Outsourcing with a twist Featured

10:10am EDT July 22, 2002

Outsourcing with a twist

How to free your company from the entire human-resource function.

By Corrine LaFata

Business owner Jeanne McNary had had enough of the mind-numbing, time-eating job of managing employee administration-from payroll to benefits management and taxes-so she simply stopped doing it.

But her staff of five still gets paid, taxes get paid, and, better still, employees are now able to receive the kinds of benefits usually reserved for Fortune 500 companies. And perhaps best of all, McNary says, she can now concentrate on her core business. Her solution: classic outsourcing-with a twist.

McNary, co-owner of Docu-Rom, is part of a growing trend of business owners who are turning over tedious human-resource tasks to outside organizations called professional employer organizations. Essentially, a PEO is an entirely outsourced human-resource department. The PEO contractually assumes and manages human-resource responsibilities and employer risks for the business.

McNary turned to YourStaff Inc., a Burgettstown-based PEO that serves clients in the tri-state region. So, instead of drudging through the weekly paperwork associated with payroll and decoding ever-changing labor compliance regulations, she now writes just one check to YourStaff, which then does all the work for her.

McNary says it has alleviated a giant administrative headache and freed her to do her other work, like running her North Charleroi-based document scanning company.

"This opens the door for me to do my tasks of the day," says McNary. "It's so easy."

"The main benefit of using a PEO is that the employer gains better control over his business," says Jeff McGraw, director of sales and marketing for YourStaff. "Instead of having to focus on payroll, etc., they can pay attention to the aspects that drew them into the business in the first place."

The U.S. Small Business Administration estimates that the average small-business owner spends between 7 percent and 25 percent of his or her time handling employee-related paperwork.

Using a PEO, McGraw says, business owners regain that much-needed time, which they can devote to the production, marketing, and other functions of their core businesses-but without losing control of their employees.

In a PEO relationship, the business and the PEO are "co-employers," McGraw says. The employees still report to the same job, at the same location, and to the same boss, but their checks are cut from the PEO's account, and their competitive benefits are the result of the economies of scale brought on by the PEO's wide employee base.

On the administrative side, the business owner and the PEO share such responsibilities as union contracts and negotiations and upholding the Equal Pay Act. The PEO, meanwhile, assumes full responsibility for tasks such as maintenance of employment records, workers' compensation, and compliance with federal, state and local tax regulations.

The regulations alone, McGraw says, can seriously distract business owners, given the constant changes in labor laws and regulations. Without a PEO, the business owner is responsible for complying with the changes.

"We insulate them from a lot of these risks," says McGraw.

Adds Marcia Sartori, founder and president of YourStaff: "We focus on being a professional employer, and they focus on being a good business."