Posted on Tue, Jul 13, 2010 @ 10:29
In “Perfect HR Storm Part 1”, we identified the key drivers that are creating a potential HR Perfect Storm for Private Clubs – The Recession, Rising Unemployment, Growing Regulation, Increasing Litigation and Downsizing. This blog post will look at how clubs can develop a strategy to streamline payroll and HR processes, protect themselves and avoid costly mistakes.
Clubs generally fall into two basic camps when it comes to their payroll and human resource strategy: in-house or outsource. In-house means club staff are generally directly responsible for the process and outsource is defined as contractual service with a 3rdparty (like ClubPay) to perform all or part of a particular HR process. As a sub-category of outsource, some clubs utilize a Professional Employer Organization (PEO) but we generally recommend against this strategy.
The vast majority of clubs opt for an “outsourced” strategy to relieve administrative burden, gain expertise and prevent liability. Given the trend towards Club Controller’s taking on increasing HR related responsibilities, this approach is likely to accelerate.
Develop a Strategy
Within the category of “outsource payroll”, there are a variety of sub-strategies clubs employ. The beauty of outsourcing is each club has the flexibility to customize its level of services based on existing resources, expertise, payroll & HR complexity… and budget. At the heart of any club’s outsourcing strategy, the goal is saving time and reducing expenses.
Key Drivers
All strategy considerations should be evaluated against the positive or negative effect on these key drivers:
Administrative Burden – This really comes down to taking a close look at resources – time, people and money; determining if the club is getting the best return on investment of each. Additionally, what are the opportunity costs and associated risks?
Compliance and Risk Exposure – The question here is: Do I understand the rules of the game and are there processes in place to make sure I stay up to date and on top of the rules? Is the club at risk and how much risk is the club willing to tolerate?
Employee Relations– How is the morale of the club’s employees and what effect is this having on productivity and profitability? Are time and attendance policies fair and are they fairly and equitably enforced? Are they enforced at all?
Asset Protection- Related to risk, this is quantifying and documenting the high risk points related to payroll and human resources. One of the most common types of litigation a club may face is employee related. Is there a way to protect the assets of the club from frivolous HR related lawsuits?
Cost Considerations – Is there pressure on the club to reduce expenses? Labor is typically the biggest expense making it the most likely candidate for significant savings. Can you do this without a negative effect on service?
Action Plan
To get started in developing a high performance plan for your club, schedule a full payroll, HR and compliance audit. While I recommend hiring a professional HR Consultant to perform an external audit, some clubs may opt to conduct an internal audit for budgetary reasons. To provide an idea of what is involved, you can download a Sample HR Assessment Form here (courtesy of Crawford Consulting Group).
Once the audit is complete, you can evaluate your clubs strengths, weaknesses, opportunities and threats (SWOT) to determine the best processes to outsource. Again, the overall goal is to save time, reduce expenses and prevent risk. Every club is different and there is no perfect combination of outsourced services, but below is a list of the most commonly outsources processes.
HR Perfect Storm for Clubs White Paper
If you would like to dig a little deeper into the current HR environment clubs are facing today, the most important issues and how to develop a winning HR strategy, check back here for our upcoming white paper. If you would like to receive an advance copy, email us at info@clubpayroll.com with HR White Paper in the subject line.
Posted on Fri, Mar 19, 2010 @ 11:18
I recently made a presentation at the HFTP Development Conference in New Orleans related to helping Controllers at Private Country Clubs deal with expanding human resource management responsibilities. In preparing for the presentation, I discovered there are a variety of conditions that are contributing to a potential "perfect storm" related to the payroll and human resource functions at private clubs. Within this blog post, I'll lay out what those conditions are and how they may affect your club. In part 2, we'll talk about what you can do to protect your club and yourself.
I call the current situation a "perfect storm" not to be an alarmist, but to bring attention to circumstances which are occurring in clubs today that may have a serious adverse affect tomorrow. The major factors influencing potential future issues include:
- The Great Recession
- Rising Unemployment
- Growing Regulation
- Increasing Litigation
- Downsizing at Clubs
Let's dig a little deeper into each of these contributing factors and why it should matter to you, your General Manager and your Board of Directors.
Without doubt, we are in the midst of one of the more difficult economic times of our lifetimes. This means many people, including your club's employees are under financial duress and extraordinary stress. Even though your employees are working, they may have spouses or extended family members that are unemployed. They may also be dealing with a home foreclosure, short sale, evaporation of savings accounts and home equity or any of a host of stressful situations. These types of stressors sometimes spill over and can affect one's work life even when not directly related to one's job. Productivity, attitude and employee relations can all suffer and this can create problems, sometimes big, costly problems. 
Unemployment rates are at historical highs and the "real" rate of unemployment is much higher than the reported rate. This "real" rate includes underemployed and those who have "given up". Additionally, unemployment compensation has become easier to get and has been extended well beyond the traditional allowable time line. This has a multi-faceted affect on clubs. You may find that a segment of your employees see unemployment as a viable alternative to working with reduced hours or working at all. This type of culture can be a morale and productivity killer. Additionally, who funds unemployment? The employer of course... brace yourself for a freight train of increasing premiums, it is coming. This will be a huge factor in future budget years.
We are living in a time when businesses in America are literally under attack. There are currently over 70 Acts affecting benefits, labor and employment and this is only on the federal level. Every state tacks on hundreds more laws and statutes related to how you hire, manage, pay and provide benefits to your employees and you are required to keep up with and comply with each one. If you don't, your club can be held liable and in many cases, you may be held personally liable as well.
Don't think this is a problem that is going away. In an average year, there are over 200 changes to employment related federal law again and all signs point towards increased regulation by the current administration. The very first bill signed by President Obama was the Lilly Ledbetter Act - extending the statute of limitations to file an equal pay lawsuit. Other examples of how this administration is making it more difficult on business (and private clubs are small businesses) is to greatly expand the qualification for the American Disabilities Act (ADA) and to extend and complicate COBRA Benefits.
Our next trend is simply a result of the first three factors. A poor economy combined with rising unemployment and growing regulation leads to an increase in litigation. Have you noticed the increased frequency and boldness of Trial Attorney advertising related to employment? If you can't find a job and can't pay your bills, just sue someone! It is easier than ever to do so and it is happening with increasing frequency. Business Week ran an article that stated Fair Labor Standards Act lawsuits have "exploded nationwide" and the problem has only gotten worse recently.
Finally, the icing on the cake is that in this environment, an industry trend is rising to eliminate so called "non-essential" positions (often including HR Director) and migrating these responsibilities on to another staff member (usually the Controller). In effect, at the most critical time to stay on top of HR issue, we are dumping the responsibility on a staff member that is most likely under trained and too overworked to handle these additional duties. This may indeed prove to be a "penny wise, pound foolish" strategy, only time will tell. What may happen is clubs may indeed find some short term savings from consolidating duties and reducing labor overhead but long term find themselves with much larger expenses and more ominous challenges.
Having solid payroll, human resource and compliance processes in place should be viewed as an investment, not an expense. Similar to an insurance policy in nature, you might save some money by canceling the policy in the short term but what happens if the club burns down?
Posted on Thu, Feb 04, 2010 @ 03:47 PM
Outsourcing has been standard throughout the business world for many years and its popularity is now expanding rapidly through the club industry. The driving force behind this trend is related to the economic pressure many clubs are under to reduce operating expense.
Of course, the risk with this approach is service or quality will suffer. To balance the importance of managing expenses and maintaining quality, clubs should closely examine their key business processes to identify which systems are the best candidates for outsourcing. Processes that fit well into an outsource model are typically complex in nature, highly regulated, time consuming or create potential liability.
Outsourcing makes the most sense when three key criteria are met - processes are done better, faster and with more consistent results. The types of outsourcing that meet these criteria can be considered "smartsourcing" partnerships. Unlike traditional outsourcing, which is commodity driven, smartsourcing enables clubs to partner in synergistic ways that decrease expense, increase quality and carry low risk for the club. With smartsourcing, clubs work with highly specialized companies that bring both improved efficiencies and very specific expertise.
SmartSourcing creates an environment where the results of focus, efforts and expertise actually equal more than the sum of the parts. With smartsourcing, clubs become less "people" dependant and more "systems" dependant. This makes the club stronger as it causes a shift of the focus of the club's staff from an "administrative" focus to a "member centric" focus.
Current economic conditions make this a perfect time to consider a company like ClubPay that combines expertise and efficiency to create value for your club. Our approach is simple but powerful. We have done the homework and put together a suite of solutions and services that eliminate the headaches and hassles of payroll and HR management. At the same time, we give you expanded access to your information to enable you to make better business decisions. Finally, we help you control costs by leveraging our economies of scale and expertise.
Posted on Thu, Nov 12, 2009 @ 02:56 PM
What is Employee Leasing?
Employee leasing is an arrangement whereby a club enters a co-employment relationship with a Professional Employer Organization (PEO). In this arrangement, the PEO and the club are actually co-employers of the club staff. The club employees are "leased" to the club by the PEO. The club retains the responsibility of hiring, firing and day to day management of all employees and the PEO is typically responsible for obtaining benefits and worker's compensation.
Why do clubs use PEO's?
In theory, entering into a co-employment relationship offers overall cost savings and provides the club with additional HR support services. In most cases, potential savings are centered around the concept of "pooling" employees from a multitude of businesses in order to negotiate a more favorable premium by spreading the risk across a larger and more diversified base of employees.
In most cases, HR services such as an employee handbook, benefits enrollment, HR help desk and compliance management are provided by the PEO. Other services such as background screening, drug testing and employee assistance programs may also be part of the services offered.
Finally, worker's compensation insurance is typically provided to the club through the PEO. The PEO most likely will support and train the club in loss control to manage the worker's compensation premiums.
What's the catch?
The catch is this... PEO's work well in some cases when clubs have experienced above average worker's compensation or health benefit claims. In such cases, a PEO may save the club significantly on insurance rates. The PEO accomplishes this by combining the risk of all of its clients to negotiate a preferable worker's comp insurance rate.
Be careful though, because in order for the PEO to make a profit, some "low risk" clients must be blended with the "high risk" clients in order for the PEO to remain financially stable. This means the lower risk clients are effectively "subsidizing" the higher risk ones.
Many might find the initial benefits rates offered by the PEO to be very attractive. But the club gives up its control and ability to manage or bid on their own benefit coverage. In many cases, the club is forced to participate in more expensive plans in future years. Over time, they often see the savings in benefits cost quickly disappear while administrative fees charged by the PEO rise.
Finally, the HR service aspect the PEO offers is often underused or not used at all. In many cases, HR services actually provided by the PEO amount to little more than an updated employee handbook and an occasional call for advice. These services are easily obtained at a much lower investment from an independent HR service company.
Why leaving increases the taxes your club pays...
In many states, state unemployment tax is paid only on the first portion of earnings per employee. For example, in Florida, employers pay unemployment tax on the $7,000 in taxable wages. Likewise, federal unemployment is applied against the first $7,000 as well.
Because the club is in a co-employer relationship and operating under the PEO's FEIN number, if they leave the PEO, the clubs' rates will default back to the "new business" rate for Florida. What most clubs don't realize is that their thresholds will reset as well.
This means that even if the club has already paid SUTA/FUTA on the first $7,000 of each employee earnings, it will now be liable to pay again under the new FEIN number. This can be an expensive problem. For an average size club, say 115 employees, that have all hit the threshold, this will amount to over $28,000 in additional taxes.
Why it makes sense to change January 1
Your unemployment tax thresholds will re-set January 1st regardless so in most cases, this is when clubs will move away from a PEO relationship to working with an independent payroll company. For this reason, if your club has considered moving away from a PEO in order to reduce fees, the time to do this is now. Looking at your options during the fourth quarter will allow you to make the change at the beginning of the following first quarter.
Conclusion
Choosing to partner with a PEO arrangement should be reviewed very carefully. Once a club makes this decision, it can be very difficult to leave. What was initially a cost savings move can quickly turn and end up increasing expenses for years to come. If your club is currently with a PEO and is interested in reviewing options to reduce expenses, evaluate your options during fourth quarter to avoid paying additional taxes related to a mid-year conversion.
Posted on Tue, Nov 10, 2009 @ 07:26
Dear Payroll Provider,
I can't go on living this lie...there is a confession I must make, I don't love working with you anymore. When we first met, you promised me the world, you told me how important I was to you and promised how you would make my life easier. These days, I feel like just another case number to you. Look, we can still be friends, I just don't want to process with you anymore.
Putting up with mediocrity?
Many clubs tolerate broken promises, inferior functionality and poor service for years because they believe the transition to a new payroll company will be too difficult. The perspective is that it is easier to accept the problems than to make a change and fear of losing data from years past. The result is the club ends up feeling like it is a hostage to the payroll provider.
Breaking up is not hard to do...
We are often asked, "how do I end the relationship with my previous payroll vendor"? Not to worry, companies change payroll companies every day and despite the old cliché - breaking up is not really that hard to do. However, the steps and timing you follow can either cause or prevent some headaches down the road.
First off, in nearly all cases, you have the right to terminate your service without notice. Rarely, if ever, does a payroll company have a contract with its customers. If you are approached by a payroll company that wants your club to obligate itself to a long term contract, see this as a big red flag. This same logic applies to similar providers such as time keeping/labor management, human resource management, or other related service companies.
The tru
th is these providers are not making a large up front capital investment in new equipment or people to provide service to you so they should not require a long term commitment. Put your club in the position of having your payroll partner "earn" your business every month and keep your options open.
When is it time to call it quits?
Timing is everything and though you expect the best from your current provider, we should be prepared for the worst. With this in mind, our advice is not to advise your current provider you are making a change until after you have successfully processed your first payroll with ClubPay.
The rationale here is to continue to have access to your legacy system as long as possible in case you need to retrieve additional information from it. If you are running a locally installed solution (server or PC based), your legacy vendor will most likely not deactivate your access for some time, if ever.
If you are running a web based system, they may deactivate it a bit quicker. Either way, it never hurts to ask for them to keep access open for a few months in case you need to run some reports. It never hurts to ask, the worst that will happen is they say no.
Keep good records...
If you are not already doing so, be sure to keep a log of all of your payroll registers. You can keep paper log but preferably these should be kept electronically. If available, keep them in a common format such as excel or .csv so that you can easily pull and import information if required.
Shortly before transitioning to your new system, you should also go into your legacy system and run copies of every report you have access to. Err on the side of caution. Although you may not ever need most of these reports, better safe than sorry. Some systems grant broad access to reports while others are very restrictive. The point is, get what you can and get it in a exportable format if possible.
What is a retention team?
Many of the larger payroll companies have actually created "retention teams" to try to "save" clients that intend to leave. The basic premise is to approach unhappy customers, create fear around a change and offer to discount prices to keep your club as a client. How pathetic is this? My advice to you is to not work with any company that even has a retention team in place. The investment in this team should be made into improving service so that a retention team is not needed.
Data conversion and professional services...
Finally, make sure your new vendor will take the lead role in helping you make a seamless conversion. Do enough research to determine how complete and systematic the implementation plan offered by your vendor is. Ask hard questions! Who takes the lead in the conversion? Are implementation templates available? Will demographic data be converted? If data can't be converted, who will hand key - you or the vendor?
Most important - do not take your vendor's word regarding ease of conversion. They are trying to sell you something and are not going to level with you about any potential issues. Insist on talking to at least 3 clients, in your industry, that the vendor have gone through an implementation within the last year. Make this a demand, not a request.