 21st, Bloomberg BNA released its annual 2015 HR Department Benchmarks and Analysis Report. The Report provides key metrics and findings which are derived from a survey of almost 350 HR executives including a broad cross-section of US employers. Not surprising to many HR managers, a key finding indicates that the HR staff ratio has declined to 1.1 HR staff for every 100 workers on average. This is down from 1.3 HR staff for every 100 employees in 2013 and 2014.

Economic growth in the U.S. has led to the expansion of employee ranks in many organizations. “This means that HR departments are being tasked with supporting more employees, potentially putting a strain on organizational resources,” said Tony Harris, Managing Editor of HR publications at Bloomberg BNA. According to another global consulting firm, World at Work, companies with less than 250 employees spend an average of $3,372 per year per employee on the HR function. This figure is high but not unexpected given the increasingly complex compliance environment HR practitioners face.

One way small to mid-sized companies can control HR overhead is to outsource one or more HR functions. According to the Benchmark Report, 65% of companies outsource at least one of their HR functions. This practice dramatically increases with smaller companies that cannot justify a dedicated HR team, but must stay on top of compliance and day-to-day HR transactions. Many smaller firms also use HR outsourcing as a way to organize systems and technology.

Click here to read BNA’s press release.
Click here to read about the benefits of HR outsourcing.

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

3 Things Leaders Must Do Every Day

By Saul Macias, MBA, PHR, Vice President of Professional Services/Principal

Leading others is hard work and it is a vital function in any organization. Oddly enough, though, very few organizations are able to make a large investment in resources and formal training to ensure that their managers are equipped to lead others effectively. We often have to rely on our own reading and experience to help us become better leaders. So I was pleased when a client forwarded an article in the Harvard Business Review summarizing the 3 Things Managers Should Be Doing Every Day.

The authors, Linda Hill and Kent Lineback, argue that building trust, building a team, and building a network are three key elements in a manager’s ability to function effectively as a leader. They offer compelling rationale for why these principles are more important than, say, workflow management, quality control, and resource management.

Managing is the art of getting things done through others. At the root of this concept is the ability to influence others, and in order to that well, there must be trust. Rightly so, they argue that trust is built when the manger demonstrates high levels of competence and character. They write, “if people believe in your competence and character, they will trust you to do the right thing.

Building a team is another key principle espoused by the authors. In this principle, the leader’s role is to define the purpose, values and rules of engagement for the group and then manage through the team. When the team is bound by a collective purpose, shared values and norms, they create the sense that winning as a team is the best way to win.

The concept of the leader’s role in building a network was not as intuitive to me as the other two concepts in the authors’ model. But it makes sense, if you think about it. Everyone and every team depends to some extent on external partners. The team can’t do it alone. So the leader must be able to build and support networks of partners that can support the current and future needs of the team.

To read more about these principles and the authors’ opinions on how to build trust, build team, and build a network, click here.

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Are You Motivating Your Workers or Driving Them Out the Door?

By Paul Finkle, CMC, SPHR, President & CEO/Principal

Whether your business is a small-town corner bakery, an upscale department store, or a multinational technology company, a well- motivated workforce is key to success. These days it seems many companies are better at talking about employee motivation than actually doing it – and that has left many businesses losing ground in the war for talent. Regardless of the economic climate, no business can afford to have its most experienced and valuable workers walking away to join the competition.

If your business has been bleeding workers, it may be time to take a step back and look at your practices. Many all-too-common business practices can sap employee motivation and dedication, leaving your company open to defections at a time when experienced and capable workers are more important than ever. If you have been trying to motivate your workforce and create a more positive and productive work environment, you may want to start by asking yourself these important questions.

  1. Do you tell your workers when they are doing a great job, or do they only hear from you when they do something wrong? Nothing provides motivation like a pat on the pack or a heartfelt “job well done”. Workers at all levels need to receive positive feedback when they do a great job as well as constructive criticism when mistakes are made.
  2. Does your firm provide clear and consistent guidelines for employee behavior, or are punishments and rewards doled out on an ad hoc basis? Are some workers seemingly getting away with murder, while others get written up for the slightest infraction? Any perceived unfairness in the way employees are disciplined and counseled is sure to sap motivation and breed resentment.
  3. Are your workers allowed reasonable time to take care of personal business, or does your management team actively discourage all personal activities? While no business can survive if its workers are surfing the web and chatting with their kids on the phone all day, many smart companies understand the value of allowing limited time for non-work related activities. Allowing workers to make personal phone calls and do personal research on the web during their break and lunch hours is a great way to foster work-life balance and keep workers motivated. Of course it is important to set down clear rules and expectations – and make sure the rules apply to everyone (see #2 above).
  4. Are there clear lines of communication between departments, or is everything a deep dark secret? Nothing fosters rumors and kills motivation quite as fast as secrecy. Making sure that there are clear lines of communication between workers and managers, between departments and between employees is one of the best ways to keep everyone on the same team.
  5. Does your management style foster teamwork and cooperation, or is it every player out for himself? The best organizations foster a sense of teamwork and cooperation among all their workers. While it is often impossible for all workers to personally get along, it is essential that all workers respect one another. Creating a workplace that fosters open communication, teamwork and honest feedback is one of the most effective ways to create a motivated and productive workforce.
  6. Does your organization foster a sense of greater purpose? Many workers, particularly younger workers want to feel as though they contribute to a higher purpose. If your work does not easily lend itself to this objective, consider offering “volunteer days” or sponsoring non-profits to help engage and motivate your staff towards a higher purpose.

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.