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Check out some of the value-bombs dropped by Michael Gugliotti with SWBC’s PEO (Professional Employers Organization) Division during his 15 minute interview with Stephanie!
What are some of the biggest mistakes you see people make when they're running their own HR that you can share with us?
The biggest mistake about the HR is running your own HR.
Few companies are HR companies. If you’re a roofer, you're doing roofing -- you're not doing HR.
For example, if you’re not an auto mechanic you don’t change your own oil. You outsource it and let an expert do it.
A lot of business owners try to think, “Hey, I know this. I can Google it.” or they believe that HR scandals won’t happen to them, or “I've got a friend that's been doing this for 20 years this way.” And that's where they end up running into problems.
Way too often people try and do what others are doing, for example, they will hire someone as a 1099 when they probably aren’t. If the IRS catches that, you might be in the back of the business journal with a tax lien on your 941 and none of us want to end up publicly called out for not paying taxes properly!
The biggest thing is making sure that those processes are done correctly and legally.
What is your best tip for retention with your employees?
When it comes to Human Resources, perception is reality.
What's the first impression an employee gets when you hire them? Is it this discombobulated mess? “I think I got your I-9 here... I think I've got this over here… Time off? Well, kind of just let me know when you want to take it.”
If that happens, and it does, a lot! Your new employee is starting to think “Man, did I make the right choice by coming to work here?”
Or do they come into a well oiled machine and think “Wow. Yeah, this is a small company. But they've got their stuff together and I need to too and I want to work here!”
Their impression of the company can either retain an employee or help them leave.
(A sidenote from Steph: In a recent study, it was discovered that most employees leave a business within a year and decide if they’re going to stick around in the company long term within the first six weeks. So first impressions matter!)
And you want them to stay.
If you have an employee turnover, that turnover and retraining to get the new employee to the same level that the person just left, it costs about 30% of their total salary. So if it's a $50,000 employee, you're talking several thousand dollars that you're losing just to replace someone.
It's a lot less expensive to keep a client than to go get a new one, and it's the same thing with employees. You make a lot more if you can keep your employees, than having to go out and get new ones and replacing them.
What are some of the craziest cautionary tales you've ever experienced or heard about?
I'm never amazed at what somebody thinks is okay, but I’m always like “What part of just common sense told you this was okay?” So here’s one.
It was a company in Houston and they did guide services, the kind where you see these oversized vehicles going up and down the road leading cars to make sure the people behind them don’t hit a bridge or something like that.
They had a big yard in the Houston area and had an employee call to say that the owner was docking their pay. So I asked “What do you mean?”
She said “She’s forcing me to clock out 30 minutes multiple times per day.”
I said “What for?”
She responded “I’m going to the bathroom.”
I was like, “Why is she making you clock out to go to the bathroom?”
She said “We don't have a bathroom at our office, so I have to drive down the street to the gas station. And she tells me that since I could be out smoking a cigarette or getting a coffee, that's a break and I have to clock out but the clock won’t do five minutes so I have to clock out thirty.”
We were like, “No, she has to give you a bathroom.”
We called the owner and she simply said they didn’t have one and it was an inconvenience and would cost her thousands of dollars to put one in. Obviously this wasn’t just an inconvenience -- you have to have a bathroom, it’s like having a door to your building. However she kept refusing to put one in and we eventually had to split ways with that client because she wasn’t someone we could work with.
You see random things like that when you work in HR.
I would also add a word of warning about working on your business, not in your business.
When we (entrepreneurs) start out, we’re always working in the business. You're flipping burgers so to speak, but at some point you want to get to where you work on the business. On the next location or strategic partnerships where you’re not in the daily grind.
But even when you get that far, you still want to keep tabs on things.
We had a client of a 400-500 employee company, and the owners were excited but the lady who ran the HR payroll department fought it tooth and nail.
To the point she would make up stuff and say we screwed stuff up to try and get us in trouble. All of a sudden one day, we had an FBI agent show up at our office and asked for a bunch of records. We found out that the payroll HR lady was embezzling money. She had been there for 10-15 years and was the one that the owner trusted and never double checked on her work.
I'm not saying your employees are all dishonest. But if you're the owner, that's your baby. You've put blood, sweat, tears, your mortgage, your house, everything on the line to get where you’re at. So every once in a while just do a spot check because there are those bad apples out there. And if someone is really fighting you on something you want to do like bringing in new technology or adding resources, go deeper. Find out what the underlying reason is.
(Side note from Stephanie: If you are concerned that someone might be stealing from your company but you’re not sure how to read your financials, check out a recent blog we put up about our interview with Financial Expert Daphne Sohockie of A-Z Helpers Bookkeepers here!)
Having a Professional Employers Organization (PEO) is an important third party, but what are some things to look for in order to make sure you get a good PEO since some PEOs can be shady?
One thing is billing.
A lot of POS charge percent of payroll. They just tack on 2%, 5%, or 10% to your taxes.The problem is it's a percentage: there's a lot you can hide in a percentage.
If you're going to use a PEO, make sure there is transparency. Ask what’s included in that percentage, and ask the PEO to break it out for you.
I had one client one time tell me that they asked the PEO to break it out for them and the PEO said “Do you go to McDonald's and ask them to bring out the cost of the lettuce, the cheese, and the meat?”
Thing is, that’s a $4 hamburger. I'm talking about tens of thousands of dollars for a PEO. It's a little bit different. In the PEO world, if they're getting in your face with stuff and trying to push you in that hard sell, they're probably hiding something. You want somebody that's more consultative and asks what your problems are, not just somebody to run your payroll and HR: there’s software that does that.
Bring in someone who is going to look at the challenges and problems you are having. Things like keeping employees, getting employees, finding good health benefits, etc. It’s about more than a commodity.
Also, PEOs can now be certified by the IRS. And so I would make sure at bare minimum that they have the IRS certification. One of the things that most people don't know is that if you use a payroll company and they take your tax money and don’t pay it off to the IRS, the IRS is coming after you and you have to go fight the payroll company. If a PEO is certified with IRS, it’s actually different. You get to get out of jail free card, so as soon as you do business with that PEO, the IRS is going after that PEO. Not you.
One more thing about transparency:
Make them show you the numbers three different ways. If they can't do that, they're hiding something in there.
What is one problem across the board that you often see in most clients?
90% of people would say “you pay time and a half for overtime.”
And that's part of it, but the FSLI law for overtime changed on January 1st.
Most people think that if they pay someone $30,000-$50,000, they don’t have to pay on overtime. But there's other aspects of the overtime. There's actually a duties test, so you can't just pay someone $60,000-$100,000 and say “they’re full time, I don’t have to worry about overtime.” Things like bonuses, and commissions sometimes have to be figured into the overtime rates because of the new law, and most people don’t know that.
If you call a payroll company, they probably don't even know that.
Again, the important thing is knowing that the companies you're using truly have that working knowledge of what's supposed to be going on.