Selecting human resources outsourcers.

• Author: DeWitt, Lyle

As new business trends develop, CPA firms must keep pace in order to give clients ethical advice and responsible referrals. This article discusses the significance of integrated human resource service providers to your firm and your clients and offers practical advice on selecting a provider that you can trust, and that will profit your clients.

Here's how it starts. A client asks for your advice, or perhaps even a referral, for a third-party payroll services provider. Before you drop the name of a well-known administrative services provider, consider for a moment the many advantages of an integrated human resources service provider. They are known as human resources outsourcers (HROs), or sometimes professional employer organizations (PEOs), but regardless of what you call them, you've probably considered calling one.

Why? More often than not, the answers will be more and less as in less liability, fewer fees, and fewer benefit hikes versus more choices, more available time, greater competitiveness, and greater overall value. The outsourcing boom that began over a decade ago has become increasingly more apparent--growing some 25 percent yearly--and desirable, especially with smaller companies that now can compete with large corporations in providing benefits options and containing costs.

More choices and lower costs

According to Mercer Consulting, healthcare costs are expected to increase 15 percent in 2004. To stay afloat, many companies are either slashing coverage options or passing increases on to their employees. Neither of these approaches supports a company's goal of attracting and retaining qualified, high-performing personnel. To remain competitive, fiscally and otherwise, more and more companies are discovering an emerging solution, namely, outsourced benefits. Certain third-party providers can leverage their cumulative roster of participants in order to qualify for substantially lower rates. According to National Public Accountant (May 2003), "PEOs offer employees more and better benefits than they would receive from a small business ... [and] due to economies of scale, can offer these benefits at attractive prices." San Leandro-based TriNet Group, my employer, for example, recently announced it had contained healthcare rate hikes to 9.15 percent--easily half the national average--while adding to its coverage options.

Reducing risk, for you and your client

According to the Small Business Administration, business owners spend up...