The PEOS are coming! The PEOS are coming!(professional employer organizations)

• Author: Peterson, Eric

A new law. Another booming industry. And help for small business.

Colorado's on a roll, so we're not all that surprised to hear about a business growing 25 percent a year, or even 100 percent.

But how about an entire industry ready to sextuple?

How about Professional Employer Organizations?

Until late March, Colorado lagged behind most of the country's $30 billion PEO industry; behind Florida, for instance, where 7 percent of the state workforce get their pencils pushed by PEOs. In Colorado, just 15 Professional Employer Organizations employ fewer than 1 percent of workers.

But a new state law has eliminated health insurance restrictions - the final barrier to a PEO boom (that word again!) in the state. The new law, SB31, has left the market wide open for small businesses to shuck their human resources headaches, and for PEOs poised to take on this lucrative market.

Small businesses use PEOs to outsource their human resources departments. Idea No. 1 is to reduce or remove the time business owners spend on HR - which consumes 7 percent to 25 percent of an owner's workday, according to the U.S. Small Business Administration. Idea No. 2 is to let small businesses get group benefits coverage equal to Fortune 500 companies'.

PEO-client relationships are "a two-fold situation," noted Rick Lang, founder of LMC Resources Inc., a Denver PEO. For 1 percent to 20 percent of a company's gross monthly payroll, a PEO will take on regulatory, benefit, legal, administrative, hiring and firing, and other human resources requirements. Second, it assumes a portion of the business' liability for worker's compensation, unemployment, and other potentially litigious issues. In this "co-employer" variant, the business owner retains control over management and decision-making.

"We really allow small-business owners to concentrate on their core business, which makes them money, rather than on their human resources, which makes them absolutely no money," said Kirk Kilpatrick, vice-president of operations at Terra Firma LLP, a Denver-based PEO.

"It's not like you're selling a product," Lang said. "This is a relationship."

Old restrictions in Colorado's health insurance laws prevented PEOs from grouping their small-business clients' employees under one health insurance plan, making it tough for PEOs to offer a full package to clients. Colorado was one of eight states to have such rules.

The old law "was a huge hang-up" for Colorado PEOs, said Ron Smith, lobbyist for...