Understanding Your HR Options

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Katrina Faessel:
For our final session of the day, prepare for an extraordinary duo of speakers. Learn to ask the right questions and find the right solutions for your business. I'm honored to welcome two members of TriNet's Product Marketing team, Josh Newman and Ankur Patel.

Ankur Patel:
Thanks, Katrina. Josh and I are extremely excited to be able to talk about understanding your HR options today. So just to frame how our session is going to go, a couple of the topics we're going to cover. What are our solution options that are available? What you need to know before you decide and picking the right option for you.

We understand the landscape is pretty complex, so we're hoping to help kind of simplify what are the solutions out there for the problems you're facing.

So kicking off what HR solution options are available? One of the first ones that always come to mind. Option one is running the HR function in-house. And as simple as this sounds, it can be very nuanced and to me, and kind of based on best practices in the industry, this option typically spans the spectrum of the size of an organization.

For instance, for very, very small teams, you might have an individual who is wearing multiple hats conducting the HR function. And then on the entire other end of the spectrum, for larger organizations that are staffed, they may have a full in-house HR team that can deal with the nuances and complexities of HR and be able to handle the entire function themselves in-house as well. Both scenarios, many folks kind of look to multiple vendors or point solutions.

So everyone's turning to technology to enhance their business processes to help mitigate risk and ensure they're remaining within compliance. When you think of all the complexities that HR offers. A lot of folks tend to either lean on multiple vendors, but we're also seeing a larger trend  in the landscape among SMBs to identify consolidated point solutions.

So these are solutions that are really all-in-one that helps simplify both cost and really help simplify the tooling that the individuals are working in, whether they are that extremely small, lean team that's wearing multiple hats or the larger scale HR function that's kind of spread and divvied specialized responsibilities.

Option two typically goes to outsourcing HR services. So in the landscape of solutioning, vendors typically use this umbrella term named ASO, which stands for administrative service organizations. Like I said, it is an umbrella term. So it's a little bit nuanced depending on who you speak to, but essentially what you're kind of buying into is relying on a third party staffing to come in and support the administration of your technology.

So for instance, I may, as a small business owner, recognize that I'm currently outsourcing payroll or just the payroll function where I may want to outsource the HR function altogether, or I may actually want to deal with the administrative services that are a little more transactional and may just need tax filing assistance or HR and payroll auditing to help align towards compliance.

So you can see just in kind of those examples how nuanced they can get when you think of ASO. But again, the goal here is to rely on some third-party staffing to help fulfill a need, without fully relying on just wearing multiple hats as a lean individual, as we saw in option one. Or fully on the other end of the spectrum, where you have a multitude of people in-house covering a ton of different functions.

And I'll turn it to Josh for option three.

Josh Newman:
All right. Thank you, Ankur. So option three is a professional employer organization, or PEO, to help you run your HR function. A PEO is a full-service HR solution that has solutions throughout the employee lifecycle from hiring to offboarding. And generally speaking, a PEO will always have payroll; will always have access to their own sponsored benefits. And we're going to get a little bit more into the nuance of the benefits later in the presentation, but it's a significant distinction with PEO.

Risk mitigation—we have this term co-employment, so maybe I'll hit that right now and then go back to risk mitigation. The PEO, for companies that work with the PEO, they engage in a co-employment relationship. So the PEO becomes a co-employer of the client company’s employees and with that some of the employment-related risk transfers away from the employer to the PEO.

Often PEOs provide HR administration and guidance. This varies a little bit from PEO to PEO and we'll get more to that as well. But like I said, typically, and certainly with TriNet, HR administration and guidance is a big part of the value that a PEO provides, as well as HR technology that supports all these things, whether it's the benefits, the payroll or the risk mitigation.

And so here's just a little diagram of the co-employment construct between the PEO—here we're calling the PEO "TriNet"—the client and their worksite employees.

So one misnomer I would say, and sometimes where there's reticence working with the PEO, is a company will wonder, "Well do I lose control in any form over my employees," and answer is "No."

So day-to-day control and direction and management of the employee stay with the client company, as you would expect. What happens is things like the sponsored benefits are now listed under the PEO’s name. The W2 will have the PEO’s name because all of the payroll paid under, and the payroll taxes are filed under the PEO‘s tax identification number, and that has a benefit as well. Going back to that risk mitigation topic that we briefly touched on, the PEO's on the hook for filing and remitting the right taxes.

Ankur:
So you've already kind of noticed the solutioning and options that are out there, so now we'll get into what you need to know before you decide. So Josh and I kind of covered three categories of when you think of a business, areas that could solve your needs.

All right. So to jump into some of the advantages and disadvantages of the HR function in-house we’ll kind of kick it off with this element of control. Josh just covered one of the options on this. This awesome spectrum is a PEO model which employs a co-employment type of infrastructure.

When an HR function is in-house, you maintain this element of control, whether you have an extremely lean team or a little bit more of a robust organization that has a broader HR team. You're closer to your employees from that perspective and kind of just maintain this pulse of what that interaction looks like.

You also notice one of the next advantages is also a disadvantage, which we'll get into, but it's time intensive in the function where it's in-house. You're now seeing this big evolution, especially over the last three to four years through the pandemic, where culture and engagement of employees is an utmost priority for many organizations.

So you're starting to get individuals who are even specialized in just solving this problem for companies, which is identifying what will it take to get my employees engaged, productive, happy in their seat and just maintaining a great presence in company culture. There's a lot of work that goes into that, but there's a lot of work that brings great things to fruition as far as company culture goes.

The other advantage is relying on technology enhanced processes. So whether it is the multitude of point solutions that some firms use to kind of cobble together to get something holistic, or something that's a little more centralized all-in-one type of vendor where you can rely on every aspect of the HR benefits, payroll, recruiting type of function, you're leveraging technology to help streamline, enhance those business processes, to ensure you're able to serve your entire organization's HR needs, whether it is on the smaller end of that spectrum or the much larger end of that spectrum.

Some of the disadvantages that, that play here, it can end up being a little bit expensive. Also, depending on where you vary on that spectrum, if you are a larger organization, you are going to have to deploy more human resources into your human resources organization, so staffing up to ensure you're covering the breadth of what HR actually covers.

You also have to incorporate those costs with the technology. If you're using multiple vendors or a consolidated vendor as one point solution or one all-in-one solution, I should say, then you also have to encounter and take into what those dollars add up to.

As I mentioned, it gets time intensive here as well. This also is a little bit nuanced depending on how you look at it. If you're thinking of a much smaller team that has one individual wearing multiple hats, HR is a huge operation. There's a lot of nuance to it. There's a lot of legislation that continues to change, that drives a lot of HR practices as well. So being able to maintain adherence to those, and stay ahead of those, it's a daunting task which many individuals take on, especially as businesses grow.

And then last thing, it is resource intensive. Like I kind of mentioned, if you're a larger organization, you're staffing up, you do need a larger amount of headcount in your HR organization to delve into all of the nuances that come with HR best practices, compliance, whether you're talking just HR administration or the benefits and payroll aspects as well. And then transitioning to the outsourced HR services to the ASO concept we covered as well.

You know, one of the advantages is scalability. So if you recall, this is kind, of it's relying on a third party to fill a very specific need, whether it's an individual payroll manager or some sort of administrative task that you are needing to get kind of reined in, it allows you to scale, whether you are a smaller organization or a growing organization, you're basically relying on additional headcount without having it in-house to be able to accomplish tasks and cover some sort of specialty. With that comes flexibility. So it allows you to deploy your resources strategically depending on what the tasks are that you need fulfilled. You can kind of pick and choose.

And that that really kind of dovetails into the last advantage, which is, it allows you to be a little more ala carte. So picking and choosing exactly where your need needs to be met, and identifying that specific resource that helps fulfil that. Whether it's tax filing at the end of the year or beginning of the following year, I should say, or say you had a payroll manager, that there was a recent separation. Can I fill that or backfill that a little quicker with a third-party resource from an ASO type of provider?

And then heading into disadvantages, it can also be expensive. So depending on what you select from that, the myriad of offerings out there, those can add up. So if you're, you're picking and choosing a bunch over time, it may be more economical to just have hired a full-time individual or to cover a broader breadth. You're also relying on outsourced staff. So when you think of what I covered in the HR staff in-house, a lot of that allows you for control of your population. Now you're relying on outsourced staff, which, it may not be as intimately knowledgeable of your organization, its needs, your people. So definitely kind of a cross section of what to think about when considering an ASO model, if it is the right fit for your organization.

Josh:
All right, let's run it for PEO. So advantages for PEO. One, the time savings because for a couple of reasons, right? You have the all-in-one capability, very comprehensive capability, the tech and the administration. That all delivers significant time savings, the extent to which many companies won't need someone in-house, doing HR admin, HR operations, right?

We still see a lot of, especially in more medium size or larger small companies, having HR folk, but focus is really just on the strategic side of HR: Culture, team development, recruiting the right people, but being able to get this time dividend to focus on those, not less on the admin, but you're still getting the next advantage of that expertise, right? You can still rely on, especially the better PEOs, getting true HR professionals and experts.

Ankur alluded to the nuance and complication that surrounds HR today. You know, we've both been following this space for a while and it's never been, in our estimation, this complicated, right? With everything that's happened the last few years, remote, now people are working in a more distributed way in multistates, all the compliance that comes from that. Being able to tap into a wide array of expertise is a significant advantage and I think that dovetails into the risk mitigation.

These experts can help you be proactive in mitigating risk with best practices also covers the compliance component, a lot of expertise around the compliance and if you're complying, you're taking on less risk. And I think at the top of the call, we talked about, with the co-employment construct, little transfer of some of the risk going to the PEO as a co-employer. Another example of that would be using the retirement plan of a PEO. The PEO acts as a fiduciary in that retirement plan takes on some of that risk.

And the last advantage I'd call out is, is on the benefit side. So with the PEO you're getting access to the PEO's sponsored benefits. These are large group plans. They tend to be comprehensive, often benefits that are out of reach to small businesses if they're going on their own or if they're working through a broker. This is huge for many customers of PEOs that are competing against large businesses for talent. Many PEOs, especially the top PEOs, can assemble a set of benefits that are competitive with Fortune 500 companies.

On the disadvantage side, it's not usually the right fit for very small companies, right? Just what I mentioned, the breadth of it, so comprehensive. If, if you're a very small company that does not have much complication, you don't need this much. It's too much.

And then, on, like, the control and customization side. So, you know, I did talk about you don't lose control over managing direction of your employees, but if you're joining the PEO's benefits, those are the benefits. If you're using the PEO's sponsored benefits, you're not customizing the benefits. You're saying, "Those benefits look really good. I want to offer this to my employees. I take them as is."

Also, by being just an all-in-one solution, you get the most benefit, typically, if you're using all the capabilities of the PEO rather than going out to a point solution and getting your own. Well, with many PEOs you can do that. That does take away some of the value, and so you're not, generally speaking, if you're using a PEO, you're not going to customize nearly as much. And of course, you're relying on the PEO’s staff for your HR administration as opposed to if you have that in-house team. You're not picking the people, we like to think, and PEOs, obviously, are trying to bring on the best people, but they are making the hiring decisions for the HR admins that will be working with an account.

And so what option is right to you? I think this is in a way summation of what Ankur and I have been covering, but let's just run through it. So in-house we think is often right on both ends of the company size continuum. So for a very small company, a handful of employees where a CEO, a CXO, can manage the HR because there's just not that much to do at that point. It's not that complicated yet, and you just benefit from technology to streamline help you save time there. That tends to be a good fit for in-house. You don't literally have an in-house HR department, but you have someone spending 5% of their time doing HR.

And then the other for in-house would be on the other end of the continuum. TriNet's actually a good example of that. TriNet, we have our own HR in-house, right? We needed that customization. We wanted those resources, selecting the exact right people, the technology that we needed, customizing everything, customizing the benefits, especially for a medium sized company that is on this path, a real growth path. And is moving into the enterprise space, you know you're going to need to bring it in-house at some point. So that's also a good marker for bringing things in-house.

With the ASO, you know, that sort of fits in the middle. If on the PEO construct you want a little bit more control over customizing your offering, that's, that's where we see ASOs falling into play. Often another example would be if you want to use your own benefits. You know certain PEOs, do allow you to use your own benefits, but that's central to an ASO, it's having your own benefits so that can be a good fit there.

And then on the PEO side, you know, right in that middle, so when you get large enough that you start having some complication, HR is getting more technical, it's taking up more of your time, too much of your time, you need to tap into expertise, that's when PEO tends to be a good fit. We often hear about this from our prospective clients or clients. When you start hiring your first set of professional employees, right? You've gone beyond, you know, friends and family, founder, crew, you're all on the same page, right? And you have people that weren't necessarily tied to the business when it started, right? That you're hiring actual professionals, you need to recruit and retain them. You have to start thinking about compliance and risk. That's, that's you know, HR becomes real at that point, right? And that's a great time to tap a PEO.

Okay, so now let's run through picking the right HR options for you, some scenarios that I think are also revealing of what the right solution may be. And we kind of hit on these. But just to recap, definitely if you ask yourself, do I need that expertise, do I need that HR administration? Is it taking too much time? Do I have questions that I'm Googling that I should be asking a professional? Well, if so, and you're a startup, a PEO or ASO could be a really great fit. Again, a lot of you keep hearing me go back to complication, how technical it is. So geographic distribution moving into other cities and states is a really common trigger for that complication. That's also when a PEO can make a lot more sense.

Talent. If talent is a big priority and again, getting talent that sort of goes beyond your network, the access to benefits that comes with a PEO, the large group benefits, the range of benefits, the benefits that can work in a state that's far outside where you as the business owner are located, that's another example.

And then I'll just wrap with developing employees is a top priority. So that one I think is interesting because for employee development, if you have a strong in-house HR function there, that's often a key focus. So that's a great time for in-house or PEO also serves well for employee development, especially because it provides that time back to the leaders and the HR folks that you have internal, internally to really develop employees.

Ankur:
And, Josh, just while you were talking, I just saw a question come through the chat, which I think is perfectly fitting for how we're going to transition. What are the best tips on picking between the different vendors? I mean, we covered a lot today and it's definitely pretty nuanced. So I think you can kind of help dive into that.

Josh:
Yeah, no, that's great. It's a great question. It's the right question, right? We went into the differences between the models, but then say, "Hey, I know, I know. I want to do this in-house. I know I want ASO. I know I want PEO."  But not all ASOs, not all PEOs are created equal, right?

So, we do have some tips on doing your diligence here. You know there are thousands of companies out there that that do this. I'm most familiar with the PEO space, there's close to a thousand PEOs and, you know we really feel you know, given the gravity of what the PEO is working with, right? Payroll, and risk, your people and your benefits, it's important to select a very established player in the space with respect to handling such important matters.

References and reviews. I think that's always a best practice. And asking, in this actually in the bottom left, I see this relevant expertise, but getting the right references. Does the vendor have experience in your industry? Does the vendor have experience in your geography? That becomes very important, especially with PEO, where you're getting the administration, the guidance right, the having the right experience is key.

You know, at TriNet, we have vertical solutions by industry. Our financial services solution is different than our Main Street solution. We have different people picking up the phone or the chat. We have different benefits, right? Because as you can imagine, you know, a financial services firm and the Main Street firm have some different needs. So that's really important to uncover, is not just the capabilities, but do they have the experience in doing it for my peer group?

Fees and charges. Different vendors charge different ways. I'll just quickly maybe hit on PEO structure and then hand it off to you, Ankur. But this is definitely an important area to get your arms around in the PEO space. Some PEOs like TriNet charge a per employee, per month and itemize and break out all costs, very transparent. Other PEOs charge as a percentage of payroll. So payroll goes up and down, your fees go up and down as well. And they bundle all the fees together. So it can be difficult to understand how much am I paying for employer tax, versus the service fees, versus the technology, versus the benefits? Definitely ask about that as you're going through your vendor search.

Ankur:
Yeah. And just to kind of tack on, I know you kind of reference them as well, but I love hitting on quality products and services just because as far as my role and function, the line's right in there, but we covered the breadth of the spectrum of how folks can solve their HR needs and their problems, and within those, you're always looking for what can actually match my need.

And one of the other things that comes in on time is that transition time. So the setup process, what is implementation look like? If I'm in a headspace, "I'm trying to reduce risk now" because maybe I got slapped with a fine from the IRS as a small business, what does it look like to get that done as quickly and swiftly as possible?

So all good things to be thinking about when you're looking at vendors trying to select the right solution. One thing I just wanted to kind of call out, I hope everybody listening had an awesome National PEO Week and loved all the content that we've run through. We wanted to thank you. Thank you all from Josh and myself.

And honestly, as you're looking for solutions across this wide gamut, TriNet would love to help. So we have a resources link you can see right below. Tap into that if you're looking for any more knowledge and trying to kind of close the gap on your learning, or your due diligence. We offer every single thing we just talked about and covered in a very awesome and great way and are very much industry leaders across the board.

So, we'd love to chat with all of you, any of you, whoever's looking for a problem to solve. We definitely have a solution to help you out. Again, thank you.

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