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COVER
STORY - June 2001 by Ed Ford Sidebar-
Another call came early one morning from Tennessee where two key people had failed to report for work. Replacements were desperately needed. AHEAD HR’s on-site representative accessed a database, contacted two capable substitutes and had them on the job an hour later. These are services that staffing organizations provide. But the 21,000 or so such establishments, which represent one of the fastest growing industries in the United States, do much more. In addition to providing temporary staff, they supply businesses with permanent employees, temporary-to-permanent employee placement, long-term and contract assistance, training, managed services, human resources consulting and Professional Employer Organization (PEO) arrangements. The PEO aspect, the ultimate in staffing services, enables a staffing company to assume a business’ responsibility for payroll, benefits and other human resource functions. According to the American Staffing Association (ASA), 90 percent of U.S. companies use temporary help services and some three million people per day are employed by staffing businesses. Staffing firm assignments range from manual laborers to chief executive officers. At present, the fastest growth is in professional technical occupations. The ASA lists U.S. staffing as a $72 billion industry. Louisville’s AHEAD HR is one of approximately 265 staffing organizations in Kentucky. It’s one of five PEO services firms in the state and among 2,000 Professional Employer Organizations nationwide. Since its founding in 1995, AHEAD HR has experienced more than 29,000 percent growth and is one of the top privately-held staffing firms in America.
Robert Wilson, founder and president of PEOpleStrategy, a Lexington PEO, agrees. “A company has to be able to respond with speed to customer demands and needs,” he said. “Those who spend a lot of their organization’s resources on things other than revenue-producing activities can’t be as competitive.” The U.S. Small Business Administration estimates that the average small business owner spends up to 25 percent of his or her time handling employee-related paperwork. Staffing firms relieve that task in part or totally in addition to providing qualified personnel, staffing clients note. Staffing firms may offer two different types of employment, Bellis explained. “First of all, temporary staffing is considered a sole employment relationship,” the AHEAD HR executive said. Such temporary personnel are employed by the staffing company and are assigned to a particular client. “The PEO, or Professional Employer Organization, is a co-employment relationship,” Bellis continued. “Under this arrangement, all the employees of a company come under our federal ID number and come to work for us as a co-employee with our client.” Bellis, whose company is Kentucky’s largest PEO firm, explains it this way: “Let’s say that a company has 12 employees. It agrees, as our client, to transfer those employees to our payroll and, as a co-employer, we take responsibility for all the legal aspects of human resources and such things as the payroll, workers’ compensation, state unemployment, health-life-dental-vision insurance and retirement benefits.” Where AHEAD HR is concerned, Bellis said “we consider ourselves as an insourcer and companies outsource parts or all of their human resources functions to us.” “The business of employment is non-productive in the sense that it does not create any profits. That’s why more and more companies by the thousands are transferring their employees to an outsource firm which takes over that responsibility for them. “It’s like turning over your insurance to an insurance agent or your accounting to a certified public accountant.” Clients who use the PEO plan point out they’ve been able to increase benefits for employees as AHEAD HR and its large employee-client pool make benefits more affordable. Also, clients can obtain the benefits minus the administrative headaches. Staffing services are provided through a set fee. “We pay employees a certain rate that, usually, is set by the client,” Bellis said. “Federal income taxes, state unemployment and those kinds of things are all fixed and deducted, and, in addition, we add an overhead and a profit figure to each account. “As an example, for someone who’s paid $8 an hour, the client would pay us between $10-$12, depending upon how many employees they were using. That may sound like a lot of money, but it also includes deductions for such things as social security, unemployment, workers’ comp, plus paid vacations and holidays that we provide all our temporaries. That’s our overhead. “And, when clients calculate savings for such things as recruiting costs, which is one of our services, it generally costs them no more to have a temporary employee than if they did the hiring themselves.” “One third of our customers tell us our service costs them a little bit of money,” Bellis related. “Another third say it’s a break-even proposition – it doesn’t cost or save them anything. The other third tell us they actually save money. What this really says is we’re providing a cost-effective HR solution.” In addition to AHEAD HR and PEOpleStrategy, other Kentucky PEOs are Employers Advantage and HR Affiliates/PEO Services in Louisville and HR Connections in London. PEOple Strategy, only in business for one year, is in the process of making a giant leap in terms of clients and services. Wilson is negotiating with the Northern Virginia Technical Council for PEO services of its Fairfax County dotcom members. The council has 2,000 members representing about 300,000 employees. Wilson, former human resources director at the University of Kentucky, said he hopes to be serving members by mid-summer, providing his high-tech clients with a human resources infrastructure in a manner they readily comprehend. “Our clients will be able to access a lot of their HR services via our web site,” he explained. “If clients have a particular problem or issue, they also can access us via telephone, or, if need be, we can show up on site.” In Central Kentucky, Adecco – with offices in Lexington, Georgetown, Versailles and Winchester – provides temporary, temp-to-hire and direct placement of office, clerical, administrative, manufacturing, technical and professional personnel. Recruiting Director Stephanie Klunk points out that Adecco is the largest employment service in the world. Robert Half International, founded in 1948, has three offices in Lexington. Accountemps and Robert Half provide temporary and full-time employees for positions in accounting and finance. OfficeTeam places skilled temporary administrative and office personnel. Division Director Lisa James noted that technical skills, more than ever, are in high demand. AHEAD HR’s largest single account used 325 temporary employees. Currently, the company has seven offices, including corporate headquarters in Louisville. Other Kentucky offices are in Bowling Green and Owensboro. Clarksville, Evansville and Indianapolis are the Indiana locations and another office is in Nashville. In addition, there’s a franchise office in New Haven, Conn. Another wrinkle – on-site service – allows AHEAD HR to facilitate service to larger clients, those with perhaps 200-300 employees. The branch offices are in major client locations and are there, Bellis said, at the request of clients. “We’re always going to take care of our clients and we’ll go where they want us to be.” “We’ll put one or more of our people on the client’s premises to handle recruiting, placement, scheduling and any human resources problems,” Bellis noted. “Clients love it and it’s probably one of the fastest-growing facets of our business.” Bellis, who’s 65, was semi-retired and traveling extensively for Rotary International when he and his wife, Andrea, started their firm. The Louisville entrepreneur – whose business ventures have ranged from fine china to cola syrup – was intrigued by the employee staffing concept, but couldn’t find companies that offered the set up and services he wanted. So, he and Andrea – now AHEAD HR’s president – decided to do it themselves. Although employee leasing has existed for many years, Bellis pointed out that the staffing industry “as we know it today is probably not more than 15 years old.” It was initiated by insurance companies, he said, who were trying to enhance 401K plans. Government regulations prevented that, but “people realized the service itself was where the real value was.” In view of the high percentage of companies using temporary help, plus the human resources advantages received, the outlook for expansion of staffing service firms is considered excellent. Bellis said AHEAD HR hopes to establish eight franchise offices this year and expects the number of company-owned offices to substantially increase. Businesses,
he concluded, are finding that “you can’t be
everything to everyone.” |
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content is copyright 2001, Lane Communications Group The Lane Report is a trademark of Lane Communications Group. All other trademarks are the property of their respective owners. |
“I need
a fiberglass worker – fast!” The call from a
small business manufacturer spurred immediate action at
Louisville’s AHEAD Human Resources. A check on the
corporate computer showed two people in Louisville who
met the qualifications. The caller said he’d hire
both if they were available.
“I think one of
the reasons we’ve had such growth is that we focus
on trying to find good jobs for good people,”
William Bellis, co-founder and chairman of AHEAD HR,
explains. “We try to match people to the job and the
employees to the client so that the arrangement works
well for both of them.”