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PRIVATE EQUITY EDITIONGUIDE TOHR OutsourcingHow does aPEO work?Page 4Advantages ofa PEOPage 8Take the quiz!Do I need tooutsource my HR?Page 10
Business can be likea game of chessAre your playersset up for success?Successful chess players work backward – imaginingtheir winning scenario, then strategically deployingtheir pieces to achieve their goal.A toxic corporate culture is by far the strongest predictor ofindustry-adjusted attrition and is 10x more important thancompensation in predicting turnover.*Business leaders should think inmuch the same way.Signs of a toxic workplace1. Unapproachable leaders2. Lack of flexibility3. Bullying environmentsWhen you consider the many movingparts of running a business, this neatchess metaphor breaks it down. You don’t have one competitor; there are many. It’s not just about using your rook wisely; you must keepher engaged and invested in the game. Add in the mental and monetary toll of managing variousvendors to offer benefits and keep people paid.4. Lack of appreciation for employeesBottom line: companiesthat prioritize employeeengagement see a 23%increase in profitability** All the while, you’re left navigating regulatory andcompliance risks. And outside of people-related matters, you’ve got abusiness to run.If you could hire an outside firmto create a scalable system forkeeping your queen, providinghealth benefits to everyonein the game and offeringstrategic HR guidance tokeep you competitive,would you take it?02Introduction HR outsourcing optionsLet’s explorewhy so manybusinessesanswer yes.How can you getyour pieces inposition pronto?* Source: 2021 report by MIT Sloan Management Review** Source: Gallup’s 2020 Employee Engagement Meta-Analysisinsperity.com
Play toyour advantageWITH APEOWhen you or your portcos join forces with a PEO, yougain a powerful ally. A PEO will unleash its full suite ofresources and assume responsibility for some of themost time-consuming HR tasks and assume or helpyou manage many employer obligations and risks. You,in turn, can focus on advancing your game forward.04How a PEO worksGain access to PEO-sponsored benefits Employees have access to comprehensive medical, dental, 401(k)benefits and more As the plan sponsor, the PEO handles carrier and vendor negotiations,benefits administration and legal complianceWard off or manage risk Workers’ compensation insurance coverage and employmentpractices liability insurance (EPLI) Recommendations on best practices to improve workplace safety Assistance with HR-related compliance and paperworkLevel up employees Ongoing performance improvement support Online learning options, including leadership developmentPlay it safe HR best practices guidance to help you or your portfolio comply withHR laws, regulations, and rules, both local and federal Handbook development, onboarding, termination assistance andmore – to help reduce employer liabilitiesLet the big boss skip a turn Relief from the tedious tasks of HR administration, payroll processingand payroll tax filings Free up time for yourself or the leaders of your portcos to focus on strategy,employees and the bottom line Reduce drain on capital and improve profitabilityUnify your forces HR service and technology to facilitate efficiency and compliance One seamless technology platform to integrate payroll and time and attendance Reduced manual data entry burdeninsperity.com
Rules of the gameA winning propositionWhen you decide to work with a PEO, the businessA PEO can help optimize your investment by:relationship called “co-employment” is created.1. Providing HR infrastructure for you or your portfolioIntegrate your human capital management systems into one platformwhile gaining more accurate workforce insights and forecasting.In a co-employment relationship, your company’s employeesare employed by both your company and by the PEO, while theagreement between your company and the PEO allocates anddivides up employer responsibilities.As a business owner, you’restill in full control of: All business decisions2. Helping minimize riskSee greater clarity in your human capital costs, and get help mitigatingrisks related to HR compliance and employer liability.3. Maximizing ROIImprove the success potential of your portcos by focusing on theHR element. A solid HR infrastructure could make companies moreattractive in a sale. Daily operations Employee core job functions and dutiesAnd, just for example,as a co-employerthe PEO could beresponsible for: Providing employee benefitsA PEO provides the infrastructureand resources you need, whilegiving you back valuable timeto focus on growth. Payroll and HR administration HR-related governmentcompliance assistance Providing HR advice06Roles and responsibilitiesinsperity.com
Get to yourendgamefasterFuel your success with:1Enhanced speed ofM&A execution3Game-changingworkforce insights2More accurateemployee costforecastingPerhaps that’s why, ina PEO arrangement,businesses have beenshown to:Grow 7-9% faster*EXPERIENCE10-14%LOWER TURNOVER*Have16Xfasteremploymentgrowth thanthe rest ofthe economy*Source: Napeo.org; What is aPEO/About the PEO Industry.The right PEO can flip apotentially troubled handfull of HR compliance andoversight into your ace inthe hole.08Advantages of a PEOinsperity.com
Take the quizDo I need to outsourcemy HR?Quiz yourself on the different businessscenarios below. Think it through and becompletely honest. If you answer yes tomore than five questions, you and yourteam may benefit from working with areputable PEO.Teams, notpieces, winEvery PEO is unique in the way they structure,deliver and price their services. (Beware ofextra fees!) To pick a PEO that’s going to giveyou a leg up, first identify your HR challenges. Are you processing payroll properly? Are you losing employees to competitors because21Is your managementstyle reactive insteadof proactive?uitsqeeyor?plo r dem tice o noverruouotnyDo short higheon havyou7they don’t have access to competitive benefits?3Have you dealt withincomplete employeepaperwork before? Or is your workforce disengaged andfindHave employees quit tobetter benefit packageswith other companies?performing poorly?Now, identify your PEO must-have features: Employee benefits6Have you ever beenfined for HR-relateds?compliance violation5 you haveDounderperformingemployees?4Have new employeesmissed their benefitsenrollment period? Technology options Assistance with HR-relatedgovernment compliance Performance management support Employer liability management Training and development Payroll and employment administration Recruiting supportWhere did you land? If your teamcould benefit from working with aPEO, it’s time to understand howto choose between PEOs. Core and strategic HR services Programs for growth-focused businesses M&A integration support8Haloc ve ydo atin ou hcu g c adme erint tai ssues? n H sR109tediousAre you slammed withe totimfind’ttasks and cane?turpicgerbigthefocus onQuiz PEO partner must-haves10payroll takeDoesup a large chunk ofyour time?insperity.com
No MonopolyPro tipmoneyPart of beating the competition isholding the most coins in the end. So,it’s important to understand PEO pricingto get the most bang for your buck.Weigh your optionsbefore making a movePEO cost and pricing breakdown For public companies, you should be able to check forcompany information on an investment research website.The PEO’s fee will include thePEO’s direct cost allocations,which may include:An administrative fee mayinclude charges for: Wages and related payroll taxes(FICA, Social Security, Medicare,FUTA and SUI) Workers’ compensationadministration and safety Workers’ compensation insurance Employee benefits Employment practices liabilityinsurance (EPLI) Payroll administration Look for the PEO’s annual financial statements thatmay be published on their website.What’s a CPEO? HR compliance HR technology An audit of their financial statements HR services CPA-affirmed documentation that they payemployment taxes in a timely manner Benefits administration1. Percentage based – The PEO’s administrative fees are calculatedas a percentage of your employees’ gross payroll.2. Flat charge – The PEO’s administrative fees are calculated asa fixed cost per employee.With the flat, per-head fee structure, it doesn’t matterif an employee makes 10 or 10 million. Your PEOadministrative fee stays the same.Understanding pricing Strengths of a CPEOHow to evaluate a PEO’s financial strength and securityA Certified PEO (or CPEO) is a PEO that has applied tothe IRS to be certified and, after providing extensiveinformation, received the CPEO designation from the IRS.It’s a not a simple process to become a CPEO, and notevery PEO will qualify. PEOs applying for CPEO statusmust provide the IRS with a lot of information, including:Key differentiator: Administrative fees can be12It’s wise to conduct a break-evenanalysis to understand at what pointa percentage-based fee is moreexpensive than a flat charge. Documentation that they have positive working capital Background reports of their individuals responsiblefor employment tax paymentsThe IRS wants to take a good look at the PEOs it certifies because CPEOs(unlike non-certified PEOs) are solely responsible for paying employmenttaxes on wages they pay to worksite employees – meaning that as a clientof a CPEO, you have additional peace of mind by knowing that if you remityour payroll taxes to the CPEO, then you’ve satisfied your obligation to theIRS for those taxes, even if the CPEO failed to pay the IRS.insperity.com
Winner takes allWould yourather have It’s your turn!Decisions, decisions. Finding the PEO that’s most suited for yourcompany can be tricky – not all PEOs are created equal. Before youcommit, ask each PEO these questions:A.B. How experienced are your service team members?A PEO with a strongA PEO with How do you communicate with your clients?local presence in yourresourcescity or state?nationwide? Can I meet the people who would be servicing my account? What is your “staff support ratio” or number of service teammembers compared to my employees? May I see your service agreement? Do you carry employment practices liability insurance (EPLI)? What coverage would my company gain by joining your PEO? How are employee benefits funded? Are you a CPEO?If you’ve been in the game longenough, you’re not just lookingto skate by, you want to win big.For a private equity firm or anyfast-growing business, that could meanconstantly encountering laws in newcities and states across the country.Will a PEO that’s strictly local be ableto provide you with the nationalresources you need? Before youanswer, pause! You don’t have tosacrifice one for the other.14Local and national PEO benefits Questions to ask a PEOWhy not work with a national PEO withservice team members in locationsacross the country? Here are someof the benefits: Invested in your local community Proficiency in federal-level issues Convenience and accessibility Market-specific awarenessPlay yourcards rightBe a savvy consumer. Beforeyou sign on the dotted line,make sure you ask questionsand read the fine print.insperity.com
HR services thatscale and adaptto your needsInsperity’s comprehensive solutions offer the integrated HRtools, resources and support to help your PE firm overcometoday’s challenges and position your portcos for growth.Ready to discover all that’s possible with the rightHR partner? Email alliance@insperity.com.FULL-SERVICE HREMPLOYEE BENEFITSHR TECHNOLOGYNSP 82-1827 0322 CPM-P0122-5169
most time-consuming HR tasks and assume or help you manage many employer obligations and risks. You, in turn, can focus on advancing your game forward. 04 How a PEO works insperity.com Play to your advantage PEO WITH A Gain access to PEO-sponsored benefits Employees have access to comprehensive medical, dental, 401(k) benefits and more
