ScreamingBox Technology & Business Rundown

Dave Erickson 0:00
So, you finally got your business up and running, and now it's time to scale up, but that means hiring people. On this ScreamingBox Podcast,we are going to look at how to use various HR techniques to grow a business. Please like our podcast and subscribe to our channel to get notified when the next podcast is released.

Dave Erickson 0:44
To grow a business, at some point you will have to hire employees, but hiring employees can be one of the riskiest and one of the most expensive things a business can do. Welcome to the ScreaminBox Technology and Business Podcast. In this podcast, Dave Erickson and the great Botond Seres are going to explore HR strategies for Tech Companies with Suzanna Martinez, Founder and President of PEO for the CEO. With over 20 years of HR experience in the professional employer organization industry, Suzanna is very experienced in guiding businesses through vendor consolidation and cost saving solutions that empower their leadership teams to focus on growth. She is passionate about helping entrepreneurs scale with confidence by leveraging outsourcing HR infrastructure that works. In 2020 Suzanna founded PEO for the CEO, a national brokerage firm that helps growing companies streamline HR, Payroll, Benefits and Compliance. Through strategic professional employer organization partnerships. Before that she worked for large companies such as Trinet and ADP as a PEO business consultant and in HR service sales providing comprehensive HR solutions to small and medium size firms. Suzanna, welcome to the podcast.

Suzanna Martinez 2:01
Thank you for having me.

Dave Erickson 2:04
To begin with, how did you end up in the HR industry?

Suzanna Martinez 2:07
Many years ago, I started selling payroll services, and payroll is, is more of a commodity service, and people really just want to talk about their payroll system if something's broken; if it's not broken, don't fix it, and they don't even, you can save money, you can save a few bucks, but people really just do not want to change payroll services if it's not broke. However, healthcare is a big hot topic. HR issues are very hot topics. So as I was selling payroll, it was just a lot easier for me to have business conversations with businesses regarding things that were important to them, like benefits, benefits, typically is the second line item, second to their gross wages and HR compliance. If they're growing, scaling, or perhaps they're reducing and having to downsize. In any event, they have to really think about HR and dotting their I’s and crossing their T's.

Dave Erickson 3:08
Yeah, this is probably particularly sensitive in countries with a lot of regulation and compliance issues as well. The United States is, it has plenty of those for sure.

Suzanna Martinez 3:19
Yeah, many states, I mean it, you know, many of the companies are, might be headquartered in one state, but then have employees spread out in different states, and a lot of times they're remote workers, but they have no idea what compliance means in a lot of the different states. And very high regulated states are: New York, Colorado, California. Even if you have one remote employee in any of those states, you really want to make sure you're doing things correctly.

Dave Erickson 3:51
What seems to be right now kind of the newest HR trends or issues that people are working with or dealing with?

Suzanna Martinez 4:01
A lot of the states are really changing their FMLA, their family medical leave policies. They're doing a lot of payroll deductions to have to pay for that. Some, some states will let employers pay an individual policy to kind of self insure that their employees have that family medical leave that's paid for. That's a big one, 401 K is also another big one. Many states are making it more regulated and mandatory, even if you just have five employees that you have to offer a 401 K to your employees.

Dave Erickson 4:39
Are there any technologies that are helping companies do the HR, not so much compliance, but just the processing. There are situations where an employee is needed, or a situation like that, and if you're a small startup and you actually want to employ somebody and get some people on board. Are there things that can help them, as far as you know, managing employees or bringing them on?

Suzanna Martinez 5:09
Yeah, so you talk about independent contractors. That's typically what a lot of startup companies do. They have independent contractors, and they're 1099’s. It's really important that you regularly have a professional do an HR audit on those contractors to make sure that they're legitimate contractors, because there could be some heavy fines and penalties with the Department of Labor and the IRS if they're not legitimate contractors. So having a professional just take a look at them on a regular basis, do an audit to confirm that their contractors is very important. There are systems so the PEO by outsourcing it to a PEO company. And oftentimes, when you're a startup, you think you're just too small for HR infrastructure or an HRS system. But that's really not the case, because you know, if you're growing and scaling, you should have an HR infrastructure, like you're 100 employees, and just have it set up so that way you're ready, set up for success. I mean, who goes into business and says, Oh, I want to do compliance, and I want to do payroll, and I want to do a COBRA administration audit, and I want to do a 401 K audit. Nobody ever goes into business for handling those type of issues. So oftentimes, what, with the PEO model, you get a very robust HRIS system. So it really does help streamline and make a very centralized hub for businesses to have everything in place. And some companies will even let you have your W2’s and your 1099’s in the same system to do the direct deposit, and then they will give you some HR support to make sure that your 1090 nines are legitimate, 1090 nines. And if at some point they're not, they're going to let you know, and that's either you're going to have to change responsibilities of what those employees are doing, or contractors are doing, or it's time to possibly turn them into w2 employees.

Botond Seres 7:07
So please excuse my naivety Suzanna, but you mentioned that there's a need to make sure that these contractors are actually contractors. What else could they be?

Suzanna Martinez 7:20
They could be employees.

Dave Erickson 7:21
There are certain regulations that define what a contractor is versus an employee. So there's certain things that contractors should not be responsible for, if they're technically a contractor, and if they happen to be responsible for those things, and technically they're an employee, not a contractor.

Suzanna Martinez 7:43
Yeah, there's actually companies that specialize for people that have contractors in multiple countries as well, to make sure that you're compliant in each country.

Dave Erickson 7:55
For us, we try to simplify it to as few countries as possible, because we had to go through all those audits and everything. But I can understand, and it took us, you know, we've been in business for 12 years, so we've had some time to work on this. But I can just imagine a startup that's starting, (yeah), and you know, a lot of these startups are started by engineers or people developing a product, and all of a sudden, they now need to do business and do HR, yeah. How has AI affected the HR industry, or has it, and if so, what are some of the things that the HR industry is dealing with when it comes to AI?

Suzanna Martinez 8:37
I definitely think it has quite a bit and hopefully for the good, because it's, even it's very difficult for even the most seasoned HR professional to stay up to date with compliance. It's changing so rapidly, each state, each city, federally, locally, and it's really difficult for the most seasoned HR to stay up to date. That's why they like to typically partner with a PEO company, because they have a whole team that'll help them stay up to date. But AI has, has really helped, I think, as far as you know, passing down the new laws and regulations that have taken place and are up and coming, things that are on the ballot to possibly pass. As far as healthcare goes, AI has affected it quite a bit. lots of back underwriting. The underwriters are really using a lot of AI tools to really make sure that the companies get put in an appropriate tier for medical pricing.

Dave Erickson 9:42
In most other civilized countries around the world, the healthcare is centralized, so I guess the healthcare issue with work is much simpler for many employees. But in the United States, you know, there's private insurance, there's work insurance, there's federal insurance, state insurance could get quite complicated to do health care in the United States.

Suzanna Martinez 10:10
Very complicated. So on the individual market, that's like a whole system in itself. I just don't even play in that arena because it's just too much. And so much is changing. A lot of the carriers are just making, shrinking their networks of doctors. It's just more narrow. It's really hard to keep track there. As far as the group size, the group side, under the PEO model, you still have a lot of rich fortune, 500 benefits with PPO, so the doctors are real, open the networks, the hospitals are still open, lower deductibles, and oftentimes, especially when we're talking about technology companies, these employees are typically have worked for the big companies like the Googles and, you know, silicone companies that have rich fortune 500 benefits, so it's very difficult to attract and retain talent in the in any type of industry, but especially in the tech industry. So if you want to attract them, you have to make sure you have some competitive benefits in place, and if you want to retain them, you have to continue to offer rich benefits and contribute. The employer needs to contribute a good portion towards those benefits as well.

Botond Seres 11:23
Speaking of benefits, I hope you don't mind me asking, what are some of the most popular benefits these days?

Suzanna Martinez 11:31
Well, everything, typically, it's always healthcare. I mean, there's so many other benefits, ancillary benefits you got, your vision, your dental, your short term life, disability, your 401 K benefits, all these other commuter benefits, flexible spending account benefits. But the driver, most cases, is the health care, because health care is so expensive and it's just going up every year, the premiums are increasing, the deductibles are creasing, increasing. So oftentimes, I find that most employers are making a lot of their decisions based upon the medical first, when it comes to benefits, because they want to make sure it's affordable that all their employees nationally have access to all their doctors locally. And then after that, then, then we start to really dive more into all the other additional benefits.

Dave Erickson 12:26
Oh, yeah, and Botan, this may seem strange to you, but if you noticed when Suzanna was talking, healthcare seems to be separate from your eyes and your teeth.

Suzanna Martinez 12:41
Yeah

Botond Seres 45:42
Oh yes, that is strange to me.

Dave Erickson 12:45
I do not understand it. It makes no sense whatsoever. But health care system, yeah, vision and teeth are separate from health so,

Suzanna Martinez 12:57
Yeah, what? What I'm finding oftentimes, because health care, the medical side, is just increasing so much, and we really want the employer to contribute quite a bit towards those benefits. Is oftentimes they'll contribute, you know, 85% towards the health care, but then they might not have enough money to contribute towards the dental or the vision, and they'll just make those benefits employer paid employee paid benefits only, which is fine, because oftentimes those benefits aren't nearly as expensive and they don't increase every year. Oftentimes those type of benefits stay pretty stable every year.

Dave Erickson 13:34
Yeah, yeah. Like vision usually is a pretty small amount and is pretty stable. Teeth depends on how much candy you eat, but, you know, it can be somewhat at least, keeping checkups and the occasional cavity or whatever. But that's interesting, that healthcare is so focused of companies, but retirement is a, is a big issue. Also, how does you know you mentioned 401, k's and some others. How is retirement benefits part of this? What? What does it rank out?

Suzanna Martinez 14:15
It's pretty high up there. Absolutely it is. And oftentimes employees, especially in the technology industry, they're looking for companies that are contributing a good portion or matching their 401 K benefits. So if you're an employer that's not able to match, you're going to, you're going to struggle in the technology industry to find talent. And when you're a startup and you have to offer 401, K, and if you're not matching, what ends up happening is your highly compensated employees will participate, and your lower compensated employees won't participate, and then it won't, it won't pass the testing at the end of the year. So it basically becomes what we call top heavy. And those you know, higher compensated employees have to pay money back, which is, is never, ever fun.

Dave Erickson 15:08
Besides these, kind of retirement packages, would you say that in attracting talent to a company, whether you're a startup or a mid size firm, you know, people in their heads say, Okay, this employee will cost, you know, $100,000 a year. But in reality, it costs a lot more, employer taxes, there's the health care costs, there's a retirement fund. What is that number for people who are trying to think about employees, is it double what their salary is? Is, (Wow), 50% what their salary is? Is there kind of a, a rule of thumb that that way people who are starting a company can kind of say, Okay, I think it's $100,000 but it's really $150,000 in cost, or something like that.

Suzanna Martinez 16:00
You know, that's a really good question. I've really never thought about it that way. When you're talking about tech, tech companies, that's typically lower wage workers comp. So if we're talking about industries construction, they're going to have higher premiums when it comes to workers comp. So I would say on the companies where the workers comp premiums are probably going to be a lot lower or minimal. When you take a look at your taxes, your FICA, your your your Social Security, your Medicare, your federal unemployment, your state unemployment, all your local taxes, your your workers compensation, employee benefits, so all the employer burden and plus your retirement 401, K, depending how much you're gonna match your employees, I I would probably say at least minimum 25% and probably even higher than that. Yeah.

Dave Erickson 16:52
so if you're looking at hiring someone for 100,000 you're really looking at a cost of $130 or $140,000

Suzanna Martinez 17:00
Yeah, I would say that would be a lot fair. Yeah, another strategy that employers can put into place, especially if you're a startup, and you don't, you can't afford to risk a lot, is to put in a funding strategy, a vesting strategy, into your 401 K, saying that the employees, if they leave, they can't take the employer match until they've been there a certain number of years, you know their best, a vesting schedule, and that all helps As far as retention of your employees as well

Dave Erickson 17:29
These startups now, if you want to attain or get the best talent, you really have to kind of think about a lot of different things that go into it. It's not just I'm going to offer some money. What are some of the strategies that startups, and not just startups, but obviously even mid sized companies, as they grow, they need to bring on new positions and new people. How? What strategically should they be thinking about to attract talent? What are they really looking at?

Suzanna Martinez 18:02
Well, most companies, when you're starting up, you're, you're doing fundraising, you are out, possibly going to set yourself up for some M and A down the road. And if you ever look at doing fundraising or M and A, you want to make sure that you have a really tight HR infrastructure, and you're very compliant. It's pretty nipped in the bud. You want to make sure that you already have top talent in place and that they're staying on board, because that's really when your company becomes more valuable. And what you can do from the very beginning is put something in place immediately, so that way it's just a turnkey model, and as you grow your company can stay compliant, be able to offer affordable benefits to your employees, be able to attract them, be able to retain them. And it will help you in the long run, when you get ready to do some fundraising, or M and A. And a PEO model is a way to do that. I mean, it's very difficult for an employer on their own to be able to do all this. It's too many. You'd have too many hires, you'd have to hire too many professionals to do it. So once a company gets to be in the hundreds, plus, you know, 500 employees, they can afford to have a HR team in place. They can afford to have a nice, robust HRIS system, a human resource information technology system. A lot of the big companies will use a system called Oracle, very sophisticated, but when you're smaller, you can't afford to, you know, have an HR team in place, and you can't afford to purchase these HR softwares either? (Yeah.)

Botond Seres 19:43
So putting cost aside for a moment, what are some of the distinct benefits between a PEO solution and a dedicated HR team?

Suzanna Martinez 19:57
Well, the dedicated HR team you typically, you. You not only have to pay a salary, you're going to have to pay benefits, you're going to have to pay taxes, you're going to have to pay workers comp, you're probably going to have to contribute to their 401 k so, and if you want to get somebody that's a real seasoned HR, professional minimum, minimum, you're probably looking at $70,000 and that's probably on the low side for just their salary only. So it's really difficult. Oftentimes, a lot of the startup companies, what ends up happening is the founder is the one that's trying to manage it, or they have the spouse is handling HR. They don't really, you don't know what you don't know, and set yourself up for a lot of HR nightmares down the road, perhaps. any type of audit, Department of Labor, any of the state any of the federal agencies, IRS, agencies coming on in to knock on your door you want to make sure that you're going to pass any type of HR audit with flying colors, because that could be an HR nightmare.

Botond Seres 21:05
Well, the common things I hear about HR, one of the, I'm not sure if it's called a regulation, but DEI is one of the things I hear about a lot. What are some of the, the similar things that a company has to comply with from an HR perspective?

Suzanna Martinez 21:28
Well, it depends on your size. So typically, like from one to 20 employees, you really most of those times, companies are really focused on, are these really true? 99,1099 contractors, or are they w2 employees? Because if you fail a Department of Labor audit or an IRS audit, and they find out they're w2 employees, there can be some heavy fines and penalties that you're going to be facing once you become 25 to like 55 employees, you have the FMLA, Family Medical Leave Act, ADA, Disability Act that you have to make sure that you comply. Once you're over 50 employees, you have the ACA requirement, which is making sure that you offer affordable health care to all your employees, and you have to make sure it's tested correctly so you can't just be discriminating against your key employees versus, you know, all the other employees. So there's a lot of other reporting. There's reports called the 1094 the 1095 that businesses need to make sure that they're filing and they can hire, you know, third party companies to do a lot of this reporting, but these third party companies have to get the data from the payroll system, and it's, you know, the benefits system. So in the PEO model, it just becomes very efficient because it's all in one system. Everything is tied to benefits. I'm sorry, everything is tied to payroll. And then you got your benefits in the same system. You got your HR in the same system. And, you know, another, another big thing is an EEOC and an employee discrimination lawsuit. You know, you, you never know what's going to happen with employees. Oftentimes, when a company starting off, they typically have family or really good friends that they have working for them. But as they grow, you know, you're, you're not quite sure who you're hiring. And there can be some, you know, pitfalls, and there can be some discrimination lawsuits that that can play any any disgruntled employee can basically file any type of, you know, claim on your company, whether it's legitimate or not, and even if it's not, you still have to go through the whole process, and it could be very timely, very frustrating, takes away time that you could be focusing on growing and scaling your business.

Dave Erickson 23:57
Yeah, and legal fees are always outrageously expensive. It seems that, you mentioned it a little bit. You know, data systems in the systems for tracking employee data, managing employees and managing the hiring process seem to be critical. Are those advancing at all or are they still back in the 70s and 80s, as far as those systems? Are they very different now? Or is that a technology that's becoming more important in HR?

Suzanna Martinez 24:34
I think that's one of the biggest selling features. Is the PEO. Is the technology, and some have you know, different their own internal, proprietary software. Some companies, you know, basically lease other companies, but they're typically pretty sophisticated, and it allows companies, as you're growing to scale, to do ad hoc reports, to be able to have everything in one single source system creates a lot of efficiencies when you're onboarding off, boarding employees onto different benefits, making sure that if an employee terminates, that you terminate all the different benefits that they're participating in.

Dave Erickson 25:15
Well, since we've kind of mentioned PEOs a bunch, professional employee organizations, maybe you can talk a little bit about what are they? How do they start? What does the PEO actually represent, versus, say, an internal HR department?

Suzanna Martinez 25:33
Yeah. So PEO stands for professional employer organization. And basically what it does is it pulls several 1000s of CO employees into a large group to get buying power on employee benefits, workers comp, insurance, retirement services, and it creates a lot of efficiencies when it comes to HR, your back end HR infrastructure, you actually get certified HR professionals that are dedicated to Your account and can do HR audits on a regular basis with you to ensure that if you were to ever get an audit or a lawsuit, that you're going to basically have your dot your I’s and cross your T’s and make sure that there's no compliance issues down the road. And under the PEO model, it's actually a shared risk liability situation. So that means, if there was a lawsuit, both companies are going to be named on that lawsuit. When it's an employee lawsuit, sexual harassment, a discrimination lawsuit, ABC company going to be named on that lawsuit, and so is PEO company going to be named on that lawsuit. So basically it's a shared risk and liability arrangement, so you have a partner by your side to really help you make sure that you're staying compliant.

Dave Erickson 26:52
So the PEO is basically a separate company, and then you are basically paying the PEO to manage all of your employees and all the onboarding and other things that are within HR situation, instead of having to hire an HR department to do all that. Is that correct?

Suzanna Martinez 27:12
Yeah, that's correct. You do have to charge, they do charge an administrative fee, but it's not like you're paying a w2 wage, you know, $60 plus wage, salary, plus benefits, plus, you know, you have to pay taxes on it's not going to be an employer burden. You're not going to have to pay a PTO for your PEO. You know, you're if you have an internal HR theme, you're going to have to pay them PTO, vacation, contribute to their 401 K. It's going to add more to the employer, to the employer burden. And certainly, once you get to a certain scale, you probably do want some internal HR as well. The PEO is not going to be your HR down the hall and help you with strategy. So it's not that the PEO is going to replace your HR. It can just help, possibly, as you're growing, not have to hire as many internal HR staff, or just be more efficient.

Dave Erickson 28:10
In a sense, it's more HR support. I mean, I guess at some levels, right? So if you're a small company, the PEO will probably handle a lot more of your HR required, requirements because you're small and you don't have that much, and as you grow, the PEO may hire, handle less of it, and you may have to hire an internal HR person to handle things like strategy and other things.

Suzanna Martinez 28:36
Oftentimes, like I said, the spouse, Sorry to interrupt, the spouse or somebody internally that they don't have an HR role, but they've kind of been just put into that job. Oftentimes, maybe it's an accounting person or a CFO person, and they're really good at what they do, but they have other job duties, and HR is, is not one of them. So to be able to have that support by their side, it really, it helps them quite a bit.

Dave Erickson 29:01
The PEO industry, I assume, is somewhat large, and probably consists of a wide variety of PEOs, small and large. If you're a company looking for a PEO, how do you go about figuring out which one fits you? Or what are some of the things that you can look at to try to determine that?

Suzanna Martinez 29:23
Well, at one time, there was over 900 plus PEO companies. I think during COVID, it got reduced to like 600 PEO companies. So there are quite a, there's a lot, and oftentimes companies are being called on by every PEO company out there, and it becomes very confusing. And you know, typically you would probably, a lot of the employers would Google it. Somebody's knocked on their door and they're trying to talk to them about PEO. So then they start Googling other companies to, to look at as well. And you typically don't want to go with. Just one company. You really if you're going to look at a PEO, you want to get a quote from at least three or four companies. Make sure you're doing your due diligence. Make sure you're finding the right partner for you, because every PEO company has a special niche, and there's lot of large, publicly traded companies. There's your national players. There's some local, local players, really small, privately held companies. There's companies that just specialize in high risk workers comp, and you really want to make sure that whatever is important to you, that you find the right fit. And that's kind of where I come in. As a PEO broker. I kind of help you holistically take an approach. I don't work for the PEO company, I work for you as the client, and we really try to take a holistic approach, like, really, what are your goals and what are you looking for? Who's going to be the most competitive as far as benefits, pricing the overall package, and who's going to be the best fit overall? We kind of narrow it down, shop multiple PEO companies, narrow it down to the top three or four, and then from there, will help the client select the number one PEO company that they're going to go with. But it becomes very difficult, because if you have a lot of different sales reps calling on you, it's, it can be overwhelming. Their underwriting teams are constantly asking you for different things, and clients get really frustrated. They're like, I already gave you all this information, I'm then they get confused, and so I pretty much take that headache off their shoulders. I know exactly what the PEO, the data that the PEO companies are looking for, and help them just shop multiple PEO companies at no cost to them.

Dave Erickson 31:39
When you are looking at a PEO, what are things that you are looking at? What are things that are, I guess, attractive to you as an HR professional that the PEOs offer or don't offer? What? What are things that you like to see?

Suzanna Martinez 31:57
I like to see companies that have local support. I don't like companies that are now outsourcing to other countries, you know. And when you talk to your payroll person, and your payroll person in a different country is asking you what PTO means, that is a problem. I mean, it's very, there's so many nuances here when it comes to payroll, when it comes to HR and compliance, it's really important that you're really talking to people that are here locally, that are true, seasoned professionals, and that are giving you the right advice. So I really try to shy away from companies that are outsourcing internationally, and then I really listen to the clients like, really, what is important to them? You talk about technology, sometimes it's a lot of the you know, they're at a certain level in their growth stage internally, where they need more ad hoc reports when it comes to HR. So in that particular case, we want to make sure, because not every technology that a PEO company out there do these ad hoc reports. So we want to make sure that those reports are going to, that system is going to be able to meet their needs.

Botond Seres 33:11
Question about compensation strategies, specifically, the difference between PEOs versus those companies with traditional HR departments. So how do they differ? One of the things that comes to mind for me anyway is stock options is one of the things that some big players in the industry do you offer? But also, it would be interesting to hear about bonuses or or just even the possibility of remote work and pay bands. Sorry, I'm just throwing a lot of things out there.

Suzanna Martinez 33:59
Yeah, so,yeah, it's out there. Yeah, that's a lot. So I guess if you have some good internal HR people, they're going to, you know, definitely be able to help you with that. But when you're growing in your startup, like we talked about, you're not going to have those professionals at your beck and calls. It's going to be very difficult. In the PEO model, they have a lot of access to a lot of resources that you know, a lot of the big companies have like for salary survey compensation, so they have tools at their beck and call based upon the industry, based upon your industry, based upon the job title, and based upon how much these particular employees are, you know, on an average, being paid on a national basis. How much locally per state are these employees compensated? So that way you have some type of baseline when you're out there recruiting like you know that your, the salary that you're offering is going to be competitive, and they can give you a lot, not just salaries surveys and the baseline of how much to pay them, but what typically do the benefit packages look like? What are the, you know, retirement packages? Oftentimes, these companies aren't publicly traded, so they don't have stock options, but there could be a lot of other options into the company as they grow. And you know, these HR professionals can help you put some strategies into place, but it's, they also have the technology to look at all this data, and so that's really what's important, and companies can hurt, there's different types of software companies out there that, you know, companies can go purchase, but it all adds up when you're trying to look at this software and that software, it's, you know, software here, software there, whereas under the PEO model, it's all one single source solution at your beck and call. They can do these seller, salary surveys like that for you.

Dave Erickson 35:53
In the beginning of business, PEOs can play such a valuable role, and I'm surprised they're not more kind of talked about or known. I do a lot of entrepreneur and small business seminars, and nobody ever talks about PEO when it comes to hiring people. But I can definitely see some advantages to it, particularly on the data side and the technology side, because they have a lot of different people, they can afford to get a bigger or better system than, than what a smaller company can basically afford. What's kind of like, it's kind of hard to to understand this, but you know, if you're starting a business and you're going to hire your first employee, should you go to a PEO first or should you, you know, it's too small for them? Would it be better to wait till you're ready to hire your second or fourth or fifth employee? Or does it matter?

Suzanna Martinez 36:54
Typically, what I see is, when you are about five employees, it's probably time to start looking at something, especially if those five employees are spread out in different states. However, I just talked to a company the other day that's a nonprofit, and most of her people are contractors, 1099’s and she only has two employees, but she's like, they were just bombarding me about 401 K’s and, you know, PTO. And I just got so frustrated. She was like, I just don't want to handle it. She's like, I'm the CEO that doesn't want to handle all of this. And I'm like, well, that's where I come in. PEO, for the CEO, helping you not having to handle all that. HR, you know, making sure that your employees are, you know, requesting time off and, you know, making sure that they're changing their 401 K deductions. She said she just got so frustrated. She's like, I'm only two employees now, and I just see the value of just outsourcing it to, to the professionals. And plus, she's looking at growing and scaling. So it's just, it's going to be great to just have that infrastructure in place for her.

Dave Erickson 37:59
What are the PEOs looking at, you know, since they're kind of, in a sense, separate companies, how is the PEO industry kind of evolving? What are they looking at, is, what's important? And how do they see, basically, their clients.

Suzanna Martinez 38:19
They, they do a lot of due diligence themselves. They look under the hood. They're looking at the clients websites, making sure, you know they're doing what they say they do. For example, a lot of engineering firms, architectural firms, they'll have these great websites, and they'll have these bridges and, and then the underwriters are going to start questioning, are you guys actually building these bridges? No, no, we're just drawing it, but it looks great on our website. So they're going to be looking at you as well to make sure that you're a good fit, because they want to make sure that they're putting you in the right risk when it comes to workers comp risk, healthcare risk as well. And you don't want a company that's going to give you some honeymoon rates just to buy your business the first year, and then the next year just increase, you, you know, double digits, just because they were trying to buy your business. And then also, a lot of companies really look for companies that really want to do things the right way, if it's somebody that, you know, not all business is good business. If somebody just does not care about doing things correctly, somebody doesn't care about their employees, that's just too much risk for the PEO companies as well. So believe it or not, they will walk away from potential clients if they feel like it's not a good risk. It's not going to be a good partnership. They really want to work with a company that's like, I really don't know what I'm supposed to be doing. I want to do the right thing, but I just don't know what I don't know. And that's where they're going to come in and really help you. But if you know to do the right thing and you don't want to do it, they'll probably not want to work with you. It's too much risk for them, really?

Dave Erickson 40:03
Yeah, I've always had this kind of philosophy that if you're going to do business, it is better to do it the right way. And we've had some clients in the past, long ago, that you know why they're in business, I don't know. They're in business not to do it the right way. Their only trouble. They only cause pain and suffering for everybody else they deal with. But yeah, it's smart of the PEOs to check the client as well. When it comes to PEOs, you know, are there PEOs that, that offer other services besides HR? Because sometimes HR can merge into other things. But do the PEOs handle other types of, I don't know, HR related or close to HR type of functions and services.

Suzanna Martinez 40:57
Some will do recruiting. A lot of them will have additional, what they call Cloud products. So your applicant tracking system that's all tied into your payroll once you get them hired, performance management system tools in place that's all integrated with your current system as well your learning management system to make sure that your employees are, you know, doing their sexual harassment training, things like that. Those are additional tools that are, are Cloud products that a lot of them will offer. And those can be great. Some of them will do recruiting. I typically recommend, depending on what you're trying to recruit, to probably work with somebody that specializes in recruiting. Some companies are actually doing the international PEO, which is, the called the EOR model, the employer of record model internationally. So I have found over the years that typically companies focus either here locally, with the PEOs, the local, you know, companies that are, have their employees here domestically. And then there's companies that focused on the international employees and HR compliance there, but now they're starting to some of them are starting to overlap and trying to offer, you know, both services. I had one company the other day that told me that all of their employees domestically, nationally and internationally, are all in the same portal and in the same system. Which to me, sounds great. You know, it sounds great on paper. I, sometimes, it's hard to be too many things to too many people. And I think, you know, if you should just specialize in what you specialize and be focused on what you do.

Dave Erickson 42:39
I mean, you mentioned PEO for the CEO. Maybe you can talk a little bit about, you know, what, what you do, what are the type of clients that you like to work with, and how you basically do your business?

Suzanna Martinez 42:53
Yeah. So what I had found working for a lot of the larger publicly traded PEO companies is, oftentimes they're really looking for, when I say they go out to do due diligence on their clients, and looking under the hood, they really look under the hood. Because many times they look and they're like, this isn't a really good fit for us. They really want that particular client that fits in their box. And not everybody fits in the box. And I don't want my clients to fit in a box. I really want to figure out what it is that you know, my client is looking for, and holistically take the approach to find out what's the best solution for them. And so that's how I started about, over four years ago, and I'm just able to really find out what's the best needs for them, as far as technology benefits. HR perhaps they've outgrown the PEO model. Maybe it's time to take a look at other solutions, you know, other software solutions, and we can take a look at that as well. So what I help them with is the RFP process, the request for proposal process. It's a lot of data that your internal team has to provide to the PEO companies for them to give you a proposal. I kind of take that headache off their shoulders a little bit and help them with that. I do the side by side analysis and a spreadsheet, to really, they can look at a side by side quick analysis at no cost to them. What does the Employee Benefits look like? What is the workers' comp premiums look like? What's the administrative fees look like? What are some of the a la carte pricing? What does that look like? What does the service team look like? Make sure that you're going to get people that's going to be local to you and be able to have that, you know that good chemistry, you want to make sure that the people that you're working with, or you feel comfortable with them, and they're able to support you. So I help them with the beginning of the RFP process, and then once we've narrowed it down, then they can start digging under the hood themselves, as far as who the best fit partner is going to be for them as well.

Botond Seres 45:00
Uh, Susanna, in your opinion, what's the future of PEOs?

Suzanna Martinez 45:06
I think there's, they're going to continue to grow and scale. I think you're going to hear about them more nowadays. Dave was saying that they're just a lot of people don't talk about them as much anymore, or they haven't. It's just, you know, if you know what a PEO is, you know what a PEO is? If you don't know, it's like, what is a PEO? I've never even heard of that. I think it's going to become a lot more popular term. A lot more businesses are going to be using a PEO. You look at the companies in Silicon Valley, a lot of the tech companies that are highly funded, that are unicorn companies, majority of those companies partner with a PEO company because they know they're going to grow and scale, and that's how they're going to be able to grow their businesses by partnering with the PEO company. So, you want to grow and scale your business, if you care about your employees, and you want to attract, retain the right talent, you know, you should really consider partnering with a PEO company.

Dave Erickson 46:05
Well, Suzanna, it has been really interesting to find out about PEO. I did not myself know a lot about it, and we'll certainly put your contact information in the description of the podcast, and people will be able to contact you about it, because I'm sure they'll have questions as well.

Suzanna Martinez 46:26
Thank you. I appreciate it.

Botond Seres 46:29
Susanna, thank you so much for being on our podcast and discussing HR strategies and videos with us. Well, we're at the end of the episode today, but before you go, we want you to think about this important question.

Dave Erickson 46:44
Which new HR strategies are you going to use to grow your company?

Dave Erickson 46:49
For our listeners, please subscribe and click the notifications to join us for our next ScreamingBox technology and business rundown podcast, and until then, maybe set up a PEO.

Dave Erickson 47:02
Thank you very much for taking this journey with us. Join us for our next exciting exploration of technology and business in the first week of every month. Please help us by subscribing, liking and following us on whichever platform you're listening to or watching us on. We hope you enjoy this podcast, and please let us know any subjects or topics you would like us to discuss in our next podcast by leaving a message for us in the comment sections or sending us a Twitter DM till next month. Please stay happy and healthy.