/Jeanne Grunert
Jeanne Grunert

About Jeanne Grunert

Jeanne Grunert is an award-winning writer and marketing expert with over 20 years of experience. In 2007, Jeanne quit her marketing executive position at a large New York City area publisher, moved to Virginia, opened her own freelance writing and content marketing firm, and began growing a life instead of just making a living. She writes about business, marketing, home and garden topics for Fit Small Business and a variety of publications and websites.

Should Your Company Use a PEO?

Small business owners may be new to the world of PEOs, or professional employer organizations, but these companies have been around now for several years and changing the face of human resources management.

A PEO provides comprehensive outsourcing for all tasks and functions typically performed by an in-house human resources department. This may include employee job descriptions, benefits, payroll, insurance, and regulatory requirements.

PEOs act as a ‘co-employer’ with your company so that they share contractual obligations with your employees. Management decisions, however, remain with your company. You continue to guide the daily job duties and responsibilities of your employees while the PEO manages their benefits administration and related tasks.

According to the National Association of Professional Employer Organizations (NAPEO), small businesses that work with a PEO grow 70 to 9 percent faster, experience 10 to 14 percent less employee turnover, and are 50 percent less likely to go out of business. Although these sounds like terrific benefits for any small business owner, there are also some drawbacks to working with a PEO. Here, we discuss both the pros and cons of working with a PEO so that as a small business owner, you can make an informed choice before taking the next step and contacting PEOs.

The Benefits of Working with a PEO

There are many benefits of working with a PEO for a small business.

  • Saving Time:  Working with a PEO can save you considerable time. SCORE reports that 25 to 35% of a small business owner’s time is spent handling HR-related tasks, with 7 to 25% of that time alone spent on paperwork.  A business owner’s time is precious and the more time that can be spent on tasks to grow a business and increase revenues, the better. Every minute spent on paperwork decreases the amount of time you can spend growing and running your business.
  • Avoid penalties and fines: Tax laws continue to evolve into complex tangles that can be difficult for the average business owner to unravel. Missing deadlines or paperwork can lead to penalties and fines from the IRS, state or federal agencies. A PEO is skilled at handling all types of HR paperwork and takes the responsibility from your shoulders of managing deadlines, filing periods, and paperwork. It becomes their responsibility so you will not incur fines if problems arise.
  • Improved employee retention: Because the PEO handles questions regarding benefits, there’s always someone available to help your team understand their benefits and work through any questions or problems. Additionally, a PEO can find better employee benefits and draw upon their industry contacts and resources to improve the benefits package you can offer to your employees. This tends to increase job satisfaction and makes your company more appealing to work with, leading to better employee retention rates.

Drawbacks of Working with a PEO

There are also some drawbacks to working with a PEO that you should be aware of before embarking on a co-employment relationship. These drawbacks include:

  • Lack of control: The PEO manages all aspects of the HR department include health insurance coverage and other important benefits. They can, at their discretion, offer new policies or coverage to your employees. Sometimes this works out for the best since they can tap into their resources and can often gain better coverage than you can on your own. But this lack of control can be disturbing to a business owner used to retaining total control over all aspects of his business.
  • Impersonal service: All questions about HR and benefits are now handled by the PEO. Employees must call a hotline or 800-number instead of stopping by the HR department in your company. This may feel distant and unfriendly to some used to the former method of getting help for their questions. It does add a layer to your organization that may not be comfortable working through at first
  • Monetary risk:  Most PEO contracts require that their fees are paid in advance before work begins. If the PEO goes out of business or is sold to another company and you are unhappy about the new company, you may be out of luck and unable to break the contract. Choosing a stable, well-known PEO with a history of successful work helps mitigate this risk.

Is a PEO Right for Your Company?

A PEO arrangement can offer significant benefits to a small business, but they aren’t for everyone. Companies with less than five employees may not be able to find a PEO willing to work with them; the average contract size with a PEO is for five or more employees.  

Working with a PEO will cost your organization anywhere from $500 to $1,500 per employee. You may be able to handle your employee benefits administration and other HR tasks at a more cost-effective rate internally than by working with a PEO.

As the world of HR and benefits grows increasingly complex, small business owners may continue to turn to PEOs for help. But if you’re just looking for help with payroll or taxes, there are self-service options such as payroll software that may be a better option.

If you’d like to start looking for a PEO, consider this comparison of several services that offers insight into costs and features. And you may also want to file the link away for future reference, since as your business grows, so too will the number of employees needing benefits and other HR support. If a PEO isn’t right for you now, we hope you grow so big that you’ll need one someday!

By | March 22nd, 2017|Business Operations, Business Tools, Other|0 Comments

Should I Call My Employee an Associate or Representative?

Small business owners often struggle when coming up with a job title for their new employee or when listing an open position at their business. Although we’d all like to think that a job title doesn’t mean that much, it’s actually really important from both an employer and employee point of view.

What Job Titles Mean – and What They Can Do

According to Fast Company, 80% of companies they surveyed use job titles to demonstrate an employee’s position in the company hierarchy. And 92% use job titles to define an employee’s role within the company.

Perhaps even more importantly, job titles can be used as recruitment tools. Since small businesses often struggle to recruit and retain employees, using job titles to find and attract potential applicants is a great tactic. The same Fast Company survey found that only 37% of companies think of using job titles as a recruitment tool, so using this tactic can give small businesses a competitive edge.

Clearly, job titles are more important than one might think at first glance. If your business is growing to the point where titles are important, there are ways to structure your system for clarity, consistency, and communications that will help your business thrive.

Choosing the Best Job Titles for Employees

Job titles help maintain structure within an organization. They serve as a shorthand and communications tool to help employees understand where they fit into an organization and how others do, too. And because they don’t cost anything, they can be used as a recruitment and retention tool.

So how do you go about choosing the best job titles for your employees? Consider these seven points when discovering the best titles for your company.

  1. “C” titles stand at the top of the hierarchy: The “C-suite” is a designation for the highest level of the company and is a common way to show decision-making power and authority. Reserve “Chief” titles for those in charge of multiple people and/or departments and with corresponding levels of increasing responsibility.
  2. Give everyone who manages staff a similar title: A consistent naming structure where people who are responsible for the performance of others all share similar designations helps people within the company understand roles and responsibilities. Whether you call them Managers or Directors, anyone who directly manages the actions of others should share a common title.
  3. Associate or representative? It can be difficult to choose between these two titles. Usually “representatives” designates a slightly higher rank than an associate. People often view associates as a starting position. Representatives “represent” their companies and as such, usually reflect deeper company knowledge and a longer tenure with a company.
  4. Titles aren’t analogous among companies: Job titles vary considerably in the scope of work assigned to the title. Look beyond titles when hiring, and make sure you designate via a written job description exactly what each position and title is responsible for so that there is no confusion.
  5. Use titles as part of a candidate’s compensation package: Many good candidates will negotiate compensation and other perks of the job. One area where it’s easy for you to compromise without affecting salary and benefits is in their job title. Consider changing or adjusting job titles, if warranted, to attract and keep great candidates for a job.
  6. Avoid “title-less” organizations: There’s been a trend over the past few years of “flat” organizations. This means that the organization eschews job titles and prefers to view everyone as colleagues. That’s fine as far as it goes, but it can lead to confusion. Customers, clients, vendors and others are used to a system of titles and responsibilities and will still ask for the Director of IT, Operations, Marketing, and so on. Even if your work environment is highly collegial and collaborative, you still need job titles.
  7. Base titles on job descriptions: It’s helpful to begin with the job descriptions you’ve created for your company and decide on titles based on descriptions. At small businesses, employees often wear many hats, and the scope of their responsibilities is broader than at larger companies where people can specialize. Decide the appropriate category for a job title such as accounting, marketing, finance, operations, etc. Then think about the amount of responsibility someone has and what that might mean in terms of job title.

Love them or loathe them, job titles remain an important consideration for employees and employers alike. As you structure your small business, structure your title system for clarity, consistency, and accuracy. You’ll set up your organization for strong growth ahead.

How to Handle Payroll for Your First Employee

Business is booming, and it’s time to hire your first employee. Finding great talent, hiring someone, and making sure that all of your new hire paperwork is in order is often a steep learning curve for entrepreneurs. Fortunately, once you go through the on-boarding process with one employee, you’ll be ready to handle many more as your company grows.

Do You Really Need to Hire an Employee?

First, you’ll need to determine whether or not you truly need to hire a full-time or part-time employee or whether contract labor or a freelancer can do the job.

Understanding the difference between the two main categories of employees versus independent contractors is critical, since mistakes can lead to hefty IRS penalties for not paying the appropriate employment taxes. An independent contractor has more autonomy in how they work, where they work, and how they complete each task, while an employee works directly under your supervision on set tasks, at the time and place of your choosing.

You cannot keep someone as an independent contractor status and treat them like an employee. The IRS takes a dim view of this approach since some companies use it to avoid paying unemployment taxes and other benefits. You must also be quite clear about job hours, since there are different insurance and tax requirements for part-time versus full-time employees.

Consider how you’ll track employee hours. If it’s just one employee, it may be easy to note when they arrive at work and when they leave. If you plan to expand your workforce, a computerized tracking system may needed to accurately track hours for benefits and payroll.

Once you’ve settled upon hiring an employee, create a job description for the position. Include roles, responsibilities, requirements for the job, and a list of tasks associated with the job itself. This will guide your hiring process and help wanted ad, too, so it’s an important task.

Finding Great Help

You can hire locally through newspaper or online classified ads. You can also place ads on job boards such as Indeed, Monster, and other sites. Base your job posting on the description. Receive resumes, review them, and interview the three most promising candidates.

Congratulations! You’ve found your candidate and extended a job offer. If they accept, it’s time to begin the hiring process, step by step.

The Hiring Process, from Start to Finish

There are certain legal and tax rules you must follow when you hire a new employee.

  1. Obtain an EIN: An EIN, or employer identification number, is a number used on many legal and tax documents. You apply for an EIN on the IRS website
  2. Register with your state’s labor department: You must register with your state’s labor department to pay the appropriate unemployment compensation taxes.
  3. Purchase Worker’s Compensation insurance: States require employers to carry Worker’s Compensation insurance to cover their employees in the event of an accident or injury on the job. Each state sets its own policies regarding Worker’s Compensation insurance, so check with your state’s labor department for the rules for your state.
  4. Set up your payroll system: You can set up your own payroll system or work with online payroll software to handle weekly payroll filing needs.
  5. Complete forms: Each employee should fill out a W-4 form, the withholding allowance form, and an I-9 form with verification of eligibility for employment. Photocopy proof of eligibility, such as driver’s licenses, etc., and return the originals to your employee.
  6. Report the employee: You must report employees to the state’s hiring agency. The state then checks against records of people who owe for child support.
  7. File IRS Form 940: You’ll need to complete IRS form 940 each year to report federal unemployment tax.
  8. Set up personnel files: Setup files for your new employees that includes copies of their resume or job application, employment verification, IRS forms, and emergency contact information.
  9. Sign up for benefits: If your company offers benefits, review them with your employee and ask them to enroll.
  10. Finish the process: Create an employee manual and hang up required “Employee’s Rights” posters. Follow all OSHA workplace safety regulations. Get your new employee the tools they need to do their job – a desk, computer, cash register, car or whatever else you need. Then welcome them aboard!

Other Considerations

Depending on your business needs, you may need to include in your hiring process an NDA. NDA stands for “Non Disclosure Agreement”. It is a legally binding contract that prevents employees from sharing trade secrets with anyone else. This protects your business if you have any important information that you don’t want getting out into the public.

Hiring the Best Candidates: 3 Filters to Add to Your Interview Process

Some studies estimate that the cost of hiring someone is approximately six to nine months’ of their salary. An employee making on average $40,000 might cost $20,000 or more to find if you factor in the time to recruit, screen, hire and train new employees. With so much on the line for finding a great candidate, it’s critically important to do your best to screen potential employees as rigorously as possible.

Weeding out those who aren’t qualified is easy, but screening the final group for the star performer in the mix is difficult. These three filters to add to your interview process can help.

 

Three Filters to Add to Your Interview Process

The typical hiring process includes:

  • Creating (or updating) a job description for the vacant position.
  • Writing and placing a help wanted ad.
  • Receiving resumes.
  • Screening resumes.
  • Telephone interviews to screen candidates.
  • In-person interviews with the best candidates.
  • An offer and someone hired.

Keep in mind, that selecting the right job boards to find employees online is important to your hiring process as well. Of course, at any point in the process, you may add steps or people, which lengthens the process but helps hire better candidates. Many companies now ask that a potential employee’s manager, coworkers and subordinates interview candidates so that they can assess how well candidates get along with people throughout the organization.

Adding the following three steps to your interviewing process won’t slow it down too much, but it will help you narrow down the candidate pool to the best-qualified applicants. This will actually save you time later since there will be fewer resumes to review and consider.

 

#1 Enhanced Job Description

When you start with a specific, enhanced and updated job description, you already start the process of being specific and choosy with your applicants. A highly-specific job description immediately attracts only those with such specific skills, while turning away others who do not possess them. The enhanced job description should detail every aspect of the position, including educational and experience requirements, specialized skills, and more. Take this information and include it in your job posting to encourage candidates with the best fit of skills to respond. When you are posting to job sites, the enhanced position description will make it easier to set up your job posting so that only the best-qualified will respond. This significantly cuts down on the number of unqualified candidates who apply, and saves you a great deal of time reviewing resumes.

 

#2 Pre-Employment Survey

After you receive resumes and cover letters from the initial job postings, it’s helpful to ask the most promising candidates to take a brief survey. You can ask them after the telephone interview or before it via an emailed response to their application. You can even add it to the application itself, before they even submit their resume. The survey can be created on a site like Survey Monkey to make it easier to collect the information. Ask questions pertinent to the job you’re hiring for, and make them specific so that it is difficult to fudge the answers. Provide scenario-based questions to see how potential employees would handle difficult situations, or ask questions that only someone with the right skill set can answer. The survey shouldn’t take too long to complete, but it will yield insights into the candidate’s’ qualifications and knowledge, so that you can save yourself time by scheduling telephone interviews with only the most promising candidates.

 

#3 Give homework.

A paid test assignment, or a homework assignment of some sort, is the final task that many employers can add to find great candidates. If you’re hiring freelancers, always offer compensation for their time completing a paid test assignment; many professionals won’t touch a free assignment even if the actual gig is promising. The test assignment can be a small sample of a larger project that the candidate would be expected to complete if actually hired for the job.

For full-time employees, a simple ‘homework’ assignment demonstrates several things. First, it shows you how committed and interested they are in the job. Next, it provides proof of their ability to complete work independently. Lastly, it provides you with insight into how well they can meet deadlines. These are three tasks that are difficult to assess from a resume but critical for job success.

See how the candidate responds to the test assignment. Those who are eager for the job will respond positively. Also listen for how well they negotiate deadlines and the questions asked about the assignment. This yields important clues about their work habits, ability to understand direction, and interest in the position.

 

Don’t Settle for Second-Best

It’s tempting to rush the hiring process along. A vacancy means lost productivity and extra work for your current team. However, rushing the hiring process never yields the best candidate. Take your time to find the best fit for your business and your business will prosper.