Small and medium-sized business
owners know how difficult it is to
compete for talent with the “big boys” in the arena of employee benefits. However, what most business
owners do not know is that there is a
way to level the playing field.
HROs, or Human Resource Organizations, are fast becoming the best way
for small and medium-sized businesses
to compete by pooling together benefit
packages, human resource services,
payroll and retirement plans.
“HROs level the playing field,” says
Mike Leach, Senior Vice President of
Employco Group, an HRO that handles
human resource outsourcing for 400
small and medium-sized Midwest companies.
“A small company can become a
member of an HRO and offer its
employees the same benefits as a
Fortune 500 company.”
Smart Business spoke with Leach on
how Human Resource Organizations
operate and the benefits to becoming a
member.
How does an HRO work?
It is an outsourcing vehicle to help
reduce and stabilize labor costs by
using the power of a large group. You
can outsource several areas of a business, but there are four main areas:
human resources, employee benefits,
payroll and workers’ compensation.
The smaller company falls under the
umbrella of the HRO and is therefore
able to offer discounted health, dental,
auto insurance and even pet insurance
to its employees. This is a huge advantage for smaller companies that must
compete for the same shrinking talent
pool.
The HRO takes on what the business
owner does not have time to deal with
— including HR, providing decent
health coverage, claims management,
payroll taxes, direct deposits, etc. It is
a way to simplify a small business
owner’s life by taking away the administrative burdens.
Why don’t more companies in the Chicago
area utilize this service?
HROs have been around for a long time
in Florida, Texas and California. In other
areas of the country, it has required a fair
amount of education for business owners to understand how HROs work. But,
as the economics of business are changing because of the exorbitant cost of
health care for employees, business
owners quickly understand the benefits
of belonging to an HRO.
What type of company is best suited for
HROs?
There are two types: small businesses
that are finding it a challenge to get
decent health care for employees; the
other is a business with high workers’
compensation costs. Companies usually
range from 10 employees up to 500.
HROs are very advantageous to start-up
companies and franchise businesses that
cannot manage HR and employee benefits on their own.
Clients come from various industries; however, there are certain industries
that will not be accepted by most HROs
because of the high risks, such as roofing companies or ammunitions factories,
to name a few. Companies must apply to
the firm and, honestly, many are turned
down. The business must be well managed to participate in an HRO and add to
the stability of a group.
How much does it cost to participate in an
HRO?
HROs charge a percentage of a business’s payroll. They often conduct an
extensive analysis of a business’s needs
in order for the costs to break even with
the savings. Most firms have flexible
programs — and employers can often
pick and choose the programs to meet
the ‘no cost’ goal.
What kind of company would not benefit
from using an HRO?
Companies that are too large — over
500 employees — often can get good
benefit deals on their own and don’t
have a need to belong to an HRO. Very
small companies — with less than 10
people — can most certainly use the
service, but not all HROs will take on
such small operations.
What are the steps to selecting a good
HRO?
1. Look for stability. Select a firm that has a good track record and has been in business at least 10 years.
2. Go local. An HRO that is in your city or region has its advantages since paychecks need to get to employees on time.
3. Ask for, and check, client references.
4.Get flexibility. If you are a small business owner, you need to be able to start small and have the HRO grow along with your needs.
MIKE LEACH is Senior Vice President, Employco Group (www.Employco.com), a division of The Wilson Companies. Employco handles human resource outsourcing for 400 small and medium-sized Midwest companies. Reach him at (630) 286-7357 or
[email protected].
