Professional Employer Outsourcing Helps Languishing California Employers

This past Friday, the Labor Department released the latest employment figures, and they don’t look good. The jobless rate rose in more than half the states, and the national Unemployment Rate remained unchanged at 8.2%. In California, the jobless rate has remained at a virtual standstill the entire year, still holding at 10.7%, down just .2% since January.

With health care reform, an election year and an uncertain economic future, many employers are loathe to begin hiring again, treading water until the economy clearly starts to rebound. Beyond hiring, employment risks abound, thanks to a tireless legislature and active pro-employee lobby. Particularly in states like California, labor law regulations and expensive insurance premiums weigh heavily on the minds of small business owners.

While many California employers are taking a wait-and-see approach, others are turning to Professional Employer Organizations (or PEOs) to help them navigate these difficult financial times.

What is a PEO?

Professional employer organizations (PEOs) enable clients to cost-effectively manage their human resources, employee benefits, payroll and worker’s compensation. By outsourcing these complicated and burdensome activities to the PEO, clients focus on their core competencies to maintain and grow their bottom line.

A PEO legally assumes the insurance and tax-filing responsibilities for their clients, officially becoming the “employer of record”. Beyond taxes and insurance, the PEO assists clients manage the entire “life-cycle” of their employees, from hire to term. This includes:

  1. Recruiting
  2. New Hire Packets
  3. Training
  4. Job Descriptions
  5. Employee Files and Handbooks
  6. Employee Benefits
  7. Voluntary Insurance Products
  8. Payroll and Tax Administration
  9. Workers’ Compensation Insurance
  10. Safety and risk management

Employment Know-How

At the turn of the new year, over two dozen new employment regulations were signed into law in California. These ranged from pay and rest periods procedures, to pregnancy leave, to paycheck stubs and new insurance guidelines. It is virtually guaranteed that small employers located in the state lacking in-house HR expertise will be unfamiliar with all the new regulations and unwittingly violate the law.

PEOs employ a range of human resource and California employment experts that track these regulations and communicate them back to the clients in real-time. As an example, following with passage of the Affordable Care Act (“Obamacare”) and the subsequent Supreme Court decision, CPEhr’s Benefits and HR experts spent dozens of hours reviewing the details of the law and the implications for small business owners. It is this pro-activity that helps clients rest assured they remain in compliance.

The Financial Impact

In our next post, we will discuss how PEOs, through pooling resources and establishing economies-of-scale, can assist their clients to not only remain in compliance with the law, but to actually reduce their employment costs and overhead.