What does the future hold for HR? In its new 2018 Future of Work report, HR Open Source (HROS) looks into its crystal ball to predict the future of the profession. HROS surveyed over 500 professionals from 36 different countries on their HR strategies and expectations looking ahead to 2021. The results suggest that HR is more metrics-driven than ever, and increasingly willing to embrace technology to deliver measurable insights on HR initiatives and strategies.
We’ve summarized some of the most interesting findings below. Download the full report for even more insights.
Data Matters More Than Ever
The future continues to look bright for HR analytics. “Data and analytics” was voted the top trend to keep an eye on in 2018, beating out “AI and automation,” “design thinking,” and “Blockchain.” Over 75 percent of respondents believed that analytics would either make a substantial impact or be “revolutionary” for their organizations in the coming years. That marks a big change—in 2015, people analytics ranked in at 7th place for trends impacting HR. This year it earned a spot on the podium, jumping up to 3rd place.
With all the focus on data, it’s no surprise that companies are investing heavily in tools to measure it. Survey respondents believed that people analytics software will become increasingly important to HR over the next three years. Of those who didn’t have it already, 48 percent said they’d implement analytics software by 2021.
Shift Away from Recruiting
Though a resounding 79 percent of respondents agreed that recruitment should be owned by the HR department, it was pushed out of the spotlight by other HR initiatives. HROS respondents predicted that recruiting would be less impactful to business goals by 2021, while they expected the impact of talent initiatives like learning and development to increase.
While there’s no shortage of new recruiting software solutions to choose from, HR teams still seem reluctant to get on board. HROS reports that the untested nature of these solutions is most likely the cause of low adoption rates. Only 25 percent of respondents use candidate recruitment management software, with most opting for applicant tracking systems instead. Respondents were also skeptical of candidate chatbots, with 58 percent saying they have no plans to implement them in 2018.
The Rise of Diversity and Inclusion
Diversity and inclusion aren’t just workplace buzzwords. In 2018, they were both top of mind for HR professionals. 40 percent of HROS respondents said their workplace encountered employee relations issues related to diversity. 10 percent claimed that issues came up on a regular basis.
With workplaces becoming increasingly diverse, HR professionals have a need for technology to support diversity initiatives. While only 12 percent of survey respondents have implemented diversity and inclusion technology today, 39 percent expect to invest in the technology within the next three years.
In this guest post, our friends at Remote Year share their top tips for selecting an employee to test drive your remote work initiative.
As technology and digital communication advances, location independence has become a much-requested benefit at organizations of all sizes. From Fortune 500 companies to small businesses, employees are searching for more flexibility. Enter remote work: the go-to solution for achieving the ideal work-life balance.
If your organization is considering implementing a remote work program, there are several questions to consider, including how to choose an employee to pilot your remote work program. Not everyone is suited to work remotely. Those who can do it successfully often have innate characteristics that allow them to excel in a flexible environment and break out of the mindset of a traditional employee.
So, how can you choose the right employee to kickstart your remote work program? Here are four questions to keep in mind as you start vetting candidates:
1. Is he or she already performing well?
There is no better indicator for an employee’s potential success as a remote worker than their current performance.
Successful remote employees are typically already well-regarded and respected within an organization. They are trusted and relied upon—and for good reason. They are not the type of employee who will let things fall through the cracks or ignore problems when they arise. They are intent on success, eager to learn, and determined to make their mark on the world.
2. Would you consider him or her a self-starter?
In order to be successful, remote employees need to be able to prioritize and finalize their work without any significant hand holding. Since they are no longer working down the hall in a traditional office environment, it is up to them to take responsibility for the work that comes across their desk. They will need to adhere to strict deadlines and coordinate with other team members (who may not be remote) in order to execute on important projects.
3. Is he or she a creative problem solver?
Remote work does not present the same types of problems that in-office work does. Employees who work outside of the office may find that they are put into situations they haven’t experienced before, like instances of miscommunication, feeling disconnected from the larger team, and technical issues. Fortunately, a great remote worker can overcome these challenges without too much external support.
4. Does the role lend itself to remote work?
Could your employee actually do his or her job outside of the office? While so many duties can be taken care of online in today’s world, it’s still an important factor to consider. As a general rule, if 80 percent of an employee’s tasks can be done from a phone or a computer, their role likely could be transitioned into a fully-remote position.
Evaluating Pilot Program Results
Now that you have gone through a selection process, chosen an employee to become your pilot for your remote program, and have agreed on goals and progress checkpoints with that employee, it’s time to think about how you’re going to track whether your remote program is successful.
After Two Weeks: Check-in with Your Employee’s Manager
The person who works the closest with your first remote employee will surely have a lot to say about how the working style is affecting his or her work. Two weeks is just the right amount of time to get a feel for what has changed since the employee has begun working outside of the office—not too short that the employee is still adjusting, and not too long where an issue has occurred, and it’s too late to fix it. Set aside some 1:1 time with your remote employee’s manager to determine how the trial period is going so far.
After One Month: Check-in with Your Employee
Though the flexibility of remote work allows employees to spread their wings and become more productive and creative, it also takes a bit of getting used to. Based on his or her manager’s responses, you’ve probably eliminated some of the simple roadblocks in your remote employee’s way. Perhaps you’ve implemented a new project management tool across the company to keep everyone on the same page or have established core hours so that the company is on a similar schedule across the board. Now that a month has passed, it’s time to sit down with (or video call) your remote employee and get their thoughts on the program.
After Three Months: Evaluate Performance
Goal check-ins tend to happen on a quarterly basis, so this is the perfect time to look at the initial results of your remote work program. Your employee has been working outside of the office for three months, so they should have settled into their new working style by now. During this check-in, it will be important to gain an understanding of how your remote employee and his or her manager feel about the goals that they set in their initial discussions, and if they feel like they were too ambitious or not ambitious enough.
After Six Months: Identify Any Major Successes and Challenges
Finally, six months after your remote employee began working away from the office, it is time to reflect on the important successes and challenges that have occurred during these early stages of your remote work program.
Once you have gone through this extensive reflection process, you’ll be able to determine whether you need to make changes to your remote work program before you launch it company-wide, or even expand it. Whatever the case may be, let these qualities and questions guide your implementation process. Don’t lose sight of the purpose that you have for creating a remote work program and select employees to participate with this mission in mind.
Improving candidate experience has quickly become a top priority for HR and recruiting teams across industries. Onsite interviews play a big part in leaving candidates with a lasting impression, so it’s important to give them a positive glimpse of what it’s like to work for your company.
How can you strengthen the candidate experience? Start by inviting a cross-functional set of interviewers. As long as you ensure interviewers are asking the right questions (and not repeating one another), there’s tremendous value in having more than one person in your interview lineup. However, assembling the right mix of interviewers can be tricky.
To help you create the perfect lineup, we’ve outlined who you should include. We recommend asking each interviewer to focus on certain competencies and skills and have included a few sample questions to spark your creativity.
Hiring Manager: This interviewer should be person that the candidate will report to if they are hired for this role. The hiring manager has the best understanding of the requirements and day-to-day duties the applicant will need to be able to perform. In the interview, they should plan to evaluate the candidate’s skills and competencies that directly relate to the position and the candidate’s ability to execute on the work.
Consider these sample questions to get you started:
What management style do you work best with?
What is the biggest challenge you faced in a previous role, and how did you overcome it?
Peer: This interviewer should be someone who will work directly with the candidate if he or she is hired. They should use this interview to assess work style and collaboration, and get to know the candidate as an individual. Peer interviewers should walk away with an understanding of how the candidate would fit in with the team dynamics and company culture.
Try these questions to get the conversation started:
What is the culture like at your current company?
What is your style of collaboration?
Cross-Functional: This interviewer should be in a position that would work closely with this candidate, but sits on a different team or department. This interviewer should focus on cross-team collaboration through competency-based questions. As a cross-functional interviewer, they should also plan to explain the ways in which different departments work together within the company.
Here are two questions to consider:
Tell me about a time when you had to work on a project that wasn’t in your job description. How did you handle it?
How have you worked with other teams in your previous roles?
Manager / Team Lead: This interviewer should be in a management or lead role on your team, but will not be the direct manager of the open role. This interviewer should assess job fit and act as sounding board for the hiring manager.
Consider these potential questions:
What qualities do you see yourself adding to our team?
What is one thing you like most about your current manager, and what is one thing you would change?
Tell me about a time when you fell behind on a goal. What did you do to catch up?
Executive: Depending on the size of your company, this interviewer could be your department head or the CEO. This should be a casual conversation to help excite the candidate about the mission and values of the company. They can also answer any “big picture” questions the candidate might have.
A few interview questions from an executive might be:
What excites you most about working at our company?
What are you most excited about as you grow in your career?
Once you’ve assembled the ideal interview team, it’s important to make sure they know what they can and cannot ask. Remind interviewers that they are not only there to assess, but also play an important part in the candidate experience. Ideally candidates will walk away from an interview just as excited to work for you as you are to offer them a position.
HR Redefined is less than a month away, and we hope you’re as excited as we are! Whether or not you attended last year’s inaugural HR Redefined conference, this year is one not to miss. We have a variety of surprises up our sleeve, but to get the excitement brewing, here are five things we’re looking forward to at this year’s HR Redefined:
1. Adam Grant Takes the Stage
Organizational psychologist and New York Times best-selling author Adam Grant will keynote the HR Redefined conference. With his wealth of management expertise, Adam Grant is well positioned to inspire today’s HR leaders. His extensive research on building strong collaborative communities and supporting a more original workforce will help you inspire employees to do their best work.
2. Spotlight on Data
In response to the overwhelming success of last year’s HR data session, this year we dedicated an entire track to the “Analyze” function of HR. Namely’s own Manager of People Analytics, Eric Knudsen, will return to the stage to delve into the Quality of Hire metric, providing actionable insights to help you make smarter hiring decisions. The Analyze track will be jam-packed with information on how to quantify difficult-to-measure initiatives, like culture and employee engagement.
3. Redefine Live Hackathon
Conferences should be more than just listening to presentations. We want every attendee to walk away with new connections, ideas, and strategies to implement in their own companies. Last year, clients teamed up with Namely engineers in our third hackathon to help build innovative solutions for the Namely product.
This year, attendees will hack solutions to top HR challenges in our Redefine Live hackathon. With help from a Sayge coach and Namely advisor, teams will create innovative solutions to real world HR problems (and the winners will take home some great prizes)!
4. Exclusive Product Sneak Peek
Wondering what Namely’s product team has in store for the rest of 2018? We’ve got just the session for you! Namely’s VP of Product, Bryan Tsao, and Chief Client Officer, Debra Squyres, team up to share a sneak peek at some of the most exciting upcoming product features. Whether or not you use Namely in your own company, you won’t want to miss this opportunity to see what the future holds for HR technology.
5. Work Hard, Play Hard
After a full day of learning and innovating, it’s time to come together and celebrate. Join us Thursday evening at STK Downtown for food, drinks, networking, and amazing rooftop views of the Big Apple. We can’t wait to toast to HR Redefined 2018 with you!
Don’t have your ticket yet? We have just a few spots remaining. Snag your ticket today, and we’ll see you there!
To learn more about how improv practices can support a more creative and collaborative company culture, we spoke with Four Day Weekend co-founder, Frank Ford.
What was the inspiration behind Happy Accidents?
Frank Ford: Happy Accidents is an autobiographical look at our journey over the last 21 years as we built our business. What’s great about improv comedy is that it’s all about collaboration and teamwork. The philosophy that is fundamental to all improvisation is called “yes, and” [an exercise where participants must actively listen to a partner on stage, acknowledge and accept what they are saying as real, and then add onto it] Our book chronicles how we built the Four Day Weekend business and shares how we applied the improv philosophy that we use on stage to our business model and culture.
We started a show in 1997 that was supposed to have a six week run. Before we knew it, six weeks turned into six months, then six years, and now it’s been 21 years (and counting!). But none of us were business majors. So as we grew, we had to ask ourselves, what kind of business model do we want to operate from?
The “yes, and” philosophy is all about accepting ideas in the moment, being present and non-judgemental, and building on those ideas with a very unselfish approach. It hit us like a ton of bricks, and we realized that we could apply those same principles to our business.
The book explores how the “yes, and” framework led to great success, along with the risks of deviating from it. We explore the power of active listening, collaboration, and teamwork, resulting in a more positive approach to work, life, and relationships. It really is transformative!
How can companies get started implementing a “yes, and” philosophy?
FF: The fastest growing part of our business has been our workshops, in which we .help clients implement this philosophy in their culture. Corporate America can often be a cynical environment, and over time, this negativity becomes ingrained in our psyche. People are paid very well to say no, and good ideas often get thrown away before they have the chance to develop into something great.
In business, everything tends to be seen as black and white, but in our world, we tell our clients that there is no right and wrong, there are only higher and lower percentage choices. If you create an open culture where employees feel engaged and listened to, they'll be more willing to contribute ideas that help the business grow.
Many companies who have completed our workshops say that simply integrating “yes, and” into the everyday lexicon helps everyone listen with a more open mind. In that environment, more ideas can flourish because employees feel that they are really being heard.
One immediate and easy thing companies can do is to simply practice saying “yes, and.” While I am a professional improviser, however every single one of us is an improviser of sorts. We all improvise every day without realizing it. The world is but a stage, and we can choose to improvise in a positive environment rather than a negative environment.
HR is sometimes forced to be the bearer of bad news. How can HR create a more positive work environment?
FF: HR is often put in the position of being a naysayer. We do a lot of corporate events and often jokingly ask “is HR in the room?” There is that stigma attached to HR, because HR is responsible for ensuring that employees are honoring the company policies and values. But at the end of the day, HR is dealing with people in the same way that managers deal with their employees, and they can apply “yes, and” to the HR function too.
As the ears and eyes of the company, HR is on the front lines of identifying a company’s challenges. Active listening is crucial to finding “yes, and” solutions, and HR is well-positioned to initiate conversations that can solve whatever obstacles a company may face. HR has the opportunity to be thought leaders within a company.
In the real world, you have to say no sometimes, but with “yes, and” there’s always a workaround. If you’re going to say no make sure it’s a thoughtful no—not a reactionary, knee-jerk no.
Is there a danger in saying “yes” too much?
FF: It’s important to create a culture that rejects the dog-eat-dog mentality. You have to be careful not to work people to death, or else you’re going to see burnout. If the company understands employees need that time to recharge, you’ll see better performance and happier employees.
As human beings, we’re hardwired to be empathetic, but unfortunately it sometimes takes a disaster for that to surface. People are inherently more similar than different, and we try to promote those natural human instincts to help each other, rather than give into that cut-throat approach to business. Collaboration and empathy are a part of who we are, so why not embrace that and bring that into our business and culture?
Don’t let your employees navigate the workplace unprepared. Regardless of whether you’re at a large or small company, mini-disasters can strike any time. You never know when a sore throat or a shirt stain could ruin someone’s day. Stock the office with emergency supplies so your employees can handle whatever comes their way.
To help you build your own office survival kit, we’ve compiled a list of our favorite workplace necessities. Use this list to equip your employees with the tools they need to survive the workweek.
Keeping a stash of allergy medicine and painkillers can help alleviate aches and pains around the office. A word of caution—be sure to consult with your legal and management teams before stocking up, as employers can be held liable for health risks, side effects or accidents caused by over-the-counter medicines. If you do get approval, provide only single-use packets so employees can review ingredients, warnings, and usage instructions to determine if a drug is right for them.
Stock enough tissues so that employees can have personal boxes at their desks. You may also want to keep plenty of extra inventory if it’s flu season. Just make sure to encourage employees to take advantage of your office’s work from home policy if they’re really sick.
Vitamin C supplements, herbal teas, honey, and cough drops are great to have on hand so employees can proactively boost their immune systems and treat mild symptoms when they first appear.
Share ideas, not germs. Set up hand sanitizer stations in common areas and urge employees to frequently wash their hands to limit the spread of illness and prevent an office-wide epidemic.
Show your female employees you care. Store feminine products and sanitary napkins in the ladies room so everyone can grab what they need to tackle the day.
Mouthwash and Gum
No one wants coffee breath. Offer mouthwash and gum around the office to keep bad breath at bay and make tight-quartered meetings more bearable. From bad breath to B.O., read more about dealing with office odors here.
Tame an unruly mane and lock down flyaways. Keeping hairspray and hair gel on hand helps your employees look their best before that big presentation.
Accidents happen at the most inconvenient times. Don’t let pasta sauce on an employee’s shirt ruin their next client meeting. Help employees look sharp and spotless with handy stain-removing pens or wipes. If you have extra closet space available, you might also encourage client-facing employees to keep a change of clothes on hand just in case.
Did someone split a seam during office yoga? It happens to the best of us. Come to the rescue with a needle and thread for quick clothing fixes!
Your employees are the heart of your company. You need them happy, healthy and safe. Hopefully, you won’t need to crack open the survival kit every day, but being prepared for the worst will keep business running smoothly when issues do arise.
According to the United States Bureau of Labor Statistics, roughly three million American workers quit their job every single month. But the reason for this mass exodus has nothing to do with companies firing poor performers. Quite the opposite, in fact. One recent study from Willis Towers Watson revealed that more than half of all global organizations are having a hard time retaining some of their most valuable employees. Many even cite it as one of their primary concerns over the next five years.
There are a variety of reasons why you want to keep your turnover rates as low as possible—like the fact that the cost to replace even a single highly trained employee can often exceed 200% of their yearly salary. But beyond that, creating the type of company that people actually want to work for should always be a top priority.
If you really want to improve your company's employee retention efforts, here are a few key things to keep in mind.
1. Consider Remote Work
If you had to make a list of all the reasons why creating a more flexible working environment for your employees via telecommuting is a good idea, retention would undoubtedly be right at the top. One study revealed that job attrition rates fell by a whopping 50% for employers who offered the option of remote work. But this is hardly the only benefit that remote work brings to a company.
People who currently work remotely (at least some part of the time) say they have the ability to hit maximum productivity. In other words, they've removed all the distractions that come with being in the office and are able to do far more in far less time. Remote work has also been proven to lower stress, boost morale, and increase employee engagement
Gamification involves taking the elements of a game and applying them to other settings—in this case, your office. Consider using job simulation activities for recruiting or to train new employees, for example. Or, when implementing a new piece of software, you might hold a contest and award a prize to whomever is able to master it first.
According to one recent study, 34% of turnover is from employees within their first year on the job. One of the major reasons that this number is so high is thanks to a poor onboarding experience.
The early days of an employee's experience with your company cannot be built on a lack of trust. Yet, - that's exactly what’s happening if you skip out on a strategic onboarding program and appropriate training. Make sure that your onboarding and training programs are as effective as possible. It will help give employees clarity, and beyond that, it will give them a trusted network of colleagues to act as a support system, along with a crystal clear path to success.
4. Create a Culture of Feedback
Finally and perhaps most importantly, one of the most powerful ways that your company can improve employee retention is soliciting open and honest feedback from your workforce.
This should go far beyond "what type of snacks do you like in the break room?" and "where should we hold the company holiday party this year?" You need to dig deeper into how employees feel, why they feel that way, and what you can do to make significant improvements as often as possible.
What do employees like about working for your company? What do they not like? How do you compare to past employers that they were very satisfied with? What are the types of problems that would lead them to look for work elsewhere? These are just a few of the many, many questions—often difficult—that you need to solicit feedback on.
The opinions that your employees are forging each day is the most critical aspect into the relationship that you create with that workforce. Make no mistake about it: your employees all have opinions about your company. They dedicate the majority of their time helping the company reach its goals, so it's up to you to listen to them and help make sure that every day is better than the one before.
Buyer’s remorse is never a good feeling, especially when HR software is involved. With the amount of time and energy spent on making a switch, teams will want to be absolutely confident that they’re making the right choice.
Need a helping hand? We know just the guy. In his newest report, the HR Technology Buyer’s Playbook, respected industry analyst George LaRocque reveals the six things teams need to keep in mind when evaluating software.
Committing to an HR platform is a big decision, so don’t let the first option sweet talk you into a deal. Start by doing your due diligence and build a shortlist of contenders.
Once you’ve done the initial research, schedule demos with your top choices. Ahead of these live product demonstrations, provide each respective sales contact with a preliminary list of requirements and what features you’d like to explore on the call.
Sales calls can be intimidating, but don’t be put off by questions about budgets and timelines. This is just part of the process. In many ways, the “evaluation” process goes both ways—vendors will want to ensure that your company is a right fit for them as well. Listen attentively and take notes. It’s also worth inviting other members of your team to participate, which brings us to our next tip.
Include the Right Stakeholders
While it sounds counterintuitive, your HR team shouldn’t be the only party involved in evaluating HR software. Don’t find yourself in the final stages of the process just to discover that you can’t get IT or your legal team’s sign-off on the contract. Include the following actors from the onset:
Finance – It’s only logical to involve the department that holds the purse strings. Work with someone on your finance team to straighten out the budget and get final approval.
Legal – Before attempting to get sign-off on a contract, you’ll need to involve someone who can read between the lines: in other words, your company’s legal team.
Information Technology (IT) – As with any technology vendor, your IT team will want to run a full security review. Given the sensitive employee information stored in an HRIS, for example, this is a partnership you’re not going to want to overlook.
Employees – Depending on the software you’re evaluating, there’s a more than likely chance employees will be its heaviest users. Consider arranging a live demonstration for a small panel of employees and ask for feedback.
Consider Your Existing Ecosystem
Be thoughtful about how your new software will interact with the other tools you use. When confirming whether your HR platform will integrate with your applicant tracking system, for example, don’t just take the vendor’s word for it. Ask for a demonstration of the integration or for documentation covering what it entails.
If you’re looking for a sign that a vendor plays well with other software, confirm whether it has an open API. This simply means that third party engineers can easily develop exchanges of data between it and others systems. Namely’s open API makes it possible to integrate with a diverse set of partners, ranging from employee rewards platforms to 401k administration tools.
As they say, caveat emptor. Buying HR software is hard, and the above just scratches the surface. Download the full report, and take control of the sales and evaluation process.
How do you make sure core company values matter to employees? That can be one of HR’s toughest questions. A strong, successful company is built on a set of core values that help define the organization, orient employees in an ever-changing corporate environment, and help to establish lasting relationships with clients. However, these values are not always easy to instill in others—and ensuring your employees understand and exemplify them can often be challenging.
Fortunately, there are three simple ways to help your employees live out your company’s core values:
1. Make Every Employee Feel Like Part of the Team
The first step is ensuring employees care about the company and the work they do there.
As any good manager knows, employees who are happy perform better at work, and those who feel like they are an integral part of the company are more likely to live out the company’s values. There are lots of little ways employers can help keep employees happy, such as taking the time to get to know them a little bit better.
One easy way to do achieve this: Use your HR tool’s custom employee profiles to keep up with the little details—employee birthdays, work anniversaries, hobbies, and even snack and drink preferences. Having all this information at your fingertips helps build stronger connections in the workplace.
Those connections can be made even stronger still by giving employees an opportunity to share with one another through a social news feed. Seeing regular reminders of the company’s core values, staying up to date on what’s happening within the organization, and sharing personal victories are great ways to improve communication skills and increase accountability.
2. Let Employees Know How They Are Doing
Before being able to truly live a company’s core values, an employee needs to understand what those values are, what the company strives to achieve, and what role he or she plays in making that happen.
Setting expectations, providing regular feedback, and commending a job well done are all things that can help motivate an employee. Use talent management tools in concert with your project management software to set goals, define competencies, and track the progress of tasks so employees can take ownership of their work.
Since self-improvement starts with self-awareness, providing feedback is essential. Fortunately, this is now easier than ever with performance reviews and reporting that can be used to identify both areas of strength and areas in need of improvement. Celebrate great work and displays of core values in an employee appreciation tool. These habits are especially important since employee appreciation has been shown to be an important aspect in the modern workplace.
3. Live Your Company’s Core Values Yourself
Because any good manager leads by example, an employer must first be committed to a company’s core values in order for them to really stick with employees.
Perhaps the most important role an employer plays in ensuring that his or her employees live a company’s core values is communicating them. After all, you know these values. Maybe you even helped determine what your company’s core values would be. It is imperative that you express an understanding of and commitment to them if you expect others to do the same.
During meetings, when providing feedback, and even when posting on the social news feed, make sure you are proudly broadcasting the company’s values.
To ensure that your messaging is effective, consider seeking formal feedback from your employees. Do they understand what the values are? Do they agree with them? Try using an ongoing feedback option where you can conduct surveys to understand where your employees stand.
Finally, make sure every new person you bring into the company embodies those core values. When recruiting new employees, seek out those who will not only be a good fit for your company, but who will also demonstrate the qualities most important to your organization Finding these employees might not be easy, but it will be worth it.
Laura Hudgens is a writer for TechnologyAdvice.com. She is a communications instructor and freelance writer who studies and writes about technology, media, science, and health.
Change is scary. For growing companies with threadbare HR teams, the thought of leaving a PEO might cause cold sweats. It doesn’t have to.
Professional Employer Organizations (PEOs) take on HR, payroll, and benefits administration for their clients, typically businesses without an HR professional on staff. Clients enter into a “co-employment” relationship with the PEO, where the latter becomes their workforce’s employer-of-record for tax and compliance purposes.
Sound complicated? It can be, which is why many companies don’t revisit the decision to continue the arrangement. But as your company grows—particularly once you hit the 50-employee mark—it’s the right time to take a closer look. Here’s are four things to consider.
Most PEOs charge companies per employee, per month (PEPM). The bigger your company gets, the more expensive a PEO becomes. Typically, this “admin fee,” as the industry calls it, hovers around $100. Depending on your provider, this number can be even higher—admin fees as high as $160 PEPM have been reported.
While this structure might make sense for budding companies without the time or resources to hire a full-time HR professional, it may become more cost-effective to bring HR in-house once your headcount reaches 50 employees. To illustrate, let’s run the numbers.
($100 PEPM x 50 employees) x 12 months = $60,000 per year
In actuality, PEOs leave companies holding the bag for many HR issues. Most contracts stipulate that client companies are responsible for wage and hour compliance, correct overtime classification, and determining whether employees need to receive a Form W-2 or 1099. In other words, your company is still left trying to make sense of the most complex (and if a claim is filed, costly) parts of employment law.
That’s not to say that PEOs don’t offer any protection. Client companies will receive something called Employment Practices Liability Insurance (EPLI), which offers some coverage from sexual harassment or discrimination claims. Unfortunately, even these plans have their limits—you’ll need to first pay off your deductible, which can reach as high as $50,000 per incident or claim. Certain PEOs have been known to cap the benefit to as little as just $100,000 per year. For reference, the average age, race, or sex discrimination claim costs employers about $125,000.
HR technology has come a long way since floppy disks and CD-ROMs. Today, there’s no shortage of intuitive, cloud-based solutions covering every stage of the employee lifecycle. Whether you need a better way to manage job applicant resumes or securely offboard employees, HR professionals have never been better-served.
Unfortunately, PEO clients are often left on the outside looking in. Because co-employment has always been first and foremost about compliance and access to benefits, they’ve historically invested little in their technology. Pulling even a basic employee report from your PEO’s HRIS might require a call to a customer service representative, and even then you’ll be limited to a few standard reports.
Being able to make better-informed decisions about people becomes critical as you grow. At this stage, companies start focusing on metrics that go beyond just headcount, like career path ratio and company demographics. It’s hard to fault PEOs for not being able to offer these insights, as their services were never intended for anything but small teams. But at employee 50, it’s due time to shift beyond HR 101.
4. Leaving is Easier Than Ever
Historically, the decision to leave a PEO was one only made at year-end. Why? Because of how federal unemployment taxes work, businesses would often end up having to double-pay taxes whenever they joined or left a PEO midyear.
Fortunately for employers, a new law has almost entirely eliminated that hiccup. The Small Business Efficiency Act (SBEA) created a program where PEOs can apply to become “CPEOs,” or certified professional employer organizations. Companies who work with CPEOs can leave at any point without having to deal with the type of tax reset describe above.
Virtually all major PEOs are certified under the federal program. If you’re unsure of whether yours is, just give them a call and ask.
Sooner or later, companies need to make HR a top priority. As startups grow into midsize companies, the list of challenges they face goes beyond what the one-size-fits-all co-employment model provides. At this stage, your company isn’t just trying to stay afloat and meet compliance minimums—it’s beginning to take an interest in employee engagement, HR analytics, and strategy. In other words, exactly what modern HR is all about.
You don’t have to take those first steps alone. Namely has helped hundreds of companies make the transition from outsourcing HR to building award-winning workplaces.