Understanding Your HR Options

Please note that these sessions are for educational purposes only. TriNet provides HR guidance and best practices. TriNet does not provide legal, tax, or accounting advice. The materials in these sessions and the products, advice and opinions expressed in these sessions are solely those prepared by the presenter and not necessarily those of TriNet.

Katrina Faessel:
We hope you enjoy today's event. I would now like to turn it over to our TriNet team members, Joshua Newman, Executive Director, Product Marketing and Catie Grigsby, Senior Product Marketing Manager, to help you learn to ask the right questions to find the right HR solutions for your business.

Catie Grigsby:
Welcome everyone to our presentation—Understanding Your HR Options. We'll briefly pause on this disclaimer slide and move right into what we'll be covering today. So the topics we'll be discussing today are: what HR solutions are available to you, what you need to know before you decide and picking the right HR option for you. So, first, we'll start with the options that are available.

And the first one that we'll cover is, kind of the one that comes to mind, is running the HR function in-house. And as simple as this sounds, it can look very different, depending on the size of your organization.

So, for example, a very small company with less than five employees may have an individual wearing many hats, then also wearing the HR hat to cover any function like payroll or administration. On the entire other end of the spectrum, you have larger organizations with more resources that may have an HR department full of either teams or individuals specializing in each area of HR.

Either way, these teams' organizations depend on technology and our staff to handle the level of complexity of HR for their organization internally. But they do have that technology to streamline HR processes and mitigate risks when it comes to compliance. That technology could look a little different depending on the organization. It could either be several point solutions or you could have just an all-in-one system that covers everything from HR, payroll and benefits, which, if you are one of those larger organizations with a lot of overlap and HR functions, it can be helpful to have a single system of record, especially if multiple people are making updates.

The next option is outsourcing HR services and this is commonly referred to as ASO or administrative service organizations. Again, this can mean different things, depending on the service provider, but essentially what you're getting is third party staffing to support the administration of your technology, your HR technology and providing a certain level of expertise.

So when you recognize that the running HR in-house is a little bit overwhelming, you may be able to partner with an ASO provider to address your specific needs. And this can range from outsourcing just specific areas of HR, like payroll, to the full end-to-end HR administration.

Some ASOs or outsourced HR services offer more transactional support, so if you want help with tax filing or HR and payroll auditing for, you know, just reassurance to stay compliant, those are available as well. So technology's still a huge part of this model but the difference here than option one is the third party staff is actually in the technology and executing your HR strategy for you. So it's really a service to compliment the technology that you've chosen and for the third option. I will turn it over to Josh.

Josh Newman:
Thank you, Catie. Okay, so third is PEO. So first, let's define a PEO a little bit. PEO is short for professional employer organization. PEOs are not monolithic though. So there are hundreds of PEOs out there. The descriptions that I provide throughout, you know, our session here, over the next half an hour or so, are going to more or less describe TriNet's PEO model, as well as other leading PEO models. There are certainly levels of comprehensiveness with TriNet and other leading PEOs, you know, on the end of the continuum of being more comprehensive.

So with that in mind, PEOs like TriNet offer a full-service HR solution covering the complete employee life cycle from hiring to offboarding. So payroll and benefits and risk compliance and the technology and people to support that all will fall under the capabilities of a top PEO like TriNet and its peers.

As we think about payroll, what does this mean? It means you're getting the technology for payroll. You're getting the support with the administration related to payroll, similar to what Catie was speaking about earlier, as it relates to the outsourced or ASO model, as well as the expertise for more complicated payroll topics or issues that you may have.

Benefits are definitely unique under the PEO model because you are getting access to the benefits that are sponsored by the PEO. And I am going to spend much more time on that later and why we believe that's a strength and a good thing.

Risk and compliance—there's a thorough offering as it relates to, and thorough capabilities, as it relates to risk and compliance in the PEO model, both in the sense that the PEO is handling a lot of compliance related items as it relates to being employer, payroll, benefits, HR compliance, as well as, I'm going to talk a little bit more about some things that are inherent to the PEO model that shift some of the employment related risk over to the PEO.

HR administration and guidance. So just what I mentioned earlier for payroll, the point would also apply to the benefits. You are getting that hands-on support for you and your employees as it relates to HR, but also payroll and benefits. But you're also getting expertise and guidance to help with the more complex or consultative and strategic areas of HR, payroll and benefits.

PEOs generally come with their own technology platform. In the case of TriNet, that is a really comprehensive technology platform that not only includes payroll and benefits administration, but a full HCM—things like performance management, expense management, learning management and the list goes on.

And last on the slide, we have this co-employment relationship. So this is what's binding this model together. And on this next slide, we're going to depict it and I'll talk through it a little bit more. So a lot of what the PEO is able to provide or many areas of what the PEO is able to provide is because of this co-employment model.

So when you, as a company, work with a PEO, the PEO becomes a co-employer of your employees. As the client company, you still retain all day-to-day decision making, retain all the control of your employees—hiring, firing, managing, etc. But the PEO becomes the employer of record as it relates to things like benefits and payroll taxes.

And this shows up in different cases. So when your employee goes to the doctor and shows the benefit card, the employer listed there would be the PEO. The payroll tax filings, your W-2s, the tax identification number, name of the employer in that case will show as the PEO.

It doesn't have a bearing on how you manage your employees. It's more behind the scenes. Your employees don't really see it, but there are those cases where it is more noticeable to your employees and in a couple of slides, we're going to get into, in more depth, what are some of the real advantages that come because of this model.

Catie:
So going into what you need to know before you decide on an option. We're going to look at some of the advantages and disadvantages of each. So, first, starting out with HR in-house, the first advantage that comes to mind is control. Having HR in-house gives you the ability to maintain control. Whether it's that leaner HR team or a robust HR department, you're hiring and managing these professionals, and they're closer to your employees, and they have a better pulse on your organization based on those interactions. Again, technology is a big part of this, so you are able to simplify and streamline most aspects of HR and also deliver a consumer-friendly experience for employees.

And then both of these actually lead to the third advantage, which is the ability to make HR a strategic function for your organization. You're closer to the people and you have the staff that has the expertise to leverage their people management skills and your technology to focus on strategic priorities, which in the past few years, that has been to identify what keeps employees happy, productive and engaged and really attract and retain top talent. So the disadvantages of this option would be—it is very resource intensive. If you're a larger organization, you're likely staffing up to fully cover the breadth of what HR supports—everything from evolving legislation, benefits, payroll, culture building.

These are highly specialized individuals who probably make a considerably high salary, plus benefits, plus the cost of your technology, so it can add up pretty fast, but it's also time intensive. To be able to fully support HR, you have to stay on top of those changes and that can be a daunting task for some of the leaner teams.

And then you're when your business grows, that's even additional complexity that you'll need more staff to handle. And then that means more time spent hiring and training these individuals on your organization's specific processes. So, looking at the outsourced HR services or ASO model, some of the advantages here is scalability.

It's more scalable than what an in-house HR solution would be. You can add additional headcount without adding a full-time salaried employee. It also gives you flexibility. You can pick and choose what you need, a third-party staff to cover and only pay for those services and then change over time.

For example, if you do have your payroll manager go out on maternity leave or depart the company, maybe you just need to fill that gap until you find somebody new to take over.

And then lastly, is time savings. So all the time that you're spending on HR, you can free up to focus on other parts of your business.

It's also less time spent hiring and training individuals to run your HR for your organization. So the disadvantages of outsourcing. You give up some of that control that you have with an in-house HR solution. You lose that with a third party because you're not hiring and managing those individuals like you would your own team.

And as a service provider, they're likely to have certain ways they execute certain strategies, certain processes. So, they're actually the ones making the call on how things are done. And inevitably, that can lead to your ability to be more strategic. So when they're taking on certain administrative tasks, they may be just doing it, you know, following the step-by-step process and practice that they know.

They may not have experience in your organization or your industry to deploy certain programs that could build a long-term HR strategy. You also may lose sight of strategically managing your workforce investments or even lose sight of some opportunities to attract and retain talent with this model.

And for PEO, I will turn it over to Josh.

Josh:
So, starting with advantages of PEO. So time savings. I think Catie hit on a bunch of those with the outsource model as well. You know, both the comprehensive technology you're getting with the PEO, as well as that administrative support level is going to save a huge time dividend.

The other added feature of a PEO that I think delivers a time savings is that you have one solution for everything—one contract, one technology platform, one team to reach out to for support. So that delivers a better experience. And part of that is the convenience of all that. Where I think the advantages are more unique to the PEO are these other three advantages.

So going to benefits next. I started talking about that earlier, but with the PEO, you are getting access to the PEO's benefits. In the case of TriNet, there's thousands of companies and hundreds of thousands of employees using these benefits. So the scale and scope that comes with that is hugely beneficial and is made available through this PEO construct.

You know, as you think about a company like TriNet and other leading PEOs, the benefits that are available become very similar to the benefits that you would get at a Fortune 500 company. So, they are broader. The range and breadth of these benefits goes far beyond your traditional medical and dental and maybe a retirement plan.

Its perks, its pet insurance, its voluntary benefits, its transit benefits and the list goes on and on. Having that range of benefits, for most small businesses, small, medium-size businesses, it's just too much to administer and keep track of. But beyond even the range of the benefits as it relates to things like health insurance and retirement plans, joining in a larger group provides advantages in the types of plans, the range of carriers that you even get access to, to begin with, that may be out of reach to a small business. And the retirement plan, PEOs often have what's called a multiple employer retirement plan, where, again, you have all the employees or many of the employees, co-employees of the PEO participating in the plan, which can really bring down fees associated with the retirement plan.

Next, I'll talk about expertise of the service model in general. This does not apply to all PEOs, but again, top PEOs are providing that administrative and outsourced layer that we're talking about in the prior, that Catie was mentioning on the prior slide, which is helping you do things like running your payroll, sending the benefits communications, doing the actual operational, a lot of the operational work that is difficult, technical, time consuming. With top PEOs, beyond that, you're getting HR professionals that have expertise, that can help you in the strategic areas of HR and that are highly specialized. So I think this has become, in our experience, more and more important as HR has become more strategic to businesses and as HR has become more complex from the perspective of what small businesses are dealing with today, whether it's remote work or the disparate workforce, opening in new states.

So many different things could add to the complexity and also the environment we're in from a compliance standpoint has become more specialized and complex as well. There's only been more rules and regulations. And as you multiply that by the number of states you're in, it becomes just requiring an immense amount of knowledge and specialization, which top PEOs can provide.

And last is the point on risk mitigation, as it relates to advantages. So this risk mitigation applies to a few different things. So one is sort of inherent to the PEO model to begin with, what we were talking about earlier, TriNet becomes the employer of record for many things. And with that, we assume certain employer related risks.

For payroll, you know, when I mentioned before, we are providing, the PEO's tax identification number is on the W-2 filing. So we are the employer of record. And because of that, we take on some risk. The same point could be made to retirement or to the health plans that we offer. But beyond that, the range of compliance-related items that we're helping with and provide guidance and have the expertise on also mitigates risk and top PEOs like TriNet also provide EPLI policies or employment practices insurance to further mitigate risk.

And in the last point I would make, in the time we have now, on risk mitigation is workers' compensation. So PEOs often provide workers’ comp. Those, again, are sponsored by the PEO. They're administering them, they're selecting the plans as well as help, in the case of top PEOs, helping with claims administration.

On the disadvantages side, sort of related to what I just talked about, you're getting so much—the breadth, the expertise. Well, if you are a company that has very low complexity, are not in this race for talent, you don't need all this. So it can be more than companies need. And there's the customization point. There's, as opposed to maybe outsourcing or especially bringing your own in-house, there's less room to customize. What the PEO does is has a very broad offering, so you can pick and choose amongst that what makes sense for your business and your employees, but you don't have the flexibility to choose everything. You're selecting amongst the PEO's health plans, it's the technology that the PEO offers, etc.

And the last point we have on the slide is related to costs or savings. We have that in the middle, not an advantage or disadvantage as it relates to PEO. Many companies find that the PEO provides a huge cost savings. Many companies, when they get pricing, find that the PEO costs more. And the primary reason for that is because, as you look at PEO costs, and if you look at a detailed invoice for PEO, the benefit plans or the benefits are part of the PEO offering.

And sometimes it's more expensive to get benefits through PEO, sometimes it's less expensive. We price PEOs, TriNet prices to risk, so that's part of why not all PEOs price that way. But with that, what I would encourage you to do is it's going to be very hard to know if the PEO is going to provide a cost savings, unless you go through a whole buying process and get a quote based on your employee census. And the other thing I would note from, you know, as you're looking at the economics, it's not just the dollar amounts. You're getting a lot with the PEO in terms of these points we brought up earlier and, you know, time savings, risk mitigation. So if you're looking at something that's more watered down, I would certainly ascribe a value to that.

Okay. So based on that, what option is right for you? It's sort of summarizing what we've just said. So in-house, sort of on both sides of the continuum is where we see it making sense. So you're either very small company, a couple employees, have low complexity. You can do it yourself. Right?

You don't need all this specialized support. Just you're getting the technology to run payroll, maybe working with a broker. But it shouldn't take up too much time if you only have a couple employees. And then, of course, on the larger end, large companies where you want this really bespoke offering that's highly customized to your organization, you can spread out the cost over enough people that it makes sense to doing that hiring.

For the outsourced HR, small, medium-size businesses, this is a great option for, especially if like, really your need, your friction point is, "I just need to save time. I can't. I need help doing the administration supporting this. My benefits are fine. I don't have a high level of complexity or the need for strategic HR support. I just want help running payroll, administering the benefits, that sort of thing, some compliance support." That's where outsourced is great.

And then for the PEO, also great for small, medium-size businesses. I'd say as long as you have at least, let's call it five or so employees all the way up to about 500 employees, but that have some complexity, whether that complexity is stemming from the need to recruit and retain talent and the benefits and the experience you get from the PEO, or you need to tap into the expertise.

Your business is changing. You're opening in new states and the complexity is driving the need for that offering and as well as risk mitigation, compliance is high on your list. Okay, so similarly, let's just talk about this a little bit more—picking the right HR solution for you. So as we went through the last slide, like, what are the questions that you might want to ask yourself? Kind of hit on this already. But do you find yourself needing the expertise and strategy, or is it just HR administration. If it's a former, PEO; if it's the latter, the outsourced support might be a better fit.

The next point, am I looking to grow multiple cities or states? We talked about the complexity. PEO is great for that. Same on the next bullet of talent, the benefits and the resources and the experience you get from PEO ends up being a really compelling point as you look to recruit and retain talent.

Developing employees—that involves strategy, getting expert, getting talent and organizational consulting expertise. PEO is strong in that area and I think we hit on the benefits piece a couple of times already, but that benefits in the meeting and looking to get more competitive with benefits or looking for different economics on benefits is where a PEO can also differentiate.

Catie:
All right, I'll really quickly go through this slide because I know we're getting close to time, but when you do decide on a PEO, like Josh mentioned earlier, there are several PEOs out there. So you want to make sure that you're choosing someone that will support your efforts and long-term strategies. So we recommend considering finding an established partner, someone who has a great track record and you'll know we'll be around for the long run. And check for accreditation from key organizations.

Along the same lines, collect references. They should have clients willing to provide these references, and they should be willing to share those references with you. You want to know that they've worked with companies like you. Another resource for this are sites like G2 Crowd and Trust Radius.

Look for quality benefits and packages. You want to choose a PEO that has the knowledge of how to compete in your industry. It's a big reason why small companies or small to medium-size companies go with a PEO, right, is to offer this big company benefits. So you want to know that they can offer this competitive benefits for your industry and those products that your employees will find value in.

Relevant experience. This kind of goes hand in hand with references. You want to make sure they have worked in your industry and also your geographic area. So going back to multiple states, you want to know that they have, you know, the right certifications and knowledge to work in those locations.

I think Josh touched on this too, knowing the charged rates. Some PEOs charge a percentage of payroll. Some charge a flat per employee fee, but you'll want to ask for an itemized list so you know what you're being charged for ahead of time.

And then lastly, it's just the transition time. How disruptive will this be for my organization? What does it look like? Can you provide a schedule of what the flow will be to get a PEO on board? And with that, I think we will go to questions or the next part of the presentation.

Josh:
Okay. Yeah. So I know we're about out of time. We got a few questions.

So a couple of things to know. As you probably heard and have seen in the instructions, Catie and I will be available in the breakout rooms after the next prepared presentation. And we can get into many more questions. I'm going to take one question, one quick question now and then we'll tackle the rest in our breakout room.

But the question I am going to, I think is a really good one that I want to raise right now is—Is the PEO only available in the U.S? And how I'd answer that is it mostly applies to the U.S. In the case of TriNet, we also have an offering for Canadian employees, but as you think about your workforce and the PEO and let's say you're a global workforce, the PEO is really for your U.S. and maybe your Canadian employees. But what top PEOs like TriNet have done, knowing that you're looking for a solution globally, is form alliances and partnerships with organizations. Oftentimes, they're called EORs, employers of record that can handle HR for your non-U.S. and Canadian employees.

And many of the top PEOs have integrations and partnerships with them. So data can flow so you can get visibility into your full global workforce. But generally speaking, your PEO is not going to cover your full global workforce; you would then be working with multiple providers.

And I think that's the time we have today. I believe we even ran a little over. So thanks for bearing with us. This was fun and stay tuned for our next session when we bring in some TriNet clients and then hopefully we'll see you in the breakout room.

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