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TAP 31 | Professional Employer Organization


You have to be prepared for the moment 100% of the businesses start to reopen. You have to be there right out of the gate, but how can you do that if you keep worrying about the smaller tasks? If you want to grow, you need your full attention on your main mission. This is why you need a professional employer organization system. To talk more about that is Tom Lemmey and Brian Kennedy. Tom and Brian work at Ethan Allen HR Services where they can assist your small business by doing the back-office work. Alongside your host, Brian Power, learn how H.R. departments can adapt to a changing post-Covid workforce.

Listen to the podcast here:

Is A Professional Employer Organization Right For Your Business? With Tom Lemmey And Brian Kennedy

Welcome, Tom Lemmey and Brian Kennedy from Ethan Allen HR Solutions. It’s great to have you here. Tell us a little bit more about what Ethan Allen does.

I’m Tom Lemmey. I’m the Director of Sales for Ethan Allen. Ethan Allen works for solutions. We are divvied up into four different divisions. We have a staffing division where we cover the gamut from industrial to administrative and medical. We have a professional search division, which a lot of you might call head hunters. They go about the process of finding more highly skilled employees through their resources. We have a division we call RPO, Recruitment Process Outsourcing. Those three divisions are about finding employees for our clients. Brian and I represent the HR Services division. I’ll let Brian talk a little bit about what that is.

Thanks so much for having us. We’re excited to be here. We have a couple of different platforms that we work off of on the HR side of the house. Most predominantly being what’s called a PEO, Professional Employer Organization. It doesn’t mean much, probably, to a lot of readers out there. The overarching theme is we co-employ our client companies, employees with them. What that does is, open up a world of benefits for their employees that they might not have access to in the open market. We can save them significant dollars off of those benefits. We have a couple of hundred client companies in the Hudson Valley that take advantage of that. The nice thing about it is we also take care of payroll for those clients. We administer the worker’s comp as well as the benefits and essentially, our HR team becomes small business owners, HR team for their employees.

I know you guys do a lot in this space. We’re going to talk about PEO and explain. If somebody is looking at it, what does it entail? What’s the savings? What’s the benefit of doing it? Let’s start there. Can there be an increase in revenue growth by adopting a PEO with you guys?

Focus more on the primary mission of your business than the back office if you want to grow. Click To Tweet

I’ll take that one to start off, Brian. Our industry has a great trade association known as the National Association of Professional Employer Organizations, NAPOE. We’re very fortunate. They keep quite a few studies with businesses, business owners and they’ve been able to come back with several interesting statistics over the years. The most recent one is that companies involved in a PEO relationship tend to grow 7% to 9% faster than companies not in a PEO relationship. From everything that we can see by talking to the business owners and delving into that study, the real issues are when you have your team focused on the primary mission of the business.

It’s your clients, your product, your service, collecting your money, selling. Those big things help the business grow. You’re taking the time out of back-office administration, which is what we do for our HR component. We minimize the amount of time they spend there. We contain the costs. We let them focus on the primary focus of the business. It tends to work out better that they’re going to grow and do a little bit better. They also like to throw in there those businesses in a PEO relationship are 50% less likely to go out of business. We know a lot of business owners like that stat. It makes them feel good about things.

We see the revenue growth that the opportunity that’s there. Let’s go to the employee. Maybe Brian can talk to this slide a little bit. Can we offer through the PEO benefits at a lower cost?

At its core, a PEO acts like an aggregator. We bring large group buying power to the table. We have a great partner and MVP, obviously a predominant name in the area. We’re the only PEO with access to MVP and their rates through the platform. They look at our client companies like one large group instead of the small group that they are in the open market. What that’s able to do is drive down costs for the small business owner and the employee. We say 20% on average that we save the small business owner. We certainly see higher percentages than that at times, depending on the organization’s demographics. The other nice thing is that it’s not just the medical side of the house.

We bring a rich Fortune 500 field to the table. We open up things like dental and vision plans for your employees. We bring a 401(k) to the table and the EAP program. We don’t know what goes on in our employee’s lives on a day in and day out basis. Giving them this access to resources that they might not know are available to them becomes important. All the Aflac benefits you can imagine, guaranteed issue life insurance. Things that the small business owner doesn’t have access to on a day in and day out basis because they don’t know about it. We’re able to educate and bring that to the table and we get to administer for them as well. Come renewal time. They don’t have to worry about that. We take that burden off their plate and handle it for them.

I hear the efficiencies and opportunities there. Obviously, the savings are not only for the employer but the employee. I know you guys gave us another stat slide. Maybe, Tom, you want to cover this one.

It goes back to what’s the core of the business. What are your real strengths? Unfortunately, we find that most small business owners spend 30% of their time on HR-related administration and activities from surveys. That cost is substantial if you think about it because there’s an opportunity cost there. If you’re spending 30% of your time on this, what are you not getting to? Maybe this is stuff you’re doing after hours or weekends when you should enjoy the fruits of your labor from all of your hard work all week. If we could return time to our client, bring a great economic benefit through our medical benefits program and the whole cafeteria suite as Brian described. By the way, we know that revenue’s going to get higher. It’s a nice package.

One thing we did not add to this yet, though that is important, is that there’s a big piece of the risk of being an employer that we assume. That’s by our regulations here in New York state, which says that we’re responsible for compliance to state and federal employment laws as the professional employer in the relationship. We’re responsible for the payroll once the clients provide the correct information to us to pay the employees. We make sure that all of our clients have an up-to-date, very accurate employee handbook and those policies are available for the employees to read. Those are the types of things that there’s just a big burden lifted off the business and moved over to us.

The client still has to do things legally. They are responsible for their actions and activities, but by relieving them about responsibility, there’s a risk that goes away. Department of Labor can’t show up and say, “By the way, you’re paying these five people incorrectly. Here’s a fine.” No, that would be our responsibility. Of course, being what we do, being we’re certified by the state, we’re certified by the IRS, which means that we are voluntarily going through an IRS audit of our financials every year. We are confident that we know what should be done from an HR perspective. It will, again, allows the client to focus on the mission and their clients, their services. It’s how they’re going to generate and be successful in the long run.

Part of the reason for this series is to talk about resiliency. We’re coming out of a phase. We’re trying to work our way into either a new normal, dealing with COVID. A lot of businesses dealt with a lot of stuff and are trying to rebuild. Let’s talk about the resources that are there, not only the resources that were there for your clients during COVID and now coming into the way the new working community will be as we return. What are some resources that can be provided?

TAP 31 | Professional Employer Organization

Professional Employer Organization: People don’t know what the new normal is yet. They don’t know what it’s going to look like when the world gets back to work. That means business owners, now more than ever, need to be as nimble as possible.


It’s interesting because it’s a word you hear a lot anywhere, the new normal. The truth of the matter is we don’t know what the new normal is yet. We don’t know what it’s going to look like when the world gets back to work and offices are full and things of that nature. What does that mean to the small business owner? That means that the small business owner, now more than ever, needs to be as nimble as possible. Our platform allows a small business owner to be as nimble as possible. We’ll do all this stuff in the background. We’ll deal with all the employee administration, things of that nature so that you can focus on the best way to get your people back to work in a safe manner. We’ll provide you the legislation. We’ll educate you. We’ll educate your employees if you want us to, but the main focus needs to be, come day one, when the world opens up, you’re out ahead of the competition.

Even now that we’re back in this hybrid kind of fashion, I feel like every day is different. You’re probably coming across different HR things on a daily basis. Why wouldn’t you have that toolbox or those resources to turn to?

To follow up with what Brian was talking about. We were talking about whether employees will want to return to the office. That’s a big part of this. I was on a presentation with the Orange County Partnership at the end of December of 2020. They had a gentleman who is Senior Vice President with one of the largest recruiting companies in the world. He was talking about his Manhattan clients and telling them, “You’re never having your employees come back. You set them away. They moved. The flight out of the city is real. Let’s bring that back here to the Hudson Valley.” What does that mean here? One, we have a lot more people living in the area now that maybe bring some more skillsets to the table, but they’re used to working from home. Are we flexible enough to say, “We want you to come work for us, but you’re going to have the ability to do it from home?”

As Brian and I were talking about, the younger generation, they enjoy this. This is the way they like to work. They like the whole work-life balance. How can you get work-life balance any better than at lunchtime, I turn the computer off for an hour and I go for a jog or walk the dog or do whatever it is that makes me happy? At 5:02, I turned the computer off and I’m already home. I can jump on the treadmill and enjoy myself. I think this is going to be a big part of what’s going on. Interestingly enough, our HR Director, Ed Kowalski, had pointed out a lot of employers didn’t put into place work-from-home policies into their employee handbooks. What does it mean to work from home? How many hours are you supposed to be all logged on the computer? What is considered to be your lunch hour? All those little things that when everybody’s in the office together, you don’t even worry about it. Now that everybody’s off in their little Zoom box, what does that mean?

That brings up a good point. You said, adjusting your employee handbook. Just to the changes that are happening so quickly and that are going to come, instead of having to be out there and doing the research yourself, that’s something you guys provide.

Working from home provides a great work-life balance. You can do whatever it is that makes you happy. Click To Tweet

Absolutely. Ed and his team are talking to our clients every day and they’re reviewing, “Here’s what’s going on. Here are your options. Here’s how to look at this.” The big thing in New York state in 2021 is the mandatory New York State Paid Sick Leave Act. Most employers already had sick leave. The problem is, you’re now expected to follow New York state’s guidelines on accruals, carry-overs, how the employees see access to what their current balances are. From talking to people, we know there’s a lot of employers that have not done any of that because they assume, “I already have a sick leave, so I don’t have to do anything.” Now, what happened? Who’s going to do that work?

With us, we’re required to do it. We were out in front. Ed was talking to his clients in July of 2020 to update how this was going to roll out. Of course, a lot of employers forgot it was happening because it passed as COVID started to hit. We went through with shutdowns and what have you. Our job is to continuously be aware of it and make sure it gets brought to the forefront. We talk about resiliency. We talk about bouncing back. If you’re going to get tied up with your time and these kinds of issues, and it feels like strings pulling on you, it’s going to be harder for you to spend time with your clients. It’s going to be harder for you to spend time with your sales team, driving the business forward.

We go back to the efficiencies identified in general. It will probably outweigh the costs that are there to become to join the PEO. Almost getting everything your HR department. It’s basically what it is. You’re able to have that, just like when we talk about is having the opportunity with BDO and being part of their Alliance and having the backing of a big five firm. Those resources are there for even the smallest people. That’s what you guys are providing us. Being able to have an HR department where maybe there wouldn’t be an HR department ever before.

I think that’s the differentiator. It’s no secret who we compete with on a national level, so to speak. The key difference is we’re an HR provider for the small business owner here in the Hudson Valley that, by the way, we also do payroll. The people we compete with day in and day out are payroll providers on a national scale who give you access to a 1-800 number that you can call and they can provide help. Our client companies are small business owners. Employees of those small business owners are reaching out to us, morning, noon, night, weekends, cellphones. However, they need to reach us. As well as the Hudson Valley does is as well as Ethan Allen will do. We’ve got skin in the game and we invest.

You guys are right there in Poughkeepsie. It’s not like you’re definitely local in the Hudson Valley and providing local service.

TAP 31 | Professional Employer Organization

Professional Employer Organization: If you’re going to get tied up with your time and issues, it’s going to be harder for you to spend time with your clients.


Owners are all from this area. They live in this area. They’re involved in the business day in and day out. There’s value there. I think anybody who owns their own business understands when you have vendors or partners invested in their business day in and day out, you’re going to get the best service because we can’t hide from anything. You have a problem. Our company culture is you’re going to get somebody to talk to and we’re going to work with you to try to resolve it as fast as possible for you.

You got me convinced on the PEO. I think this is a good resource for clients that are maybe looking at, as they come back and get into things like we said, maybe the new normal, this is a resource option for them to explore and take a look at. Folks that don’t work with you can get an idea of what you provide your clients day in and day out. Tom, Brian, we appreciate the time.

Thanks so much for having us.

This was fantastic.

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About Tom Lemmey

As a business owner, ask yourself: do you have the necessary human resource training, payroll and accounting skills, the knowledge of regulatory compliance, or the background in risk management, insurance and employee benefit programs to meet the demands of being an Employer?

If not, you’re not alone, and let’s face it: that’s not why you got into business in the first place!

As your business grows, you may find yourself wanting expertise and to offer more to your employees alongside wishing for legal guidance.

I’m passionate about helping businesses flourish and seeing owners excel!

I use my understanding of the unique needs and vision of business owners like you to help design an HR solution which allows them to scale and grow effectively.

Ethan Allen Workforce is a professional employer organization, or PEO, that serves as an outsourced human resources department for small and midsize businesses, providing vital employment services and them access to expertise and competitive employee benefits that they wouldn’t normally have.

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