Employee leasing and the specialty coffee retailer

shaking hands

The February 2012 issue of Specialty Coffee Retailer featured the article, “A Resource for Human Resources,” that focused on professional employer organizations (PEO’s) and other companies that offer outsourced administrative services that help to streamline business. I find this to be an interesting topic and one that the specialty coffee retail community should explore more, so below is the transcript of my interview with the reporter, containing some information in addition my quotes that appeared in the issue:

SCR: What aspects of HR are most commonly outsourced? Record keeping? Payroll Training/counseling? Health insurance admin? etc.

AH: I find that single or small multiunit operators (1-3) tend to provide their own services with the assistance of an accountant, but move to a partially or fully outsourced program as the size and complexity of their business grows, specifically to handling payroll, tax and health insurance coverage. General H.R. training for these companies is typically provided by on-staff personnel, such as a shop manager, using commercially available templates.

SCR: Can you tell me more about employee leasing? What is it and how is it most appropriate for?

AH: Employee leasing is a little known and more comprehensive approach to human resource management than hiring a payroll service that traditionally offers payroll administration, tax and compliance services.

In an employee leasing arrangement, a third party human resource leasing company legally hires you and your employees, then contracts them back to your business. By doing so, they maintain thousands or 10’s of thousands of employees on their own books, which allows them to negotiate preferable rates and programs for healthcare insurance, retirement benefits and workers’ compensation insurance, which usually far outweighs the cost of the services provided.

SCR: What kind of input does the business owner have when outsourcing their HR? What kind of accessibility do they have?

AH: The business owner and his or her designated managers maintain the same control over their employees as they would in a traditional business by proxy though the company. All normal functions (hiring and firing, setting wages, submitting hours, designating company health benefit contributions, etc.) are controlled by the business owner by proxy through the employee leasing company in regular online or faxed instructions.

At first, business owners and particularly those who have operated a traditional employee structure for years, feel uncomfortable with the idea that they are losing control, to some other company. Furthermore, employees may be concerned the idea that they now much conform to the standards of a larger employer, with requirements often including strict documentation procedures and drug testing to qualify for health programs. In the longrun, however, I find that both business owners and employees are happy with the arrangement: the
owner saving a substantial amount of time and money for H.R. administration and employees receiving enhanced healthcare coverage, direct deposit and participation in retirement savings plans.

The human resource leasing industry is regulated, but as with any outsourced business relationship, it is important that you choose a supplier with a positive track record of experience and solid financial condition — the same applies for the insurance program it provides.

SCR: How much should an owner expect to pay for these services?

As a client, you are invoiced each pay period for the salaries you pay to yourself and your staff, plus a service charge of usually around 2.5%, depending on the type of services offered and number of employees.

SCR: What common mistakes do you see businesses (specifically coffeehouses, if possible) make when it comes to the topic of HR outsourcing and employee leasing?

AH: The most common mistake that I have witnessed in numerous locations is the unwillingness of businesses owners to relinquish control of the payroll administration function. I’ve seen owners sitting behind computers for hours on-end each week running their own payroll and tax calculations, printing and signing checks one-by-one, while their time could be better spent elsewhere.

The lost opportunity cost time spent administering payroll and other human resource tasks alone is often enough to justify the cost of outsourcing to professionals who specialize in those functions.

Be sure to read the full article recently posted online the Specialty Coffee Retailer website.

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