The HR Handoff

Article excerpt

Outsourcing Human Resources

Which of the following are real state concepts directly tied to income or expense activities: gross potential rent, leasing skills, nonrent revenues, utility management, usage monitoring, HIPAA, COBRA, PRWORA, FUTA, and SUTA?

If the last five choices didn't ring a bell, consider yourself lucky. Unlike hundreds of other companies, you probably are still able to focus on the business of real estate. But those who are all too familiar with these acronyms may be knee-deep in personnel administration. Both types of activity demand attention; regrettably, both do not generate revenue.

Tight labor markets, increased government regulation, exploding litigation, heightened competition, and sustained pressures on earnings make the human resources (HR) function more important than ever. Yet, these same factors make it extraordinarily difficult for real estate companies to devote the necessary attention to employment issues.

Even large companies with significant HR staffs find that their handbooks, training manuals, policies, procedures, and forms are not in full compliance. Many small companies are not even aware of what it takes to be compliant, let alone achieve it. The drain on small business is reflected in a Small Business Administration study that indicates as much as 25 percent of a small business' time can be absorbed in employment-related, non-revenue-producing activities.

Leveling the Playing Field

For smaller firms, outsourcing the HR function to a professional employer organization (PEO) might provide some relief. A full-service PEO provides personnel administration, workers' compensation/risk management, benefits administration, and payroll. Often, this alternative puts small companies on an equal footing with larger competitors in the quality of HR administration. PEOs also offer economies of scale in the purchase of health insurance and other desirable benefits.

Unlike employee leasing, in which a company hires the leasing firm's employees for short-term or project-oriented needs, the PEO relationship is long-term and involves a co-employment relationship with employees. In this relationship, the PEO and the client company contractually divide employment-related responsibilities and liabilities. Importantly, the client company maintains full control over the operation of the business and the delivery of its real estate services. The PEO assumes responsibility for the "business of employment.

Even though regulatory acronyms might make our eyes glassy, regulations governing federal and state unemployment taxes (FUTA, SUTA), medical benefits continuation (COBRA), and child support administration (PRWORA), among others, represent real expenses and potential liability. PEOs offer comprehensive, timely, and effective personnel administration over the entire employment life cycle -- from recruitment and selection to payroll and benefits administration through termination. The accompanying Exhibit lists many of the typical administrative offerings.

Moreover, the real estate industry is unique in that, in addition to the many employment-related challenges that all employers face, real estate companies face additional regulatory burdens. Residential and commercial management companies must comply with, among others:

* fair housing statutes;

* additional Americans with Disabilities Act compliance regulations;

* tax-credit conditions;

* HUD requirements;

* local zoning provisions;

* environmental reporting rules; and

* training requirements.

In addition, because there are more than 2,000 PEOs operating in the United States, companies that have employees in many locations scattered across several states can hire a national or regional PEO to administer the HR function. …