Co-Employment
Author: Cynthia M. Roehr, CPA, CMPE
I don’t know about you, but I do not thrive on writing employee handbooks, job descriptions or evaluations. And terminating employees is the worst! So when I learned about “co-employment” it sounded ideal. Who knew there was a way to push all these headaches over to someone else!
For those of you that have never heard of co-employment, it is an arrangement where you essentially “lease” employees from another entity (a “professional employment organization” or “PEO”). This PEO serves as your human resource department. They process the payroll, negotiate health insurance coverage, handle paperwork associated with employment and basically take over all those responsibilities and legal liabilities. You simply enjoy the benefits of using these employees without the responsibility and hassle.
I think this really fits anesthesia practices because many are small-employers and don’t have enough employees to justify employing human-resource personnel. In my experience, most mid-to-small size groups have two or three categories of employees – Partners, non-partner providers and staff. In my opinion, many groups would benefit by spinning off at-least the non-partners and staff (referred to hereafter as “employees”) to a PEO arrangement.
By putting these employees in the PEO, the PEO will manage their benefits, training and all legalities associated with their employment. Worries about about COBRA or top-heavy testing or filing deadlines for 5500’s will be gone. The PEO will manage timekeeping and payroll and all associated payroll responsibilities (garnishments, tax withholdings, payroll tax returns, ACA reporting, etc.). They will also be responsible for timely training and licensure. And of course, they will maintain the job descriptions, employee handbooks, annual notices and other legalities.
The PEO’s let YOU make all the hiring and firing decisions. You decide who is going to work for you. If someone is not performing, you tell the PEO and the employee stops serving you. They handle the difficult employee conversations and any disciplinary actions. The PEO also takes on the liability for those actions.
When it comes to recruiting, the PEO takes the lead but follows your guidance. They provide the advertising and initial screening and reference checks; once you select the candidate, they negotiate the salary and benefits and write the employment contract.
You could include the Partners in the PEO arrangement; however, my experience is that Partners want total control over their own benefits. They want the best health insurance network available and the ability to maximize their contributions to a retirement account – along with with access to their chosen investment advisor. PEO’s typically provide many options for all these benefits, but they might not be exactly what Partners want. It’s a trade-off; but in my opinion, it’s one that is worth weighing.
So I’m sure you are curious as to what this will cost. I spoke with a director at Aureon, a national PEO with Iowa ties. They typically negotiate either a flat amount per employee or a surcharge on actual costs. Either way, the practices that have priced this out tell me that the amount they save from not dealing with these headaches and not having to pay for payroll processing makes it cost-neutral or cost-beneficial. But each situation is unique and must be thoroughly researched.
I’ve already mentioned a couple of items to watch as you select and negotiate with a PEO. In addition to understanding their fee structure and any add-on fees, you will want to understand the breadth of benefit options that will be available. Make sure their health insurance option includes networks in your community. Watch the contract to assure that it will not prevent you from hiring the employees back directly if someday you decide to cancel the PEO arrangement. And make sure the PEO is financially sound.
Cindy Roehr is a CPA with over a quarter-century of anesthesia and practice management experience. She has been a frequent speaker at ASA and MGMA conferences and consults with groups on provider performance evaluations, hospital contracting, governance, financial modeling and RCM issues. Additional information about Ms. Roehr and additional articles pertaining to practice management may be found at www.roehrconsultingllc.com