HR outsourcing:A step-by-step guide to professional employer organizations (PEOs)

TABLE OF CONTENTS

The unique HR challenges of small businesses

The power of PEOs

How a PEO can benefit your business

How PEOs work

Finding the right fit

Insperity® Workforce Optimization®

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The unique HR challenges of small businessesCompanies of all sizes struggle with growth. But as a small business, to stay competitive, you’re constantly forced to do more with less.

Not only do small businesses have fewer resources to deal with daily HR responsibilities, they also face many of the same regulatory burdens that their larger competitors face.

The good news is, despite your size, you can still come out ahead of the pack. Outsourcing even a portion of your HR tasks can afford you the freedom to focus on core activities that help you grow your business.

HR outsourcingHR outsourcing can take many forms, from basic payroll processing and timekeeping to complex regulatory compliance and benefits administration. The most comprehensive solution is a professional employer organization (PEO), which offers a full slate of HR services to its clients.

In 2017, there were more than 900 PEOs in operation in the United States and 175,000 businesses using them.

Source: National Association of Professional Employer Organizations; An Economic Analysis: The PEO Industry Footprint in 2018

DID YOU KNOW?

900+

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A PEO provides access to these key resources:

Better benefits for employees

Workers’ compensation plan coverage and claim resolution assistance

Professionals well-versed in employee recruitment, retention and management

Precise, timely payroll and tax reporting

Comprehensive employer liability management that lessens employment-related risk

Relief from administrative duties that drain your valuable time and attention

What you’ll get in this e-bookOur in-depth descriptions and real-world examples will give you a clear picture of how partnering with a PEO can help your business gain a competitive edge despite its size. In this e-book, you’ll learn how to gauge your needs, vet service providers and quantify results.

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The power of PEOsUnlike the types of HR outsourcing companies that provide only one or two specific services,PEOs can handle the bulk of your business’s HR tasks. As a PEO client, you won’t have to devote your valuable time to manual data entry across multiple systems or negotiating rates with benefit providers. You also won’t have to hire additional staff to manage these responsibilities for you.

Businesses in PEO arrangements grow faster, have lower employee turnover, and have a significantly higher rate of business survival than businesses that don’t use PEOs.

Source: National Association of Professional Employer Organizations; An Economic Analysis: The PEO Industry Footprint in 2018

DID YOU KNOW?

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How a PEO can benefit your businessOutsourcing all or even a portion of your HR duties can provide the following:

Employee access to comprehensive, cost-effective benefits Your employees want a variety of comprehensive benefit plans, and a PEO can deliver. • Health care coverage: medical, dental and vision • Health care Flexible Spending Account (FSA) plan • Life insurance and personal accident insurance • Short-term and long-term disability insurance • Adoption and educational assistance • Commuter benefits

Note: The responsibility for complying with federal laws affecting PEO-sponsored benefits (e.g., COBRA, HIPAA and ERISA) falls on the PEO, relieving you of this burden.

Reduced payroll and administration burdens By contracting with a PEO, you stand to benefit

from a decrease in the time associated with payroll processing and maintaining wage records. You’ll also receive reliable assistance with tasks such as:

• Payroll processing • Tax reporting and deposits • Paycheck/paystub preparation and delivery • Garnishments

Assistance with federal and state employer-related laws and regulations

A PEO should be able to: • Administer payroll in accordance with federal and state laws, and properly report federal,

state and local taxes • Administer unemployment claims • Respond to employment verifications • Assist with employer health care reform compliance

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At Insperity, 99% of first payrolls are run without a defect, and 99.6% accuracy is achieved on subsequent payrolls.

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Reduced liability PEOs have a vested interest in helping keep your business compliant with HR-related laws

and will assist you with a variety of HR tasks, including: • Employee handbooks • Workers’ compensation claims support • Interface with certain agencies

Access to seasoned HR professionals PEOs employ knowledgeable professionals who specialize in HR and can be trusted to

handle issues in a timely and thorough manner, including: • Employee relations support • Employee liability awareness training • EEOC claim investigation and mediation

Freedom to focus on core business issues Your time is valuable and better spent attending to tasks related to growth and profitability.

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The structure and design of Insperity’s Group Health Plan helps us keep plan costs low while providing value to employees. The compound annual cost increase for group health insurance and related benefits paid by Insperity over the 10-year period from 2009-2018 was 3.65%.*

*The percentage reported is primarily based on the overall experience of the Insperity Group Health Plan and is not reflective of past changes or a guarantee of future changes to a client’s comprehensive service fee.

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How PEOs workPEOs exist through a relationship called co-employment. Simply put, your employees work for both your company and the PEO. You maintain control of business decisions and operations, while the PEO manages most of your personnel-related functions (wage and benefits administration, I-9s, W-2s, etc.).

Common misconceptionsAlthough the PEO industry is more than 30 years old, some common misconceptions persist.

Loss of controlPEOs provide access to seasoned HR professionals, whose guidance and advice you can solicit when you need assistance. They assist you with the employee-related aspects of your company, but you maintain control of all business and operational decisions.

Employees may not embrace the relationshipThere is minimal, if any, disruption to employees when you work with a PEO. They will see that they are being paid by the PEO and not your company, but will likely appreciate the greater depth and breadth of benefits offered as a result.

Existing HR staff will become obsolete PEOs align with your company’s existing HR department to provide much-needed expertise. External resources can prove invaluable when you are faced with high-risk HR situations.

HOW CO-EMPLOYMENT WORKS

SERVICE AGREEMENT

InsperityYour business

EMPLOYEE RELATIONSHIP

Employees

Helpful tip: PEOs do not supply a workforce; they supply HR services to your company.

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At the end of 2017, PEOs in the

United States employed a total of

3.7 million worksite employees, who

were paid a total of $176 billion.

Source: National Association of Professional Employer Organizations; An Economic Analysis: The PEO Industry Footprint in 2018

The financial strength and security of the PEOVerify that the PEO’s financial statements are independently audited by a CPA; their risk management practices have been evaluated; and their operational, financial and ethical practices have been independently accredited by an organization such as the Employer Services Assurance Corporation.

Whether or not they’re a certified professional employer organization (CPEO)In accordance with the Small Business Efficiency Act, the IRS now offers CPEO classification to PEOs that meet certain requirements. Partnering with a CPEO can provide you with significant benefits beyond those available through a non-certified PEO, particularly in the area of payroll tax reporting and remittance. Learn more about CPEOs.

The breadth of their benefit plan optionsA PEO whose health plan centers around a state-specific provider won’t work if you have employees in other states or plan to expand your business. A good PEO will provide your employees with access to a range of benefit packages from a variety of well-known, national insurance carriers.

The technology and resources they provideGood PEOs also provide comprehensive HR technology, such as a human resource information system (HRIS) or a human capital management system (HCM), and offer full-service implementation to help you start benefiting from it right away. As a small business, you’d likely find it difficult to acquire this type of feature-rich, all-in-one system without a PEO.

Their client and professional referencesAsk for referrals from other businesses in your industry and/or geographic location.

Finding the right fitIf you’ve decided to partner with a PEO, here are 10 points to consider before making your selection:

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At Insperity, we’re highly transparent with our financial information. Our clients feel secure knowing we have the capital to back our commitments.

• Established: 1986• 2018 revenues: $3.8 billion• Publicly traded company

(NYSE: NSP)• Certified PEO*

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Helpful tip: PEOs that aren’t publicly traded are not required to share their financial information with you.

Their commitment to customer serviceMeet the people who will be serving you. Some PEOs charge extra to speak with a live representative, while others use call centers and expect you to speak with a different person each time you need help. A dedicated service team can be priceless.

Their service and fee structureMany variables affect the fee charged by a PEO. Your company’s size, overall workers’ compensation risk, and the benefits package offered to employees, will all play a part. Most PEOs bill based on a percentage of gross payroll or total number of employees.

The PEO’s administrative expertise and competenceGood PEOs also provide comprehensive HR technology, such as a human resource information system (HRIS) or a human capital management system (HCM), and offer full-service implementation to help you start benefiting from it right away. As a small business, you’d likely find it difficult to acquire this type of feature-rich, all-in-one system without a PEO.

Their staff support ratioGood PEOs also provide comprehensive HR technology, such as a human resource information system (HRIS) or a human capital management system (HCM), and offer full-service implementation to help you start benefiting from it right away. As a small business, you’d likely find it difficult to acquire this type of feature-rich, all-in-one system without a PEO.

The fine printAre the respective parties’ responsibilities and liabilities clearly laid out? What provisions permit you or the PEO to terminate the contract? Does the PEO carry employment practices liability insurance (EPLI)? What business coverage (if any) will you gain?

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The Insperity service team averages 12+ years of experience in their respective fields. Our contact center resolved 97.5% of worksite employees’ concerns in under seven minutes in 2018.

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PEOs give small businesses access to

big-business benefits and help them

address the issues they consistently

report as their top concerns:

healthcare, taxes and regulation.

Source: National Association of Professional Employer Organizations; An Economic Analysis: The PEO Industry Footprint in 2018

Give your business a boost with Insperity’s PEO serviceThe Insperity® Workforce Optimization® solution includes the following:

• Fortune 500-level health insurance and benefits Choose from a range of benefit packages with nationally recognized insurance carriers.

• Precise payroll and HR administration Produce timely payroll (for your approval) and employment tax reports. We’ll also handle

much of your employee-related paperwork and other HR tasks.

• HR-related government compliance Help limit employer-related liability by letting us take care of much of your HR-related issues

and unemployment claims management. We’ll also assist you in interfacing with certain agencies dealing with employee issues, as well as wage claims and I-9 audits.

• Billing transparency and reconciliation Know exactly what you’re going to pay from start to finish. Our billed amounts are reported

in detail, so you don’t have to worry about unexpected costs.

• A professional HR service team – not a call center Get a team of onshore, professional HR specialists ready to help with your day-to-day HR

duties and provide tried-and-true, personalized guidance whenever you need it.

• Advanced software that streamlines your HR processes Enjoy the convenience and simplicity of a fully integrated HR technology platform. Our

software automates administrative processes through a single system and provides detailed reporting.

Want to learn exactly how your businesscan benefit with Insperity?

Call 800.465.3800 or visit insperity.com

Insperity, a trusted advisor to America’s best businesses since 1986, provides an array of human resource services and technology designed to help you minimize risk and maximize profitability in your business. Along with insight from our Business Performance Advisors, you’ll receive the most comprehensive suite of HR products and services available in the marketplace. Through our premier Workforce Optimization® solution, we deliver administrative relief, better benefits, reduced liabilities and a systematic way to improve productivity. Insperity operates in more than 70 offices throughout the United States. Our business performance solutions support more than 100,000 businesses with over 2 million employees. For more information, visit insperity.com.

ABOUT INSPERITY

YEAR ESTABLISHED

1986CLIENTS/EMPLOYEESInsperity serves 100,000+ businesses with more than 2 million employees.

We serve businesses with employees from 5 to 5,000

Publicly traded onNYSE under tickersymbol NSP

2018 REVENUES

$3.8 BILLION

70+ offices across the United States with 2,600+ corporate employees

Insperity has been designated a certified professional employer organization (CPEO) by the IRS*

CPEO

* The IRS does not endorse any particular certified professional employer organization. For more information on certified employer organizations go to www.IRS.gov.

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