Outsourcing is a “love it” or “hate it” proposition for many self-storage owners, but getting help with your human resources (HR) can provide significant value, particularly if you want to up efficiency and optimize your business operation. There are many benefits to uniting services like payroll, medical benefits and workers’ compensation under a single company, especially if you have limited resources and can’t support all the necessary HR functions.
Over the last decade, HR outsourcing has grown more mainstream in the self-storage industry. Continued consolidation of properties from “mom and pop” owners to mid-size and large companies means an increased geographic footprint for many operations that might span many cities and states. The plethora of state-level employment laws and regulations—not to mention continually evolving federal-level mandates—has driven significant incremental complexity in the HR field, with requirements often well beyond the skill set of an existing HR department.
Outsourcing to a professional employer organization (PEO) can provide you with critical strategic advantages. Following is an overview of what a PEO offers, pros and cons of outsourcing your HR functions, what it costs, and factors to choosing the right partner.
What Does a PEO Offer?
PEOs provide many of the services ordinarily handled by an HR department. You can choose from a menu of items and even choose to keep some tasks in-house if that’s what you prefer. A provider can generally handle:
- Payroll taxes
- Wage, hour and Equal Employment Opportunity Commission compliance
- Medical insurance and administration
- Workers’ compensation and administration
- Safety programs, compliance and administration
- Employee handbooks and operations manuals
- Unemployment and workers’ compensation claims
- Occupational Safety and Health Administration compliance
- Legal compliance
- 401K administration
- Flexible spending plans
Note: Even if you hire a PEO, you’ll still want to designate a point of contact within your organization who can handle some HR responsibilities; but the majority of tasks should be shifted to the PEO.
Pros and Cons
Facility owner-operators often wear many hats in their organization as they strive to contain overhead. A single person might serve as the company’s operations manager, marketer, head of asset management and HR manager. In addition, many self-storage companies aren’t large enough to afford a full-time HR director, so that job is often left to someone who isn’t well-versed in the complexities of the role. This can result in suboptimal outcomes, particularly given the complexity of federal, state and local labor laws.
One storage owner with whom I worked had purchased 65 new facilities across eight states over a three-year period. He was very focused on acquisitions and understandably overwhelmed by eight different sets of labor laws, employment taxes, regulations, etc. A PEO team was able to step in, simplify the employee migration from mergers to the new ownership entity, onboard staff at all locations, and streamline compliance across all eight states as well as at the federal level. It also handled all workers’ compensation and unemployment claims. Finally, it was able to automate the cost allocation of staff from multiple locations. This ensured each property carried the appropriate labor burden.
Outsourcing to a PEO enhances controls and reduces compliance-related risk. This type of specialization allows you to focus on your personal areas of expertise—operations, revenue management, acquisitions and strategic planning—while relying on HR experts for help with payroll, wage and hour laws, policies and procedures, safety regulations, etc.
Another benefit of outsourcing includes medical benefits and workers’ compensation coverage. If you engage the right firm, it should be able to offer benefits that are normally only available to much larger companies. Having one company handle all HR needs eliminates the need to deal with multiple providers and exhaust internal staff.
All these advantages aside, outsourcing may work for all companies. Obviously, you’ll need to give up some control. Your team will be “co-employed,” with the PEO acting as the employer of record for payroll, payroll taxes and benefits. As the onsite employer, you’ll still be responsible for managing, hiring and firing, but you’ll need to consult with your provider regarding disciplinary action and termination.
What Does a PEO Cost?
One of the best-kept secrets about PEOs is the cost. By outsourcing your HR responsibilities, you can often enjoy significant savings on your medical benefits and workers’ compensation; plus it usually costs less than keeping HR in-house.
PEOs charge a flat rate per employee per pay period or a percentage of gross payroll. You’ll need to determine which is better. As wages per employee fluctuate, so do PEO fees, which impact your control on cost. PEOs use contracts on one- to three-year terms. It’s usually best to lock in the rates for three years.
How Do I Choose a PEO?
Choosing a company is an important decision. First, it’s critical to work with someone who understands self-storage. To avoid a learning curve, confirm the provider’s level of industry expertise. The storage business has specific and unique laws and procedures, and it would be difficult for a PEO to successfully represent you without knowing what they are and how they work.
It’s also important to check references to ensure you’re getting the right cultural fit. Some PEOs may be too rigid for your company, which could create problems down the road. Ask the right questions to understand if you’ll agree on how to handle issues, such as disciplinary action.
Also, find a company that has the size and negotiating power to get the best rates and programs. The larger organizations can obtain benefits equal to those offered by Fortune 500 companies due to the number of employees they insure.
In addition, there are specific technology needs, such as cost allocation by location, that not every PEO can deliver. Make sure the carriers used by the PEO are A-rated, and confirm the company is accredited with the Employer Services Assurance Corp. and the National Association of Professional Employer Organizations.
Finally, compare a few PEOs for pricing purposes and have a clear understanding of the service-delivery model for HR and workers’ compensation. Confirm they’ll travel to your location for support and you’ll be assigned a single point of contact to assist with all your needs.
Labor laws and HR are becoming increasingly complicated. Outsourcing to a PEO is an effective way to improve your operation and reduce cost while enjoying peace of mind and the freedom to focus on your core competencies. Each year, PEOs continue to grow in popularity and improve efficiency for self-storage operators. Outsourcing isn’t the right choice for everyone, but it’s certainly worth exploring.
Jeniece Carter-Rae is president of the Storage Business Owners Alliance, a buyer's group that leverages the combined strength of its membership to offer savings, and CEO and co-founder of the Business Owners Alliance LLC, which partners with larger companies to offer exclusive discounts to its clients and employees. For more information, email firstname.lastname@example.org; visit www.thebusinessownersalliance.com.