Ah, the good ole days, when you could start a business and your eventual success depended largely on your creativity, intelligence and hard work. Then something changed. And those changes, once begun, started rolling and building like a snowball rolling right toward virtually every small business owner in America. So what changed? Employment Laws and Regulations, and they now touch virtually every aspect of your small business.
A Brief History of Small Business and Employment Law
Here’s the ugly reality:
In 1890 there were just 2 employment related laws; Case Law & Common Law.
By 1940, that total was up to a total of 10 employment related laws. But they were just warming up!
Forty years later in 1980 there were 34 employment laws and regulations
Today, a small business employer is tasked with knowing and adhering to no less than 68 separate laws and regulations. It’s a mind-numbing alphabet soup that is daunting enough to bring any burgeoning entrepreneur to their knees.
So it’s clear that the playing field has changed and a small business employer has to adapt their operating strategies accordingly.
Adapting to Regulations with the Help of a Professional Employer Organization (PEO)
One such strategy is to partner with a Professional Employer Organization or PEO. Simply put, when a small business owner partners with a PEO, they are dividing the responsibilities around employing their people. With the PEO, they create two employers for each of their employees. The small business owner remains “the boss.” They hire, fire, train, set wages, do performance reviews, and direct work activities. Kind of like in the “good ole days.” The PEO, though, becomes the “employer of record.”
And this is the magic of a PEO. This status allows the PEO to be primarily responsible for the minefield of compliance, freeing the small business owner to focus their efforts on growing the business. Examples of what a PEO does for their clients includes: payroll, payroll taxes, administering benefits plans, providing and explaining what is workers compensation insurance and workplace safety support, helping to develop policies and handbooks, and handling garnishments and child support orders. The list goes on, but hopefully you get the idea.
The PEO expertly handles all the administration around employment while the small business owner runs the small business. To the client’s employees, it’s pretty invisible except for the possibility of a more robust benefits package. And because the PEO has many clients, each individual small business employer shares in just a small portion of the cost of the professional employer organization’s systems and expertise.
Professional Employers and Small Businesses: Lowering Costs Together
In fact, according to the Society of Human Resource Managers (SHRM) in their 2009 Human Capital Management Study, A PEO can handle the administrative side of employment for their clients for about 30-50 percent less than it would cost the employer to do it themselves. And professional employer organizations are experts at doing it! All the time and effort a small business owner would have put into employment administration is now focused on driving revenue or just spending time on the more important things in life. A professional employer organization is not for every small business, but when there is a fit, it’s a real game changer. In fact, once a small business employer starts using a PEO, it’s VERY rare for them to decide to take it all back “in house.”
Regardless of the strategy used to deal with the complex world of what is risk and regulation, it’s clear that for a small business employer, things are not getting any easier. In fact, with Healthcare Reform now bearing down, it’s critical to secure a strategy that will be a trusted guardian for the small business today and into the uncertain days to come. Professional employer organizations are definitely worth a look.