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Should You Outsource Staff Management?

July 1, 2004
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A new (for long-term care) organization called a PEO can shoulder all those burdensome employer-related responsibilities by Richard L. Peck, Editor-in-Chief
BY RICHARD L. PECK, EDITOR-IN-CHIEF

Should you outsource staff management?

Everything from payroll and training to employment law compliance and risk management can be done for you by firms called PEOs How much would you pay to have someone else provide all of the following services to your facility: administering payroll, tracking vacation/sick time, managing workers' compensation, assisting with hiring, upgrading staff training, improving risk management, ensuring compliance with all employment laws, and providing an array of employee benefits, including health insurance? Your answer to that could determine your readiness to sign on with an outsourcing firm called a professional employer organization, or PEO.

Although PEOs have been around for nearly 30 years, they're a fairly recent arrival on the long-term care scene. PEOs-there are approximately 700 of them operating in every state and currently covering some three million Americans-are geared particularly to helping small businesses deal with the myriad employment-related rules and regulations that have emerged during the past 20 years. Their stated goal, according to the National Association of Professional Employer Organizations (NAPEO), is to assume responsibility for this function so that client companies can concentrate on doing the work they know best-in LTC's case, caring for the elderly (and meeting all those other regulations).

The one potential hurdle that would-be clients must confront (and it is more likely to be philosophical than operational) is the need to cede some autonomy in running their staffs. The central underlying concept of the PEO relationship is a term called "co-employment." This means, in essence, that employees don't work for one organization, but for two-the long-term care facility and the PEO. This will give the PEO some say in employee management, discipline, and working conditions.

The rationale for this is simple: Because the PEO accepts legal responsibility for complying with employment law (including tax obligations), it needs to maintain some degree of authority. As the NAPEO Web site (www.napeo.org) puts it, "The PEO directs and controls worksite employees in matters involving human resource management and compliance with employment laws, and the client company directs and controls worksite employees in manufacturing, production, and delivery of products and services. The client company provides worksite employees with the tools, instruments, and place of work. A PEO can assist in ensuring that worksite employees are provided with a worksite that is safe, conducive to productivity, and operated in compliance with employment laws and regulations." This applies, by the way, to PEOs working with both nonunionized and unionized organizations. PEOs might also assist clients with any qualification or performance issues that arise with the use of temporary agency personnel.

Recently, Nursing Homes/Long Term Care Management asked Bruce Cornutt, sales director of Alabama-based PEO The Hancock Group, and Angie Smith, administrator of the Regency Pointe CCRC/assisted living/Alzheimer's care campus in Rainbow City, Alabama, and a Hancock client, to comment on how this relationship might work in long-term care.

Smith: We opened about two years ago and signed on with The Hancock Group largely because we were concerned about keeping our workers' compensation rates as low as possible. But we've ended up doing so much more: Hancock has provided an employee health insurance plan, a very easy-to-read employee handbook, a review of our employment law compliance, the administration of payroll and vacation time, risk-management training, and help even with hiring some managers, such as our director of activities. I don't know how I functioned in other organizations previous to this without this kind of help.

Cornutt: PEOs like ours operate like an on-site human resources department. Essentially we try to provide whatever our client needs in this area-fulfilling tax and legal requirements, assisting with hiring and training, consulting on salary administration-whatever help the client wants. We are directly involved in risk management, perform regular on-site safety inspections, write safety manuals, and provide safety training-for example, in resident lift techniques-to ensure compliance with federal and state regulations. Because we work with several companies and can offer economies of scale, we are able to afford and provide a wide range of benefits that might be beyond the means of a small business: health insurance, including dental and vision; disability insurance; life insurance; retirement instruments like 401(k)s and IRAs; college savings plans; prescription drug discount cards; and even tickets to theme parks.

Smith: Regency Pointe has 75 independent living condos, 36 assisted living apartments, and 12 Alzheimer's care units. We have all the amenities-library, fitness room, game room, heated pool, white linen/crystal/china dining areas, an atrium and courtyard with lots of natural light, along with full-time activities and transportation services-and we employ about 75 people. Because of Hancock, we don't need staff for payroll or workers' comp, and we don't have to pay to send business office staff to off-site training to keep up with new regulations. I don't know that this is a significant financial savings for us, but there are some savings, and a lot more peace of mind.

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