PEO pays off for Salmon River Propane Services: Salmon River bought an existing propane...

Whoever had the idea to create a Professional Employer Organizations (PEO) was a genius.

Ever since Salmon River Electric Cooperative (Challis, Idaho) went into the propane business, professional staffing has been a big benefit, as several small-to-medium-sized companies around the

Salmon River bought an existing propane business from Cenex in September of 2001, and the employees came with it. Cenex had decided to move from retail distribution of propane to more of a wholesaler's role.

From the employee benefits standpoint, it was unlike the typical corporate buyout.

"We did this a little bit different," said Salmon River General Manager Werner Buehler. "When we bought the business and got the employees, we 'leased' the employees from a company in Boise."

Buehler explained that the employees of the propane utility are actually employees of record with the PEO, known as Professional Staffing Employer, Inc. (PSE).

There are eight employees working at Salmon River Propane Services who are taken care of by PSE. The agency does everything from disbursing payroll to quarterly filings.

"The reason that we established this company is that we could see a need for small-and-medium-sized businesses that have decided to outsource the administrative portion of their employee functions," said PSE Owner Ann McGregor. "It is a co-employment relationship. We become the employer of record. We pay the taxes, workers compensation insurance, unemployment insurance, administer the employee's withholdings, quarterly filings, and take care of the W-4s, I-9s, as well as W-2s at the end of the year."

In short, PSE is the firm that takes care of all of the human resources functions for the eight Salmon River Propane Services employees, on behalf of the electric co-op, which owns the propane distribution business.

McGregor said that in addition to the physical, tangible things that can be measured by a report, her company provides a lot of human resources consultation on the proper way to do the investigation of an accident, safety training, the proper way to do a separation or termination -- whether for cause or not.

"If there is a question we cannot answer for our client, we go to our legal counsel and we take the answer back to our client," McGregor said.

That alone saves the client money in legal fees.

The client base that is serviced by PSE creates a setting where a small company can save money by using the PEO setting, especially when it comes to benefits packages.

"Because we're a larger pool, it makes sense for someone to come to us and tap into our resources," McGregor said. "We're like the phantom employee in their company. We do the work of an employee that they would have to hire, except we're not there. We're here in our own offices."

Buehler said the co-op is saving money by using the PEO. The employees are screened, selected, and managed on a day-to-day basis by the utility. The utility also does any performance reviews or other such tasks regularly. But PSE handles the human resources chores.

"Insurance benefits amounted to about 35 percent of what we pay our electric employees," Buehler said. "There was a significant savings to do our human resources administration through PSE. It is really an interesting approach."

There were some concerns among the employees as they made the move from Cenex to Salmon River Propane Services, because in general, they may not have received all of the same benefits they got with Cenex, but the benefits were matched as closely as possible under the arrangement with Salmon River and PES.

Buehler said some of the same employees that would have been released by Cenex after the sale were hired by PSE. The co-op didn't have all the necessary resources to make sure the new propane employees were compensated in a similar manner to the other propane employees around the industry on its own, so Professional Staffing Employer was able to help out.

McGregor and two minority partners opened Professional Staffing Employer, Inc., in 1995 because they saw a need for small-and-medium-sized businesses that have decided to outsource the administrative portion of their employee functions. Each new client develops a co-employment relationship with PSE.

"It can be a headache sometimes," McGregor said. "But we take that upon ourselves because that is what we do day in and day out. When we encounter a problem, that's just something we always deal with. The client doesn't have to deal with it at all."

Though created in the early 1980s, professional employer organizations are still in their infancy, McGregor said. "Only about 5 percent of the market has been tapped as far as businesses utilizing what we do."

She adds that people are quick to jump to inaccurate conclusions about her company.

"I often hear, 'Oh, I know what your company does. You're a temp agency,"' McGregor said. "That's not accurate.

"There's still some resistance from people who say, 'We've always done that ourselves,"' she added.

McGregor does also own a temporary employment agency, and she's proud of the success she's had with it for the last 35 years.

The industry of PEOs has developed integrity over its early days -- days that let's just say weren't the greatest -- as states have developed statutes to regulate the companies, and a national organization and certification criteria have been established to build on that integrity.

It was through the national organization that Vi Stevens, executive secretary at Salmon River, was able to even find PSE in the first place.

"I found them through a Web site that listed a directory of the National Association of Professional Employer Organizations (NAPEO)," Stevens said. "It brought up the ones that were closest to where we are and I started making calls."

Salmon River Electric is located in Challis, Idaho (200 miles from Boise), but that didn't stop McGregor from traveling to the utility to present her agency to the co-op leadership.

"Vi enquired what we could provide for them, so I made a trip over there to give them a presentation of our services and give them a proposal," McGregor said. "The board voted on it and I made another trip over to sign up all of the employees."

Stevens has been the one staff member of Salmon River's who spent the most time with PSE, and she said she finds the experience absolutely positive.

"It's been a wonderful outfit to work with," Stevens said. "It probably took me a good four months to work through everything in setting up the partnership, but they were great to work with."

Not to mention the fact that the work McGregor's company does takes a lot off of Stevens' desk. Stevens handles the role of benefits coordinator for the electric utility's 15 employees, which is a task that takes up "a lot of time."

"I truly think it could be a fulltime job for someone to work in benefits if we'd taken on the propane services employees too," said Stevens, who is also the executive secretary for Buehler and the board of directors.

While PEOs haven't completely taken off yet, there are several places where the business philosophy is working, including Salmon River Propane Services.

For more information on what Professional Staffing Employers offers, readers are invited to e-mail McGregor directly at amcgregor@propeoplestaffing.com.

Nelson P. Holmberg is NWPPA's Associate Editor