Help without headaches

January 1, 2007

Chances are that you remember the paperwork shock that resulted when you hired your first employee.

First, there was the nightmare of payroll management, withholding taxes and additional reporting responsibilities. Even more onerous were concerns about risk management in such areas as human resource laws and workers' compensation.

Even in the smallest practices, these employee-related responsibilities can be a distraction from the core business of patient care and practice management. For many employers, co-employment (sometimes erroneously referred to as employee leasing) has proven to be a workable solution to this problem.

How does co-employment work?

For a fee, co-employers, more correctly known as professional employer Organizations (PEOs), assume such administrative responsibilities as payroll management, healthcare benefits and retirement plans, disability insurance, workers' compensation coverage and claim resolution.

You, as co-employer, retain full hiring/firing authority and day-to-day management of your employees. You schedule employees' time, assign work duties and maintain the same personal relationship that you would under the conventional arrangement.

Benefits of co-employment

Once you enter into a co-employment agreement with a PEO, that firm will take over the full responsibility of payroll administration, including preparation and timely delivery of payroll checks. They will do all of the computations and make the payments of state and federal payroll taxes, even provide a full slate of healthcare and other employee benefits. Some will even interview candidates and handle the hiring of new employees.

"We prefer to do our own interviewing and hiring," says Deepak A. Kapoor, M.D., C.E.O., Integrated Medical Professionals, Hicksville, N.Y. "Though we are very pleased with our PEO, Prestige Employee Administrators, we feel that the clinical insights needed when assessing potential employees for a medical practice make it preferable to do our interviewing and hiring inhouse."

According to Jasen A. Burcham, national sales director, PML Worldwide, one of the country's oldest PEOs, their sheer size gives them the advantage of buying power not available to smaller employers.

"This is especially true in areas such as workers' compensation and health insurance," he says. "We employ professionals in these specialties and they are able to administer benefits more skillfully and negotiate better deals than small employers would be able to do on their own."

What's in it for employees?

While benefits to employees will vary among PEOs, most will provide a benefit package superior to what can be offered by the typical medical practice.

Dr. Kapoor agrees. "Providing our employees with the highest possible level of benefits is a top priority in our practice. Our co-employment arrangement has allowed us to provide our employees with a package of benefits that we never could have afforded on our own.

What are disadvantages?

"Understand that there is a cost to co-employment," says Bob Kustka, human resources consultant, Norwell, Mass. "The PEO serves as your human resources department, fulfilling all of the responsibilities that you would have to shoulder and pay for if you were doing the work yourself. Thus, the cost for this service will be reflected in the mark-up charged by the PEO."

"Charges among PEOs will vary sharply," Mr. Burcham says. "That's why it's important to shop carefully. One of the biggest factors being the risk involved. Some occupations, roofing or construction, for example, present greater risks than office clerical employees do. The greater the risk factor for such things as workers' compensation, the higher the markup for leasing.

Finally, no one knows the work culture and environment of your practice as well as you do.