Human resource for hire

What if you could offer your employees large corporation-style benefits, protect yourself from lawsuits, receive guidance in all government compliance issues - and not have to hire even one more employee to run your human resources and legal departments?

In an age when a growing number of business functions are being outsourced to independent service suppliers, it should come as no surprise that administration of employee issues - from personnel recruitment to insurance claims management to the writing of job descriptions to defense against age discrimination, wrongful firing and sexual harassment lawsuits - are being farmed out to special companies.

Such companies are known as PEOs (professional employer organizations). They've been formed to address those needs for all kinds of small to medium-sized businesses, including car dealerships.

In essence, a PEO becomes the dealership's human resources and legal department.

The new urgency of personnel issues is driven by a number of factors, not the least of which is concern about dealership employee turnover and a heightened desire on the part of dealers to retain experienced, successful employees.

Some PEOs recruit, screen and train new hires, including managers, and provide ongoing training for new and veteran employees alike.

Yet another reason why personnel and human resource issues now require more attention than in the past is the greater level of reporting required by government agencies that regulate the auto retailing industry. Worker safety records, hazardous waste disposal logs, tax accounting, and other record-keeping tasks can be farmed out to a PEO.

The consolidation of the auto retailing industry has also made the need for human resources management more obvious.

Acquisitions have the effect of suddenly creating corporations where previously only a number of independent dealerships existed. These newly consolidated companies have already centralized many of the administrative functions of their member dealerships.

They are also in a position to address the demands of human resources issues, an area that had previously received only fragmented attention, if they received any attention at all. PEOs can offer an instant and comprehensive solution, sparing the dealership managers from staffing an in-house human resource department.

Another important factor fueling the rise of PEOs is the potential for costly litigation against a dealer whenever a disgruntled employee begins looking for reasons to sue.

Some PEOs function not only as the human resources department but also as the client's legal department, sparing the dealership the headache and expense of finding and retaining counsel to fight lawsuits.

"The worst thing that can happen to a dealership or any other company is that employee who hires on and then just waits for an opportunity to sue you," says Beverly C. Wines, president of ASSETS Team Management, Inc., a PEO based in Irvine, CA.

She adds, "This is becoming a national problem, not just in California. It's best to have human resource professionals working with you to ensure that all employee processes are in place so that the dealer can be sheltered from employee-related liabilities. Our company, for instance, provides all the safety programs, safety handbooks, and training for supervisors on safety issues and other liability concerns."

Carlos Planas, president of Tamiami, a Chrysler-Plymouth-Jeep dealership in Miami, says that his PEO, Miami-based Vincam Group (which was recently acquired by computer giant ADP), provides him with form letters dealing with such sensitive matters as terminating an employee.

"Before I fire anyone, I sit down with the people at Vincam and explain to them why a particular individual has to be fired," says Mr. Planas. "They provide me with all the guidelines for doing it correctly. I have access to their lawyers to protect me from all legal liabilities, except those that are clearly my own fault."

Traditionally, office managers and controllers have shouldered the burden of personnel management chores, such as administering payroll, keeping track of tax deductions, tracking vacation and sick leave time, employee training, filing health insurance claims, and keeping up with staff changes. In some dealerships, that can seem almost like a full-time job in itself.

Payroll administration, the essential task of the personnel office, has become far more complicated than it used to be, when a single clerk wrote and distributed a few dozen checks. Today's payroll clerk must track wage garnishments, verify data on bank loan applications, fend off wage discrimination lawsuits, and answer a barrage of questions from both inside the dealership and out.

As if such a job were not harried enough, the administration of employee issues, despite the formidable demands of the job and the potentially weighty consequences of decisions issued, has traditionally been a clerical, not a management, position.

But the need for professional management is beginning to surface as human resource issues expands, to include such new needs as child care, assistance with home mortgages and car insurance, wage and compensation analysis and retirement plan comparisons.

Says Mary F. Smith, controller at Allen Cadillac, Laguna Niguel, CA, "In a lot of dealerships, personnel administration is a multi-managed function, with a payroll clerk taking care of that area, a business manager shopping insurance plans and meeting with brokers, maybe another manager, the general manager, for instance, having to go over all the 401(K) and insurance plan analyses and other data that have been gathered to make the final decision.

"And for 401(K) plans, the government mandates that you have an outside administrator."

But Ms. Smith says all those functions - the government-mandated audits, wage and salary analyses, new employee orientation and training, reference checking - can be handled by an outside PEO.

Some PEOs also provide career development counseling and outplacement services for laid-off employees, functions whose importance grows as more independent dealerships become part of megadealer mergers and their workers find themselves in the ranks of the unemployed.

Some dealers believe that a PEO will cost considerably more than an in-house human resource department that uses outside administrative services on an ad hoc basis. However, those ad hoc costs can add up quickly, says Ms. Smith.

"It takes a really sharp pencil to know all the costs that a dealership will have to cover," she says. "There are not only fees to outside consultants, but you also have to take into account the time and effort for dealership managers to research and compare insurance offerings, or answer questions from 200 or 300 employees.

"A PEO has the technology to do this kind of research and employee compensation and benefits tracking. Dealerships don't keep their own databases that can compare health or dental insurance plans.

"So when the outside company charges $60,000, and the clerk in the dealership is getting paid only $30,000, the dealer's first reaction is that he's not going to save any money by outsourcing the work. But the dealer may not be looking at all the costs that are involved."

Mr. Planas says that his PEO consistently finds lower prices for health and workman's compensation insurance for his 140 employees than he can find shopping those services himself.

How big does a dealership have to be to benefit from the services of a PEO? "The larger the dealership company, the more savings can be realized through economies of scale," says Ms. Wines. "But even a company with as few as five locations can save money by working with a PEO."

Ms. Smith has some specific criteria for selecting a PEO.

"Look for the well-networked company that has a number of contacts in the medical insurance or 401(K) sector, a company that really can shop services for you," she advises.