Over 70% of business owners are forced to work over the standard 40 hours a week. For the vast majority of small business owners, this time isn't spent on groundbreaking growth strategies or profit-bearing R&D activities; it's spent on administration. The average small business owner spends at least 18 hours a week dealing with mind-numbing HR tasks. From compliance to turnover analysis, HR tasks are a crucial component of keeping your workplace glued together and regulatory bodies off your back — but it's often time-consuming and stressful.
Professional Employer Organizations (PEOs) help businesses navigate the world of HR administration with best-in-class support and resources. Not only are PEOs more affordable than salaried HR employees, but they perform a wide variety of tasks that a single (or even multiple) HR employees simply couldn't handle.
This series of articles will explore why PEOs provide an average ROI of 27.2% for businesses by exploring the duties and responsibilities of PEOs once they're contracted by your business. We'll explore the four primary pillars of HR value for businesses that choose to work with a PEO:
- Human Resources
- Workers' Compensation and Claims Management
- Employee Benefits Administration
- Online Employer Administration
This article will focus on the first pillar — Human Resources.
PEOs and Human Resources
In general, the "human resources" bucket of HR administration refers to all of the duties and responsibilities that go into training, retaining, and onboarding employees — as well as the regulatory responsibilities that surround those duties.
We're going to focus on these core duties:
- Background checks
- Custom employee handbooks
- Employee exit interviews
- I-9 training and recommendations
- Pre-employment drug testing
- Sexual harassment training
- Turnover analysis
- Workplace conflict assistance
- Formulating policies and procedures
- Job descriptions
- Labor law compliance
- Responding to and fighting state unemployment claims
- Wage and salary planning
Despite the ongoing skills gap (83% of HR pros are having difficulty finding suitably skilled candidates in the talent landscape), background checks remain one of the most significant ways to determine the character of a person outside of the interview process. As a business, you want to hire people who are a good fit for your needs. So, what happens when 11% of job applicants misrepresent the reasons they left a former employer, 34% of applicants lie about their previous experience, and 9% of applicants outright lie about their college degree?
PEOs like PRemployer leverage a comprehensive background screening process to identify suitable candidates and uncover falsified job applications. Not only do PEOs handle the process of background checks, but they use best-in-class background checking resources to prevent liability issues and deter candidates that don’t fit your needs.
For employers, this means less time (and money) spent on background checks and better overall candidates. 75% of small businesses have admitted to hiring the wrong candidate. A PEO helps you stay in the 25%.
Custom Employee Handbook
Your employee handbook acts as a detailed overview of policies, procedures, benefits, and guidelines for your workplace. Not only does your handbook help prevent regulatory risk, but it helps employees understand and navigate their working environment. Unfortunately, employee handbooks aren't plug-and-play. You have to spend time and resources developing an in-depth handbook that makes sense for your business.
PEOs can help. By ensuring that your employee handbook is created and administered by experts, you don't have to stress about figuring out how to make the handbook and what policies and procedures you need to adhere to.
Employee Exit interviews
It's estimated that losing an employee costs anywhere from 1.5 to 2 times their annual salary to replace. Exit interviews are powerful tools that help you understand why employees are leaving, what you can do better, and whether or not there are any immediate trends that need correcting.
Unfortunately, most business owners simply don't have the time to spend on exit interviews. Having a professional handle the interview removes business owners from the equation — ensuring an honest exit interview that doesn't sap employers time.
I-9 Training & Recommendations
There is a myriad of forms that employers must fill out when they hire a new employee. Out of all of them, the I-9 is probably the most critical. A single little error on this form can lead to significant fines for employers. Violations for a single, tiny error on I-9 forms range from $216 to $2,156 per error (not just per form).
PEOs can help train you and your employees on I-9 form procedures. This saves you from risky fines and significant time investments reaching out to lawyers, tax experts, and accountants.
Pre-employment Drug Testing
For most employers, drug testing has quickly become a nightmare. With the legality of marijuana in flux and a never-ending barrage of drug policy changes, many employers simply forgo pre-employment drug testing. That's a bad idea! Not only are 74% of illegal drug users currently employed, but they cause around 40% of ALL industrial fatalities and 50% of workplace accidents.
In other words, illegal drug users present themselves as an employment risk. PEOs can help you create best-in-class drug testing policies and procedures that align with local, state, and federal drug guidelines to minimize your risk and maximize the quality of your candidate pool.
Sexual Harassment Training
Here's a scary statistics: nearly half of small businesses have no sexual harassment training program in place. That's a big problem! Sexual harassment fines can quickly cost small businesses over $50,000 in damages, and a lack of sexual harassment training can have a massive impact on your overall company culture.
PEOs can establish a sexual harassment training program in your workplace — creating a more positive and compliant overall workplace. Since PEOs have experience handling sexual harassment training procedures across many businesses, you'll get a well-rounded sexual harassment prevention solution that follows best-practices in sexual harassment mitigation.
Every business deals with turnover. Across America, 51% of all employees are actively considering other jobs. In fact, one-quarter of employees will leave within their first year on the job. Turnover analysis involves figuring out why employees are leaving, and what you can do to get them to stay. Left unchecked, turnover can quickly sink your business. Remember, it costs around 2x an employee's annual salary to replace them. If a few employees jump ship, you can be looking at massive business losses.
PEOs can help. By analyzing your turnover, PEOs can help mitigate employee turnover — saving you time, money, and plenty of headaches.
Workplace Conflict Assistance
Let's get this out of the way: workplace conflict is inevitable. When you take a bunch of people from different backgrounds and work styles together, heads are bound to butt. It's estimated that the typical business owner spends up to 40% of their time dealing with employee conflict. Not only does this mean that business owners are forced away from growth-bearing activities, but it puts business owners in a tough position.
This is where your PEO comes in. By establishing conflict-resolution procedures, PEOs can reduce instances of conflict and remediate any issues that pop up in the workplace.
Formulate Policies, Procedures & Forms
If there are three words that scare business owners, they're policies, forms, and procedures. These often dull, but incredibly necessary, business components are the secret sauce that keeps your business running. For most business owners, policies and procedures are overwhelming. Not only do you have to deal with compliance and regulatory code, but you have to incorporate the right set of policies and procedures that enable employees and breed a successful culture.
PEOs are well-versed in policies, procedures, and forms. Since PEOs partner with hundreds of other like-minded small businesses, they have the experience, tools, and resources to help you formulate best-in-class policies and procedures that keep your business running smoothly.
With 83% of HR reps finding it difficult to acquire employees in today's talent landscape, competition for employees is fierce. You need to immediately capture the attention of prospects with well-formulated and hyper-descriptive job descriptions.
The secret is: there's a lot that goes into job descriptions. PEOs can help you create job descriptions that draw in the right employees, decreasing your time-to-hire and increasing the overall quality of your applicant pool.
Labor Law Compliance
When it comes to labor laws, there's only one universal truth — change. Business owners have to pay constant attention to new regulations, rules, codes, and changes that happen in the labor law ecosystem. From the Fair Labor Standards Act (FLSA) to state and local laws, ensuring that you're up-to-date and compliant is a headache.
PEOs can help you stay compliant by adhering to local, state, and federal labor law guidelines. Since PEOs are in-the-loop on labor law changes, they have the skills and experience to instantly keep you compliant with new regulatory guidelines.
Responding & Fighting State Unemployment Claims
46% of newly-hired employees fail within 18 months of being hired. As a business owner, you have to make tough choices. But any time an employee is let go, you'll likely end up on the other end of an unemployment claim. Like any legal paperwork with financial consequences, these unemployment claims are hyper-important and complex.
Your PEO will handle all of your unemployment claims. That means rapid response, up-to-date information, and critical advice on whether or not you should be fighting any of those claims.
Wage & Salary Planning
Your wage and salary plan describes the responsibilities and pay for each job position in your workplace. But are you positive that your salaries are competitive? How do you know if you're underpaying or overpaying in your industry and location? Your PEO can help you formulate a competitive wage and salary planning model that's appropriate for your business, size, location, and industry.
PEOs Can Help You Get Back to What Really Matters
There's a reason that 98% of PEO clients would recommend a PEO to their colleague, they're an incredible HR resource that helps you navigate the complexity of human resources. From handling employee conflict to instituting the right policies and frameworks, PEOs are an invaluable resource in the HR landscape.
This article will be part of a series that describes the duties that a Professional Employer Organizations will take over once they have partnered with a business. Part 2 of the series coming soon: Workers' Compensation and Claims Management.