Small businesses shift to HR suites
Exec says third-party bureaus expanding to handle every part of human resources, including timekeeping, payroll, taxes, compliance and more.
A local HR firm is starting to see more area small businesses make the switch from in-house payroll to third-party administration.
Jim Bolek, vice president of payroll for Portage-based Basic, which also has an office in Wyoming, said the company’s West Michigan payroll services revenue increased from $1.25 million in 2015 to $1.65 million in 2016.
Bolek said part of that growth is from clients’ business expansions — companies jumping from 10 employees to 50 and needing additional HR support — but also from bringing in more clients, especially smaller outfits.
“(Our clients are) mostly small businesses,” he said. “The average payroll we run is 26-300 employees. It could be a two-person, mom-and-pop or a 300-person factory.”
With today’s ever-evolving tax regulations, benefits, digital recruiting practices and hiring and onboarding costs, Bolek said clients often want to outsource what would otherwise be a full-time-or-more job to a third party that can do all of that plus payroll.
“When I first started in the payroll industry, we were mostly doing just payroll and taxes,” he said. “Over the years, you’re seeing expansion into workers’ comp, 401(k) and other services.
“Being able to do benefits, applicant tracking, on-boarding — that’s the new thing that’s sweeping the industry.”
He said one of the biggest reasons clients retain a firm like his is because of the work of staying on top of the tax code, in addition to ensuring compliance with FSA, HRA, HSA, COBRA and FMLA administration, and ACA and ERISA rules.
“Everyone is waiting to see what’s going to happen with the new administration,” and the repeal and replacement of the Affordable Care Act, Bolek said. “That will affect payroll.”
He said it’s easier for companies to stay compliant with federal regulations if their data are kept in one place.
“A lot of the reports you have to provide the government are payroll, HR and benefits, and a lot of that is stored with people’s payroll. Generally, (it’s in the same software). It’s a complete HR suite, or Human Capital Management suite.
“It’s all starting to tie into payroll systems.”
Bolek noted small businesses are just as worried as large corporations and government entities about the possibility of data breaches of sensitive information.
Basic addresses this by using industry-standard encrypted software — but also by getting it tested frequently by an independent auditor.
“We are … audited to make sure our financial, security and all other aspects have been checked and double-checked. We also have an annual audit by an independent contractor that looks at our IT capabilities and security.
“It’s a way to get an independent set of eyes on your operation to make sure everything’s copacetic.”
He said his employees also go through training to make sure they know how to maintain security.
“We have our employees (attend) seminars on phishing schemes, so they know how to handle and react to those things if they get a suspicious email from clients,” he said.
Employees also are encouraged to view the company’s free webinars and newsletters to self-educate on security, too.
Basic, Bolek said, recognizes HR bureaus need to have as much technology knowledge as they do human resources knowledge.
“Everything is going to the web as far as software as a service.
“If you look at a service bureau five years ago and you look at it now, it’s much different and it’s continuing to grow. You have to be capable in your payroll knowledge but also in your technology knowledge. It’s becoming a technology business as opposed to payroll business.”
He said Basic invests time and energy into mastery of the HR landscape, so clients can do what they do best.
“You want the client to concentrate on what they do, not on worrying about payroll,” he said. “They should be making widgets, not doing payroll.”