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ADP RESEARCH INSTITUTE


               Relieving the Pressure
                         The PEO Approach to Navigating Compliance
                                 & Gaining a Competitive Advantage



                                            The ADP Research Institute is a
HR. Payroll. Benefits.                        specialized group within ADP
Contents
Executive Summary 	                            4

Talent is Critical to Competitive Success 	    9

Productivity Takes Center Stage 	              10

Cost Control Remains a Vital Factor 	          11

Compliance is a Continuing Challenge 	         12

Exploring the Range of Compliance Concerns 	   14

Managing the Growing Compliance Burden 	       17

Considering Outside HR Support 	               19

Conclusion 	                                   20

About the Survey 	                             21

About the ADP Research Institute 	             21

About ADP TotalSource 	                        22

About ADP 	                                    22




                                         3
Executive Summary
Companies seeking to compete in today’s                                Respondents in the first survey identified
business climate face more intense                                     three essential strategies for maintaining
pressure than in years past. Change is                                 a competitive edge in the face of today’s
everywhere — from technology advances                                  challenges:
to regulatory and compliance demands —
and companies must be able to adapt                                            • Hiring top talent
in order to survive. Talent is critical to
                                                                               •  aximizing employee productivity
                                                                                 M
success. Companies must operate
as efficiently as possible while still                                         • Keeping overhead low
maintaining compliance and attracting and
retaining top talent.

Earlier this year, the ADP Research
Institute, a specialized group within ADP,
conducted two surveys. The first survey
assessed the most pressing business
concerns, key competitive strategies,
and confidence levels in terms of HR
                                                                        A strong majority of
compliance of more than 250 small and                                   ADP TotalSource                              SM

mid-size businesses (those with 10-149
employees). For comparison, the ADP
                                                                        clients indicate that
Research Institute also interviewed                                     TotalSource plays
clients of ADP’s PEO* solution, ADP
TotalSourceSM, with 10-149 employees,
                                                                        a role in their ability to
to measure the impact their partnership                                 focus on key strategies.
with a PEO had on these topics.




* rofessional Employer Organizations (PEOs) enable clients to cost-effectively outsource the management of human resources, employee
 P
 benefits, payroll and workers’ compensation. PEO clients focus on their core competencies to maintain and grow their bottom line.
 Source: National Association of Professional Employer Organizations.




                                                                   4
[insert bar chart of top nine business strategies from p.10/left side – include broad market
and TS #s]


   TOP STRATEGIES FOR maintaining a COMPETITIVE edge
    Top strategies for MAINTAINING A competitive EDGE

                                                                                           55%
                                                  Keeping
                                                    Keep
                                             overhead low
                                              overhead low                                 53% 55%

                                     Focus on employee                                     53% 53%
                                       Focus productivity
                                             on employee
                                                 productivity                        43%
                                            Hire top talent                              37%
                                                                                    37%
                                            Hiring top talent
                                        Manage vendor                                      53%
                                    terms and discounts
                                                                                     31%

                                          Managing vendor                          31%
                                                 Invest in
                                       terms and discounts
                                                technology
                                                                                   25%
                                                                            20%

                                                 Maintain                     25%
                                               Investment
                                         optimal location
                                                                              19%
                                             in technology
                                                                                    38%
                                     Focus on employee
                                       development and                        17%
                                             Maintaining
                                         career-pathing                      19%
                                            optimal location
                                   Maximize advertising               7%
                                    and public relations
                                                                              16%
                                  Focus on EE development                   17%
                                      Offer career-pathing
                                        and full benefits                                                           Small  mid-size
                                  package to employees
                                                                              16%
                                                                            17%                             Small  companies
                                                                                                                    mid-size
                                                                                                            companies
                                                                                                            TotalSource clients
                                    Maximizing advertising                  16%
                                       and public relations
                                                                            14%


                                        Offer full benefits
                                                                            16%
                                    package to employees                            39%


[Insert bar chart of top 5 business concerns using “significantly impacts” column from p.11 –
include broad market and TS #s]


   Impact of business concerns on companies with 10-149 EEs

                  Rising costs                                        60%
                   of benefits                                          70%


              Locating/hiring                                   47%
         qualified employees                               40%


                Rising costs of                             44%
                materials/fuel                            34%
Source: ADPRI All-Market Compliance Survey (April 2011)


                                                           41%
               Business taxes
                                               19%                                  Significantly impacts
                                                                                    my ability to meet
                                                                 5                  business goals
               Retaining good                              39%
In addition to identifying key competitive
        strategies, the survey also noted
        respondents’ greatest business                                  Most ADP TotalSource
        concerns — issues that impact their ability                     clients agree that
        to meet their goals and could prevent
        them from successfully executing their                          TotalSource is a key
        competitive strategies. The top three                           partner in driving
        business concerns among small and mid-
and TS #s] businesses are:
        size                                                            business success.
[insert bar chart of top nine business strategies from p.10/left side – include broad market

            • Rising cost of benefits

    Top strategies for maintaining a competitive edge
         • Locating/hiring qualified employees
            • Rising costs of materials/fuel

                                                                                 55%
                                           Keeping
                                       overhead low                             53%

         TOP BUSINESS CONCERNS
                                 Focus on employee
                                                                                53%
                                        productivity
                                                        SIGNIFICANTLY 43%
                                                                      IMPACTS MY
                                                        ABILITY TO MEET BUSINESS GOALS
                                                                          37%
                                    Hiring top talent
                                  Rising costs                                  53%
                                   of benefits
                                                                                      60%

                                 Managing vendor                        31%
                            Locating/hiring
                              terms and discounts
                       qualified employees                       20%            47%

                               Rising costs of
                                        Investment                  25%
                               materials/fuel
                                                                              44%
                                      in technology
                                                                          38%

                               Business taxes                                 41%
                                        Maintaining               19%
                                    optimal location
                               Retaining good               7%
                                   employees
                                                                           39%
                            Focus on EE development              17%
                                  andCash flow
                                      career-pathing                      38%
                              issues/problems                    17%                        Small  mid-size
                                                                                            companies  mid-size
                                                                                                 Small
                                                                                                 companies
                                                                                            TotalSource clients
                             Maximizing advertising              16%
                                and public relations
                                                                 14%


                                  Offer full benefits
                                                                 16%
                              package to employees                        39%


[Insert bar chart of top 5 business concerns using “significantly impacts” column from p.11 –
include broad market and TS #s]


   Impact of business concerns on companies with 10-149 EEs

             Rising costs                                  60%
              of benefits                                      6
                                                              70%
[insert bar chart of top nine business strategies from p.10/left side – include broad market
and TS #s]
     The importance of the survey’s compliance-related findings is underscored by the fact
     that more than half bar chart using “increasing” datain their p. 16]to keep up
                [insert of companies surveyed lack confidence from ability
    Top complex, ever-changing regulations — anda competitive edge only
     with strategies for maintaining see their HR compliance burden
     increasing in the near term.
                     Change in HR compliance burden
                         over the next 1-3 years
                                Keeping
                                                  55%
       STATE OF HR COMPLIANCE BURDEN IN THE NEXT 1-3 YEARS
                       overhead low        53%


                         Companies employee
                             Focus on with 10-149 EEs
                                                                                        53%
                                              INCREASING
                                    productivity                                 43%

                                     Benefits                                           54%
                                                                                 37%
                                      Hiring top talent
                                                                                       53%
                   Employee Relations                                                  52%
                                     Managing vendor                         31%
                                  terms and discounts
                                        Hiring                        20%              51%
                                           Investment                      25%
                         Risk and        in technology
                                        Safety                                         51%
                                                                                 38%

                                          Maintaining                  19%
                                      Payroll
                                      optimal location                                 49%
                                                                7%

                               Terminations
                              Focus on EE development                 17%        39%
                                    and career-pathing
                                                                      17%                                Small  mid-size
                                                                                                         companies
                                                                                                         TotalSource clients
                               Maximizing advertising                 16%
                                  and public relations
                                                                      14%


                                    Offer full benefits
                                                                      16%
                                package to employees                             39%


[Insert bar chart of top 5 business concerns using “significantly impacts” column from p.11 –
include broad market and TS #s]


   Impact of business concerns on companies with 10-149 EEs

               Rising costs                                     60%
                of benefits                                          70%


            Locating/hiring                               47%
       qualified employees                          40%


            Rising costs of                           44%
            materials/fuel                       34%

                                                    41%
           Business taxes
                                          19%                    7               Significantly impacts
                                                                                 my ability to meet
The concern of a growing compliance                                 Against this backdrop of HR
burden is particularly noteworthy. The                              compliance confidence, researchers
HR point person in a smaller enterprise                             examined the types of support
likely lacks the time and resources                                 companies use to address their
to confront increasingly complex HR                                 compliance issues.
compliance issues, especially when an
estimated 45% of his/her time is spent                              Results show that the vast majority
on administrative tasks.1                                           of small and mid-size businesses
                                                                    seek professional compliance
The research went into depth                                        guidance. Many turn to outside
about confidence levels regarding                                   sources (or plan to) for HR
compliance, finding significant numbers                             compliance help, in areas including
of respondents who are less than                                    payroll (65%), benefits (53%), and risk
extremely/very confident across these                                safety (40%).
key areas:
                                                                    In addition, the survey examined the
       • Benefits
                                                                    incidence of HR-related complaints,
       • Risk  safety                                              charges and lawsuits that companies
       • Hiring                                                     have recently experienced. One in five
                                                                    companies surveyed report at least
       • Employee relations                                         one recent incident of HR-related
       • Terminations                                               complaints, charges or lawsuits.

                                                                    When examining the detailed
                                                                    research results on the following
   ADP TotalSource                                                  pages, a clear picture emerges of
                                                                    the challenges represented by the
   clients view their                                               “moving target” of HR compliance.
   TotalSource HR                                                   Businesses that want to compete and
                                                                    grow have no choice but to decipher
   Business Partner as                                              which regulations apply, and the best
                                                                    way to comply. Anything less than
   a trusted consultant.                                            in-depth understanding can become a
                                                                    significant barrier to success.




1 HR Outsourcing Redefined: Options for Workforce Management, ADP, January 2009.




                                                                8
Talent is Critical to
                   Competitive Success                                                                                     Extremely/very confid

                                                                                                                           Not at all/slightly/mod

                   Nearly half of all respondents indicate that they expect to grow in the next 12 months —
                   a sentiment reflected in respondents’ ranking finding and keeping good people among their
s based on         top three competitive strategies.

                   However, respondents also project that top talent may soon become more difficult to
                   attract; 47% express concern about their ability to locate and hire good employees, second
ductivity          only to benefit costs in their ranking of chief concernsdozenchart on page 6).
                                                    [insert bar chart of top (see compliance issues
                                                   based on p.14 – broad market only]
                   Given the focus on hiring, it’s important to note that many small and mid-size businesses seem
                   equally concerned about their ability to comply across a number of HR compliance areas.
                                                                                                                                               T
                                             HR compliance issues of most concern
             82%
               [insert bar chart of top nine business strategies from p.10/left side – include broad market
               and TS #s]                              Companies with 10-149 EEs
                     HR COMPLIANCE ISSUES OF MOST CONCERN
                   Top strategies for maintaining a competitive edge
                                                             Payroll taxes                     38%

                                                                                         55%
                                                     Keeping
                                                Recruitment and hiring                      38%
                                                   overhead low                         53%

                                                       Pay requirements                 27%
                                             Focus on employee
                                                                                        53%
                                                    productivity                  43%
                                             Workers’ comp insurance
                                                                                         27%
                                             and claims administration
                                                                                 37%
                                                Hiring top talent relations
                                                     Employee                           26%                                                  Exte
                                                                                        53%

                                                            Terminations        31%     25%
                                               Managing vendor
                                                                                                                                        External
                                            terms and discounts
                                                  Benefit plan offerings 20%
                                                                                        23%
                                                      and administration
                                                    Investment             25%
                                                  in technology
                                                  SUI tax requirements                  23%
                                                                                 38%

                                            Risk  safety management 19%
                                                  Maintaining                          21%
                                                optimal location
                                                                      7%                                                                    Do no
                                                               401(k) plan        11%
                                       Focus on EE development         17%
                                                     Secure handling of
                                             and career-pathing                  10%
                                                           employee data17%                          Small  mid-size
                                                                                                     companies
                                                                                                     TotalSource clients
                                         Maximizing advertising           16%
                                            and public relations
                                                                         14%


                                             Offer full benefits
                                                                          16%
                                         package to employees                 39%
                                                         [insert bar9chart based on p. 17; use 10-149
                                                         column data]
Productivity Takes
   Center Stage
   In addition to attracting and retaining                            their minds know that investments in
   top talent, employee engagement                                    training and other tools are the first step to
   and productivity are high priorities.                              a more engaged workforce.

   As shown in the chart on page 5, of the
   nine competitive strategies provided
   to respondents, employee productivity               A majority of ADP
   ranks second, ahead of such traditional
   strategies as investing in technology or            TotalSource clients
   managing vendor terms and discounts.                who rank training
[insert bar chart of top nine business strategies from p.10/left side – include broad market
and TS #s]
    According to the research, there is a              and employee
    very high level of agreement among HR              assistance programs
    decision-makers regarding how best to
     Top strategies for maintaining aas productivity
    improve productivity.
                                                         competitive edge
                                                       boosters say that
    Current research demonstrates
    the correlation between employee low
                                        Keeping
                                   overhead
                                                       their TotalSource
                                                                     55%
                                                                    53%
                         [insert chart of productivity partnership allows
    engagement and productivity — and
                                                       programs based on
    an average of 12% higher profits
                         p.10/right side – broad market only] to offer each.
                              Focus on employee        them 53%
    for companies with highly engagedproductivity                                   43%
   employees.2 Companies with growth on
                Programs that increase employee productivity
                                                37%
                                         Hiring top talent
     PROGRAMS THAT INCREASE EMPLOYEE PRODUCTIVITY
                                       53%

                                      Companies with 10-149 EEs
                                        Managing vendor                           31%
                                     terms and discounts
                                                                         20%
                             Training and development                                              82%
                                              Investment                    25%
                                         in technology
                           Employee self-service tools                             29%
                                                                                    38%

                                           Maintaining
                                      Wellness program                   19% 25%
                                         optimal location
                                                                   7%
                Employee Assistance Program (EAP)
                      (e.g., programs/services that                     11%
                 address employees’ mental health)
                           Focus on EE development                      17%
                                      and career-pathing
                                                                        17%                        Small  mid-size
                                                                                                   companies
                                                                                                   TotalSource clients
                                 Maximizing advertising                 16%
                                    and public relations
                                                                       14%
   2 Employee Engagement: What’s Your Engagement Ratio? Gallup Consulting 2008.


                                      Offer full benefits
                                                                        16%
                                  package to employees                             39%
                                                                 10
Cost Control Remains
a Vital Factor
While employee recruitment/retention-
related concerns are prominent and
productivity is a significant focus, the
importance of managing overhead costs
cannot be ignored.

Keeping overhead low is ranked by
more than half of respondents as their
top business strategy for maintaining a
competitive edge (see chart on page 5).
                                                   56%              of ADP
                                                   TotalSource clients
In addition, several financial issues rank         indicate that they
among top business concerns, including
the rising cost of benefits, materials/fuel
                                                   chose TotalSource to
costs, business taxes, and cash flow (see          stabilize their costs.
chart page 6).




                                              11
Compliance is
a Continuing Challenge
One of the survey’s most notable findings        While companies clearly see compliance
is the overall amount of discomfort              as important, many don’t go as far as
companies have regarding HR laws                 they could in managing their HR-related
and regulations. The chart on page 15            practices. It’s worth noting that 61% of
shows that more than half of companies           respondents have never conducted a
responding to the survey rate themselves         voluntary HR audit.
less than extremely/very confident that
they can keep up with these requirements.

One indicator of concern is the fact that




                                                   96%
virtually all companies feel the need
to consult with advisors regarding HR
compliance issues. The survey found that
more than 90% of these companies rely
on professional advisors — ranging from
                                                                   of ADP
CPAs, attorneys and in-house HR staff to           TotalSource clients
websites and professional associations —
to help them stay current with changes in
                                                   turn to TotalSource
compliance laws and with HR rules and              as their trusted advisor.
regulations in general.




                                            12
TRUSTED HR COMPLIANCE ADVISORS


                                                                                          93%
                                       Any (Net)
                                                                                            99%

                                                                          36%
                                CPA/accountant
                                                                    25%

  External HR/payroll/benefits consultant/vendor                         30%
                               ADP TotalSource                                           96%

                                                                    24%
                         Government website(s)
                                                               14%

                                                                19%
                             Internet searches
                                                                   21%

                      HR/benefits professional                 17%
                      associations/publications                    20%

                                                              17%
                     External general law firm
                                                              12%

                                                              17%
                              In-house HR staff
                                                              9%

                                                               15%
                                Benefits broker
                                                          6%

                  External law firm specializing              13%
                             in employment law            10%

                                                          8%
                               Financial advisor
                                                          7%

                                                          7%
                    Do not have a trusted source
                                                     1%
                                                                                Small  mid-size
                                                         2%                     companies
                             In-house legal staff
                                                         4%                     ADP TotalSource clients




                                                    13
Exploring the Range
of Compliance Concerns
In general, just 44% of small and mid-size
respondents rank themselves extremely
or very confident in their ability to keep                                The confidence of
up with HR compliance. And with data
suggesting that 70% or more of employers
                                                                          ADP TotalSource
are not fully compliant with the Fair Labor                               clients in their
Standards Act (FLSA)3, those feeling less
than confident have cause to be concerned.
                                                                          ability to keep up
                                                                          with changing laws


                                                                                                   2x
                                                                          is nearly


                                                                          that of other small/
                                                                          mid-size companies.




3  DP Report, Trends in Wage and Hour Litigation Over Unpaid Work Time and the Precautions Employers Should Take, 2011.
  A
  Laurent Badoux. Littler Mendelson, P.C.




                                                                 14
[insert 2 pie charts of confidence levels based on p.15]
 ased on p.15]


                      CONFIDENCE KEEPING UP WITH CHANGING HR
 company’s ability to AND up with changingConfidence in company’s ability to keep up with changing
                      keep EMPLOYMENT LAWS
mployment laws over the next 1-3 years       HR and employment laws over the next 1-3 years
 0-149 EEs
                           Small  Mid-Size Companies
                             TotalSource clients
                                                                   Companies with 10-149 EEs                            TotalSource clients

                                           81%
                                                                                                                                  81%
 %


        78%
             44%
                                                               56%                                        44%
                                                      19%
 %
 harts of confidence levels based on p.15]                                                                                                   19%
 ased on p.15]
                               Extremely/very confident

                               Not at all/slightly/moderately confident
    Confidence in company’s ability to keep up with changing
 company’s abilityemployment laws over the next 1-3 years
       HR and to keep up with changing                                                                                Extremely/very confident
mployment laws over the next 1-3 years
                       ADP TotalSource
        Companies with 10-149 EEs
                           TotalSource clients
                                                                    Clients
                                                                        TotalSource clients                           Not at all/slightly/moderately confident
 0-149 EEs
                                                      [insert bar chart of top 10 trusted advisors for HR
 en compliance issues
                                                      compliance based on p.13; broad market vs TS]
 ket only]
ms based on
                                           81%                                          81%
 ]                                                 Trusted advisor for HR compliance
most concern
                                                                                                                                             [insert bar char
roductivity
49 EEs                                                           Any
                                                                      bar                                 93%
                                                             [insert (Net) chart of top dozen compliance issues
                                                                                                                                             compliance bas
             44%                                             based on p.14 – broad market only]            99%
     56%                                44%                                                   36%
                                                            CPA/accountant                                                                Trusted adviso
             38%                                      HR compliance issues of most concern
                                                                         25%
                   82%                                19%                               24%
             38%                                     Government website(s)

%
                                                                   Companies with 10-149 EEs
                                                                              14%
                                                                                                    19%                                                  Any (
       27%
                                                                                    17%
                                                          In-house HR staff
                                                                                  9%
       27%
                                                                                                                                                   CPA/accoun
                               Extremely/very confident
                                                                         Payroll taxes
                                                   External HR/payroll vendor
                                                                                     17%                  38%
      26%
                               Not at all/slightly/moderately confident          2%

      25%                                                 Recruitment Extremely/very confident
                                                                      and hiring                          38%                               Government websi
                                                                                    17%
                                            External HR/Benefits consultant
                                                                               2%
      23%                                                               Not at all/slightly/moderately confident
                                                                 Pay requirements               27%
                                                                                    15%                                                          In-house HR s
      23%                                                 Benefits broker
                                                       Workers’ comp insurance
                                                                            6%                      27%
                                                       and claims administration
                                                      [insert bar chart of top 10 trusted advisors for HR
 en 21%
    compliance issues
                                                      compliance based on p.13; broad market vs TS]
                                                                                7%                                                      External HR/payroll ve
 ket only]
                                                Do not have a trusted sourcerelations
                                                                Employee                            26%
                                                                               1%
11%
                                              Trusted advisor for HR compliance
most concern                                                 Terminations        25%
0%                                                                              [insert bar chart of top 10 trusted advisors for HR HR/Benefits consu
                                                                                                                              External
 [insert bar chart of top dozen compliance issues
                                                    Benefit plan offerings 15   compliance based on p.13; broad market vs TS]
                                                                                             93%
 based on p.14 – broad market only]                                             23%
49 EEs                                                  Any (Net)
                                                               and administration                               99%
Among HR decision makers who think the law in each area surveyed applies to their
company, PEO clients outdistance their counterparts when it comes to many areas of
compliance confidence.



  HIRING                                       RISK  SAFETY
  PEO clients are 51% more                     PEO clients are more confident
  extremely/very confident in                  in all areas surveyed: providing
  conducting background checks.                safety training (34%); performing
                                               drug tests (38%); and
                                               maintaining OSHA logs (28%).



  PAYROLL                                      EMPLOYEE RELATIONS
  PEO clients are 23% more                     PEO clients are 37% more
  extremely/very confident in                  confident regarding non-FMLA
  withholding and remitting wage               leaves, and 38% more
  garnishments.                                confident conducting
                                               harassment prevention.




  ADP TotalSource
  clients with 50-149


                         4x
  employees are


  less likely to experience
  wage  hour complaints
  (3% vs. 13%) and


  11x           less likely
  to experience charges/
  investigations (1% vs. 11%).




                                         16
Managing the Growing
Compliance Burden
Given concerns over costs and the negative                          Twenty-six percent of survey respondents
financial consequences of non-compliance,                           believe an outside expert could have
it’s important that companies take steps to                         prevented or reduced such HR-related
address compliance-related issues.                                  incidents. A majority of PEO clients (58%)
                                                                    indicate that their partnership with ADP
This may be especially challenging for                              TotalSource has either prevented or made
small businesses that generally have                                these costly incidents less likely to occur in
fewer resources to manage the growing                               their organization.
burden of compliance. For example, 64%
of small and mid-size businesses indicate                           Forty-two percent of respondents had
that their HR decision makers also handle                           one or more unemployment claims in
other responsibilities.                                             2010; 25% reported one or more workers’
                                                                    compensation claims.
Given the lack of confidence the
companies surveyed express in areas
such as risk and safety, hiring, and
employee relations, the reported
incidence of HR-related complaints,
agency charges and investigations, and
lawsuits is not surprising.

According to the survey, one in five
businesses have experienced at least one
such incident in the past three years. With                             A majority of ADP
employee litigation — and compensatory
awards — on the rise, companies face
                                                                        TotalSource clients
major potential legal liabilities. Statistics                           who experienced any
compiled by Jury Verdict Research
show that employment lawsuits have
                                                                        incidents attribute
risen 400% in the last 20 years, with the                               a better outcome to
average compensatory award in federal
employment cases now exceeding
                                                                        their TotalSource
$490,000 (not including punitive damages                                partnership.
or attorneys’ fees).4




4 Employers’ Responsibilities When Making Settlements in Employment-Related Claims, Bloomberg Law Reports, 2009.




                                                               17
ed on p. 40/left side and p. 41 --NEW #S BELOW
                           [insert chart based on p. 20/left bar – broad market only]

                        Confidence in company’s charts based on p.up with changing --NEW #S BELOW
                                        [insert pie ability to keep 40/left side and p. 41                                                        Any Disc

s in 2010            Workers’ Compensation Claims inover the next 1-3market only]
                           HR and[insert chart based on p.2010 bar – broad years
                                   employment laws 20/left                                                                                               A
changing
years                   UNEMPLOYMENT CLAIMS IN 2010 ability to keep up with changing
                                Confidence in company’s
                                         Unemployment Claims in 2010            Workers’ Compensation Claims in 2010
                                                HR and employment laws over the next 1-3 years
                                         Stabilize costs           28%

                                         Lower risk
                              25%
                                         Increase employee
%                                        productivity
                                                         Stabilize costs        20%                 28%

                                                           Lower risk
                                         Drive business results                                                    25%
        58%                                                     75%
                                         None of the above/Would employee
                                                           Increase
                                                           productivity
                                         not consider outsourcing
                                                                                19%
                                                                                                    20%

                                         Don’t know       Drive business results 13%
%                                      42%                None of the above/Would
                                                                                 58%                19%                                          75%
                                                          not consider outsourcing
                                                                                29%
                                                          Don’t know                                13%

%                                                                               3%
%                                                                          Companies with           29%
                                                                             10-149 EEs
ource
nts                                                                                                  3%
                                                                                                                                                       cha
                                None                                                        Companies with
ed on p. 40/left side and p. 41 --NEW #S BELOW                                                10-149 EEs
                                1 or more claims
                                                                                                                      None
                                                                                     Among those who could give a numeric response. Base = 202
                                                                                                                                                  Any Disc
pie charts based on p. 40/left side and p. 41 --NEW #S BELOW                                                          1 or more claims
s in 2010            Workers’ Compensation Claims in 2010                                                                                                A


                        WORKERS’ COMPENSATION CLAIMS IN 2010
ment Claims in 2010                 Workers’ Compensation Claims in 2010
                              25%

                                            25%
        58%                                                     75%

                    58%                                                          75%




                                None

                                1 or more claims
                                                                                     Among those who could give a numeric response. Base = 231
                                               None

                                               1 or more claims




                                                                           18
Considering Outside
HR Support
It’s no surprise that human resources departments are stretched thin in the current
environment. In addition, many smaller companies don’t actually have a formal HR
department, or have one-person departments that are often called on to handle a variety
of additional responsibilities.

Given this reality, it makes sense that the survey found many businesses are willing
to consider outsourcing aspects of their HR function, for reasons ranging from cost
stabilization to driving overall business results.

In fact, the majority of survey respondents (71%) would consider outsourcing their HR
function entirely.


  M
   OST COMPELLING REASONS FOR SMALL AND MID-SIZE
  COMPANIES TO CONSIDER OUTSOURCING ENTIRE HR FUNCTION




                       28%
                                                            Would consider outsourcing

                                                            Stabilize costs
                       20%
                                  28%                       Lower risk
                                                                Would consider outsourcing
                                                            Increase employee
                       19%                                  productivity
                                                               Stabilize costs
                                  20%
                                                                Lower risk
                                                            Drive business results
                       13%                                      Increase employee
                                  19%                       None of the above/Would
                                      71%                      productivity
                                                            not consider outsourcing
                                                                Drive business results
                                  13%
                       29%                                  Don’t know
                                              71%               None of the above/Would
                                                                not consider outsourcing
             3%                   29%                           Don’t know

                           3%
                                                                         Multiple responses permitted.
                      Companies with
                        10-149 Companies with
                               EEs
                                    10-149 EEs




                                            19
Conclusion
The preceding research illustrates that the strategies companies employ to maintain a
competitive edge are closely correlated to the challenges impacting their ability to succeed  —
increasing and unpredictable costs, employee productivity and engagement challenges, the
rapidly evolving regulatory environment, and attracting and retaining top talent.

Partnering with a PEO can help stabilize costs, enhance employee productivity and
engagement, and improve the ability to maintain compliance. According to a recent
issue of Quality Magazine, a key benefit of a PEO is access to the human resources and
compliance expertise necessary to manage critical HR responsibilities and risks, and to
stay ahead of the compliance curve.5

With 82% of small and mid-size companies that currently work with a PEO recommending
this model to their peers,6 it’s clear that PEOs are becoming a tool of choice to relieve
compliance and competitive pressures.




5 Quality Magazine, The Outsourcing of HR, David Imbrogno, December 2010
6 PEO: Taking Outsourcing a Step Beyond Pays Off for Small and Mid-Sized Companies, Aberdeen Group, August 2011




                                                                20
About the Survey
The ADP Research Institute conducted the ADP All-Market Compliance Survey in
April 2011. This online 20-minute survey of 257 small and mid-size businesses (10-149
employees) nationwide looked broadly at current business issues, and then examined levels
of confidence related to HR compliance. ADP was not identified as the survey sponsor.
Respondents were HR decision-makers responsible for overseeing HR compliance within
their organizations. Eighty percent were C-suite executives; the remainder had primary
responsibilities in administrative, financial, executive, operational or other areas. The
resulting data achieved statistical reliability at the 95% confidence level.

For comparison, in June 2011 the ADP Research Institute surveyed PEO clients (10-149
employees) who had been with ADP TotalSource for at least a year. ADP was identified as
the survey sponsor. Respondents were HR decision-makers responsible for overseeing HR
compliance within their organizations. Thirty-four percent were C-suite executives; 36%
had financial titles; the remainder had primary responsibilities in administrative, executive,
operational or other areas. The resulting data achieved statistical reliability at the 95%
confidence level.




About the
ADP Research Institute
The ADP All-Market Compliance Survey was published by the ADP Research Institute, a
specialized group within ADP that conducts studies on topics of current interest to human
resources and payroll professionals.




                                             21
About ADP TotalSource                                                SM




ADP TotalSource provides employers with a comprehensive human resources outsourcing
solution that helps reduce the costs and complexities related to employment and human
resources management. For companies and HR departments that seek to return the focus
to their core processes, TotalSource removes administrative and regulatory burdens,
allowing more effort to be expended on strategic initiatives. Our affordable outsourcing
opportunities have the ability to significantly reduce operating costs and streamline
business operations, paving the way for growth and competitive gains.

To learn more about how TotalSource can help your business, call 1-800-HIRE-ADP
(800-447-3237) or visit us online at www.ADPTotalSource.com.



About ADP                        ®




Automatic Data Processing, Inc. (Nasdaq: ADP), with about $10 billion in revenues
and approximately 570,000 clients, is one of the world’s largest providers of business
outsourcing solutions. Leveraging over 60 years of experience, ADP offers a wide range of
human resource, payroll, tax and benefits administration solutions from a single source.
ADP’s easy-to-use solutions for employers provide superior value to companies of all
types and sizes. ADP is also a leading provider of integrated computing solutions to auto,
truck, motorcycle, marine, recreational vehicle, and heavy equipment dealers throughout
the world. For more information about ADP or to contact a local ADP sales office, reach us
at 1.800.225.5237 or visit the company’s Web site at www.ADP.com.




                                           22
The ADP logo and ADP are registered trademarks of ADP, Inc. In the business of your success and
ADP TotalSource are service marks of ADP, Inc. All other trademarks and service marks are the
property of their respective owners. © 2011 ADP, Inc.

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Relieving the pressure hr outsourcing

  • 1. ADP RESEARCH INSTITUTE Relieving the Pressure The PEO Approach to Navigating Compliance & Gaining a Competitive Advantage The ADP Research Institute is a HR. Payroll. Benefits. specialized group within ADP
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  • 3. Contents Executive Summary 4 Talent is Critical to Competitive Success 9 Productivity Takes Center Stage 10 Cost Control Remains a Vital Factor 11 Compliance is a Continuing Challenge 12 Exploring the Range of Compliance Concerns 14 Managing the Growing Compliance Burden 17 Considering Outside HR Support 19 Conclusion 20 About the Survey 21 About the ADP Research Institute 21 About ADP TotalSource 22 About ADP 22 3
  • 4. Executive Summary Companies seeking to compete in today’s Respondents in the first survey identified business climate face more intense three essential strategies for maintaining pressure than in years past. Change is a competitive edge in the face of today’s everywhere — from technology advances challenges: to regulatory and compliance demands — and companies must be able to adapt • Hiring top talent in order to survive. Talent is critical to • aximizing employee productivity M success. Companies must operate as efficiently as possible while still • Keeping overhead low maintaining compliance and attracting and retaining top talent. Earlier this year, the ADP Research Institute, a specialized group within ADP, conducted two surveys. The first survey assessed the most pressing business concerns, key competitive strategies, and confidence levels in terms of HR A strong majority of compliance of more than 250 small and ADP TotalSource SM mid-size businesses (those with 10-149 employees). For comparison, the ADP clients indicate that Research Institute also interviewed TotalSource plays clients of ADP’s PEO* solution, ADP TotalSourceSM, with 10-149 employees, a role in their ability to to measure the impact their partnership focus on key strategies. with a PEO had on these topics. * rofessional Employer Organizations (PEOs) enable clients to cost-effectively outsource the management of human resources, employee P benefits, payroll and workers’ compensation. PEO clients focus on their core competencies to maintain and grow their bottom line. Source: National Association of Professional Employer Organizations. 4
  • 5. [insert bar chart of top nine business strategies from p.10/left side – include broad market and TS #s] TOP STRATEGIES FOR maintaining a COMPETITIVE edge Top strategies for MAINTAINING A competitive EDGE 55% Keeping Keep overhead low overhead low 53% 55% Focus on employee 53% 53% Focus productivity on employee productivity 43% Hire top talent 37% 37% Hiring top talent Manage vendor 53% terms and discounts 31% Managing vendor 31% Invest in terms and discounts technology 25% 20% Maintain 25% Investment optimal location 19% in technology 38% Focus on employee development and 17% Maintaining career-pathing 19% optimal location Maximize advertising 7% and public relations 16% Focus on EE development 17% Offer career-pathing and full benefits Small mid-size package to employees 16% 17% Small companies mid-size companies TotalSource clients Maximizing advertising 16% and public relations 14% Offer full benefits 16% package to employees 39% [Insert bar chart of top 5 business concerns using “significantly impacts” column from p.11 – include broad market and TS #s] Impact of business concerns on companies with 10-149 EEs Rising costs 60% of benefits 70% Locating/hiring 47% qualified employees 40% Rising costs of 44% materials/fuel 34% Source: ADPRI All-Market Compliance Survey (April 2011) 41% Business taxes 19% Significantly impacts my ability to meet 5 business goals Retaining good 39%
  • 6. In addition to identifying key competitive strategies, the survey also noted respondents’ greatest business Most ADP TotalSource concerns — issues that impact their ability clients agree that to meet their goals and could prevent them from successfully executing their TotalSource is a key competitive strategies. The top three partner in driving business concerns among small and mid- and TS #s] businesses are: size business success. [insert bar chart of top nine business strategies from p.10/left side – include broad market • Rising cost of benefits Top strategies for maintaining a competitive edge • Locating/hiring qualified employees • Rising costs of materials/fuel 55% Keeping overhead low 53% TOP BUSINESS CONCERNS Focus on employee 53% productivity SIGNIFICANTLY 43% IMPACTS MY ABILITY TO MEET BUSINESS GOALS 37% Hiring top talent Rising costs 53% of benefits 60% Managing vendor 31% Locating/hiring terms and discounts qualified employees 20% 47% Rising costs of Investment 25% materials/fuel 44% in technology 38% Business taxes 41% Maintaining 19% optimal location Retaining good 7% employees 39% Focus on EE development 17% andCash flow career-pathing 38% issues/problems 17% Small mid-size companies mid-size Small companies TotalSource clients Maximizing advertising 16% and public relations 14% Offer full benefits 16% package to employees 39% [Insert bar chart of top 5 business concerns using “significantly impacts” column from p.11 – include broad market and TS #s] Impact of business concerns on companies with 10-149 EEs Rising costs 60% of benefits 6 70%
  • 7. [insert bar chart of top nine business strategies from p.10/left side – include broad market and TS #s] The importance of the survey’s compliance-related findings is underscored by the fact that more than half bar chart using “increasing” datain their p. 16]to keep up [insert of companies surveyed lack confidence from ability Top complex, ever-changing regulations — anda competitive edge only with strategies for maintaining see their HR compliance burden increasing in the near term. Change in HR compliance burden over the next 1-3 years Keeping 55% STATE OF HR COMPLIANCE BURDEN IN THE NEXT 1-3 YEARS overhead low 53% Companies employee Focus on with 10-149 EEs 53% INCREASING productivity 43% Benefits 54% 37% Hiring top talent 53% Employee Relations 52% Managing vendor 31% terms and discounts Hiring 20% 51% Investment 25% Risk and in technology Safety 51% 38% Maintaining 19% Payroll optimal location 49% 7% Terminations Focus on EE development 17% 39% and career-pathing 17% Small mid-size companies TotalSource clients Maximizing advertising 16% and public relations 14% Offer full benefits 16% package to employees 39% [Insert bar chart of top 5 business concerns using “significantly impacts” column from p.11 – include broad market and TS #s] Impact of business concerns on companies with 10-149 EEs Rising costs 60% of benefits 70% Locating/hiring 47% qualified employees 40% Rising costs of 44% materials/fuel 34% 41% Business taxes 19% 7 Significantly impacts my ability to meet
  • 8. The concern of a growing compliance Against this backdrop of HR burden is particularly noteworthy. The compliance confidence, researchers HR point person in a smaller enterprise examined the types of support likely lacks the time and resources companies use to address their to confront increasingly complex HR compliance issues. compliance issues, especially when an estimated 45% of his/her time is spent Results show that the vast majority on administrative tasks.1 of small and mid-size businesses seek professional compliance The research went into depth guidance. Many turn to outside about confidence levels regarding sources (or plan to) for HR compliance, finding significant numbers compliance help, in areas including of respondents who are less than payroll (65%), benefits (53%), and risk extremely/very confident across these safety (40%). key areas: In addition, the survey examined the • Benefits incidence of HR-related complaints, • Risk safety charges and lawsuits that companies • Hiring have recently experienced. One in five companies surveyed report at least • Employee relations one recent incident of HR-related • Terminations complaints, charges or lawsuits. When examining the detailed research results on the following ADP TotalSource pages, a clear picture emerges of the challenges represented by the clients view their “moving target” of HR compliance. TotalSource HR Businesses that want to compete and grow have no choice but to decipher Business Partner as which regulations apply, and the best way to comply. Anything less than a trusted consultant. in-depth understanding can become a significant barrier to success. 1 HR Outsourcing Redefined: Options for Workforce Management, ADP, January 2009. 8
  • 9. Talent is Critical to Competitive Success Extremely/very confid Not at all/slightly/mod Nearly half of all respondents indicate that they expect to grow in the next 12 months — a sentiment reflected in respondents’ ranking finding and keeping good people among their s based on top three competitive strategies. However, respondents also project that top talent may soon become more difficult to attract; 47% express concern about their ability to locate and hire good employees, second ductivity only to benefit costs in their ranking of chief concernsdozenchart on page 6). [insert bar chart of top (see compliance issues based on p.14 – broad market only] Given the focus on hiring, it’s important to note that many small and mid-size businesses seem equally concerned about their ability to comply across a number of HR compliance areas. T HR compliance issues of most concern 82% [insert bar chart of top nine business strategies from p.10/left side – include broad market and TS #s] Companies with 10-149 EEs HR COMPLIANCE ISSUES OF MOST CONCERN Top strategies for maintaining a competitive edge Payroll taxes 38% 55% Keeping Recruitment and hiring 38% overhead low 53% Pay requirements 27% Focus on employee 53% productivity 43% Workers’ comp insurance 27% and claims administration 37% Hiring top talent relations Employee 26% Exte 53% Terminations 31% 25% Managing vendor External terms and discounts Benefit plan offerings 20% 23% and administration Investment 25% in technology SUI tax requirements 23% 38% Risk safety management 19% Maintaining 21% optimal location 7% Do no 401(k) plan 11% Focus on EE development 17% Secure handling of and career-pathing 10% employee data17% Small mid-size companies TotalSource clients Maximizing advertising 16% and public relations 14% Offer full benefits 16% package to employees 39% [insert bar9chart based on p. 17; use 10-149 column data]
  • 10. Productivity Takes Center Stage In addition to attracting and retaining their minds know that investments in top talent, employee engagement training and other tools are the first step to and productivity are high priorities. a more engaged workforce. As shown in the chart on page 5, of the nine competitive strategies provided to respondents, employee productivity A majority of ADP ranks second, ahead of such traditional strategies as investing in technology or TotalSource clients managing vendor terms and discounts. who rank training [insert bar chart of top nine business strategies from p.10/left side – include broad market and TS #s] According to the research, there is a and employee very high level of agreement among HR assistance programs decision-makers regarding how best to Top strategies for maintaining aas productivity improve productivity. competitive edge boosters say that Current research demonstrates the correlation between employee low Keeping overhead their TotalSource 55% 53% [insert chart of productivity partnership allows engagement and productivity — and programs based on an average of 12% higher profits p.10/right side – broad market only] to offer each. Focus on employee them 53% for companies with highly engagedproductivity 43% employees.2 Companies with growth on Programs that increase employee productivity 37% Hiring top talent PROGRAMS THAT INCREASE EMPLOYEE PRODUCTIVITY 53% Companies with 10-149 EEs Managing vendor 31% terms and discounts 20% Training and development 82% Investment 25% in technology Employee self-service tools 29% 38% Maintaining Wellness program 19% 25% optimal location 7% Employee Assistance Program (EAP) (e.g., programs/services that 11% address employees’ mental health) Focus on EE development 17% and career-pathing 17% Small mid-size companies TotalSource clients Maximizing advertising 16% and public relations 14% 2 Employee Engagement: What’s Your Engagement Ratio? Gallup Consulting 2008. Offer full benefits 16% package to employees 39% 10
  • 11. Cost Control Remains a Vital Factor While employee recruitment/retention- related concerns are prominent and productivity is a significant focus, the importance of managing overhead costs cannot be ignored. Keeping overhead low is ranked by more than half of respondents as their top business strategy for maintaining a competitive edge (see chart on page 5). 56% of ADP TotalSource clients In addition, several financial issues rank indicate that they among top business concerns, including the rising cost of benefits, materials/fuel chose TotalSource to costs, business taxes, and cash flow (see stabilize their costs. chart page 6). 11
  • 12. Compliance is a Continuing Challenge One of the survey’s most notable findings While companies clearly see compliance is the overall amount of discomfort as important, many don’t go as far as companies have regarding HR laws they could in managing their HR-related and regulations. The chart on page 15 practices. It’s worth noting that 61% of shows that more than half of companies respondents have never conducted a responding to the survey rate themselves voluntary HR audit. less than extremely/very confident that they can keep up with these requirements. One indicator of concern is the fact that 96% virtually all companies feel the need to consult with advisors regarding HR compliance issues. The survey found that more than 90% of these companies rely on professional advisors — ranging from of ADP CPAs, attorneys and in-house HR staff to TotalSource clients websites and professional associations — to help them stay current with changes in turn to TotalSource compliance laws and with HR rules and as their trusted advisor. regulations in general. 12
  • 13. TRUSTED HR COMPLIANCE ADVISORS 93% Any (Net) 99% 36% CPA/accountant 25% External HR/payroll/benefits consultant/vendor 30% ADP TotalSource 96% 24% Government website(s) 14% 19% Internet searches 21% HR/benefits professional 17% associations/publications 20% 17% External general law firm 12% 17% In-house HR staff 9% 15% Benefits broker 6% External law firm specializing 13% in employment law 10% 8% Financial advisor 7% 7% Do not have a trusted source 1% Small mid-size 2% companies In-house legal staff 4% ADP TotalSource clients 13
  • 14. Exploring the Range of Compliance Concerns In general, just 44% of small and mid-size respondents rank themselves extremely or very confident in their ability to keep The confidence of up with HR compliance. And with data suggesting that 70% or more of employers ADP TotalSource are not fully compliant with the Fair Labor clients in their Standards Act (FLSA)3, those feeling less than confident have cause to be concerned. ability to keep up with changing laws 2x is nearly that of other small/ mid-size companies. 3 DP Report, Trends in Wage and Hour Litigation Over Unpaid Work Time and the Precautions Employers Should Take, 2011. A Laurent Badoux. Littler Mendelson, P.C. 14
  • 15. [insert 2 pie charts of confidence levels based on p.15] ased on p.15] CONFIDENCE KEEPING UP WITH CHANGING HR company’s ability to AND up with changingConfidence in company’s ability to keep up with changing keep EMPLOYMENT LAWS mployment laws over the next 1-3 years HR and employment laws over the next 1-3 years 0-149 EEs Small Mid-Size Companies TotalSource clients Companies with 10-149 EEs TotalSource clients 81% 81% % 78% 44% 56% 44% 19% % harts of confidence levels based on p.15] 19% ased on p.15] Extremely/very confident Not at all/slightly/moderately confident Confidence in company’s ability to keep up with changing company’s abilityemployment laws over the next 1-3 years HR and to keep up with changing Extremely/very confident mployment laws over the next 1-3 years ADP TotalSource Companies with 10-149 EEs TotalSource clients Clients TotalSource clients Not at all/slightly/moderately confident 0-149 EEs [insert bar chart of top 10 trusted advisors for HR en compliance issues compliance based on p.13; broad market vs TS] ket only] ms based on 81% 81% ] Trusted advisor for HR compliance most concern [insert bar char roductivity 49 EEs Any bar 93% [insert (Net) chart of top dozen compliance issues compliance bas 44% based on p.14 – broad market only] 99% 56% 44% 36% CPA/accountant Trusted adviso 38% HR compliance issues of most concern 25% 82% 19% 24% 38% Government website(s) % Companies with 10-149 EEs 14% 19% Any ( 27% 17% In-house HR staff 9% 27% CPA/accoun Extremely/very confident Payroll taxes External HR/payroll vendor 17% 38% 26% Not at all/slightly/moderately confident 2% 25% Recruitment Extremely/very confident and hiring 38% Government websi 17% External HR/Benefits consultant 2% 23% Not at all/slightly/moderately confident Pay requirements 27% 15% In-house HR s 23% Benefits broker Workers’ comp insurance 6% 27% and claims administration [insert bar chart of top 10 trusted advisors for HR en 21% compliance issues compliance based on p.13; broad market vs TS] 7% External HR/payroll ve ket only] Do not have a trusted sourcerelations Employee 26% 1% 11% Trusted advisor for HR compliance most concern Terminations 25% 0% [insert bar chart of top 10 trusted advisors for HR HR/Benefits consu External [insert bar chart of top dozen compliance issues Benefit plan offerings 15 compliance based on p.13; broad market vs TS] 93% based on p.14 – broad market only] 23% 49 EEs Any (Net) and administration 99%
  • 16. Among HR decision makers who think the law in each area surveyed applies to their company, PEO clients outdistance their counterparts when it comes to many areas of compliance confidence. HIRING RISK SAFETY PEO clients are 51% more PEO clients are more confident extremely/very confident in in all areas surveyed: providing conducting background checks. safety training (34%); performing drug tests (38%); and maintaining OSHA logs (28%). PAYROLL EMPLOYEE RELATIONS PEO clients are 23% more PEO clients are 37% more extremely/very confident in confident regarding non-FMLA withholding and remitting wage leaves, and 38% more garnishments. confident conducting harassment prevention. ADP TotalSource clients with 50-149 4x employees are less likely to experience wage hour complaints (3% vs. 13%) and 11x less likely to experience charges/ investigations (1% vs. 11%). 16
  • 17. Managing the Growing Compliance Burden Given concerns over costs and the negative Twenty-six percent of survey respondents financial consequences of non-compliance, believe an outside expert could have it’s important that companies take steps to prevented or reduced such HR-related address compliance-related issues. incidents. A majority of PEO clients (58%) indicate that their partnership with ADP This may be especially challenging for TotalSource has either prevented or made small businesses that generally have these costly incidents less likely to occur in fewer resources to manage the growing their organization. burden of compliance. For example, 64% of small and mid-size businesses indicate Forty-two percent of respondents had that their HR decision makers also handle one or more unemployment claims in other responsibilities. 2010; 25% reported one or more workers’ compensation claims. Given the lack of confidence the companies surveyed express in areas such as risk and safety, hiring, and employee relations, the reported incidence of HR-related complaints, agency charges and investigations, and lawsuits is not surprising. According to the survey, one in five businesses have experienced at least one such incident in the past three years. With A majority of ADP employee litigation — and compensatory awards — on the rise, companies face TotalSource clients major potential legal liabilities. Statistics who experienced any compiled by Jury Verdict Research show that employment lawsuits have incidents attribute risen 400% in the last 20 years, with the a better outcome to average compensatory award in federal employment cases now exceeding their TotalSource $490,000 (not including punitive damages partnership. or attorneys’ fees).4 4 Employers’ Responsibilities When Making Settlements in Employment-Related Claims, Bloomberg Law Reports, 2009. 17
  • 18. ed on p. 40/left side and p. 41 --NEW #S BELOW [insert chart based on p. 20/left bar – broad market only] Confidence in company’s charts based on p.up with changing --NEW #S BELOW [insert pie ability to keep 40/left side and p. 41 Any Disc s in 2010 Workers’ Compensation Claims inover the next 1-3market only] HR and[insert chart based on p.2010 bar – broad years employment laws 20/left A changing years UNEMPLOYMENT CLAIMS IN 2010 ability to keep up with changing Confidence in company’s Unemployment Claims in 2010 Workers’ Compensation Claims in 2010 HR and employment laws over the next 1-3 years Stabilize costs 28% Lower risk 25% Increase employee % productivity Stabilize costs 20% 28% Lower risk Drive business results 25% 58% 75% None of the above/Would employee Increase productivity not consider outsourcing 19% 20% Don’t know Drive business results 13% % 42% None of the above/Would 58% 19% 75% not consider outsourcing 29% Don’t know 13% % 3% % Companies with 29% 10-149 EEs ource nts 3% cha None Companies with ed on p. 40/left side and p. 41 --NEW #S BELOW 10-149 EEs 1 or more claims None Among those who could give a numeric response. Base = 202 Any Disc pie charts based on p. 40/left side and p. 41 --NEW #S BELOW 1 or more claims s in 2010 Workers’ Compensation Claims in 2010 A WORKERS’ COMPENSATION CLAIMS IN 2010 ment Claims in 2010 Workers’ Compensation Claims in 2010 25% 25% 58% 75% 58% 75% None 1 or more claims Among those who could give a numeric response. Base = 231 None 1 or more claims 18
  • 19. Considering Outside HR Support It’s no surprise that human resources departments are stretched thin in the current environment. In addition, many smaller companies don’t actually have a formal HR department, or have one-person departments that are often called on to handle a variety of additional responsibilities. Given this reality, it makes sense that the survey found many businesses are willing to consider outsourcing aspects of their HR function, for reasons ranging from cost stabilization to driving overall business results. In fact, the majority of survey respondents (71%) would consider outsourcing their HR function entirely. M OST COMPELLING REASONS FOR SMALL AND MID-SIZE COMPANIES TO CONSIDER OUTSOURCING ENTIRE HR FUNCTION 28% Would consider outsourcing Stabilize costs 20% 28% Lower risk Would consider outsourcing Increase employee 19% productivity Stabilize costs 20% Lower risk Drive business results 13% Increase employee 19% None of the above/Would 71% productivity not consider outsourcing Drive business results 13% 29% Don’t know 71% None of the above/Would not consider outsourcing 3% 29% Don’t know 3% Multiple responses permitted. Companies with 10-149 Companies with EEs 10-149 EEs 19
  • 20. Conclusion The preceding research illustrates that the strategies companies employ to maintain a competitive edge are closely correlated to the challenges impacting their ability to succeed  — increasing and unpredictable costs, employee productivity and engagement challenges, the rapidly evolving regulatory environment, and attracting and retaining top talent. Partnering with a PEO can help stabilize costs, enhance employee productivity and engagement, and improve the ability to maintain compliance. According to a recent issue of Quality Magazine, a key benefit of a PEO is access to the human resources and compliance expertise necessary to manage critical HR responsibilities and risks, and to stay ahead of the compliance curve.5 With 82% of small and mid-size companies that currently work with a PEO recommending this model to their peers,6 it’s clear that PEOs are becoming a tool of choice to relieve compliance and competitive pressures. 5 Quality Magazine, The Outsourcing of HR, David Imbrogno, December 2010 6 PEO: Taking Outsourcing a Step Beyond Pays Off for Small and Mid-Sized Companies, Aberdeen Group, August 2011 20
  • 21. About the Survey The ADP Research Institute conducted the ADP All-Market Compliance Survey in April 2011. This online 20-minute survey of 257 small and mid-size businesses (10-149 employees) nationwide looked broadly at current business issues, and then examined levels of confidence related to HR compliance. ADP was not identified as the survey sponsor. Respondents were HR decision-makers responsible for overseeing HR compliance within their organizations. Eighty percent were C-suite executives; the remainder had primary responsibilities in administrative, financial, executive, operational or other areas. The resulting data achieved statistical reliability at the 95% confidence level. For comparison, in June 2011 the ADP Research Institute surveyed PEO clients (10-149 employees) who had been with ADP TotalSource for at least a year. ADP was identified as the survey sponsor. Respondents were HR decision-makers responsible for overseeing HR compliance within their organizations. Thirty-four percent were C-suite executives; 36% had financial titles; the remainder had primary responsibilities in administrative, executive, operational or other areas. The resulting data achieved statistical reliability at the 95% confidence level. About the ADP Research Institute The ADP All-Market Compliance Survey was published by the ADP Research Institute, a specialized group within ADP that conducts studies on topics of current interest to human resources and payroll professionals. 21
  • 22. About ADP TotalSource SM ADP TotalSource provides employers with a comprehensive human resources outsourcing solution that helps reduce the costs and complexities related to employment and human resources management. For companies and HR departments that seek to return the focus to their core processes, TotalSource removes administrative and regulatory burdens, allowing more effort to be expended on strategic initiatives. Our affordable outsourcing opportunities have the ability to significantly reduce operating costs and streamline business operations, paving the way for growth and competitive gains. To learn more about how TotalSource can help your business, call 1-800-HIRE-ADP (800-447-3237) or visit us online at www.ADPTotalSource.com. About ADP ® Automatic Data Processing, Inc. (Nasdaq: ADP), with about $10 billion in revenues and approximately 570,000 clients, is one of the world’s largest providers of business outsourcing solutions. Leveraging over 60 years of experience, ADP offers a wide range of human resource, payroll, tax and benefits administration solutions from a single source. ADP’s easy-to-use solutions for employers provide superior value to companies of all types and sizes. ADP is also a leading provider of integrated computing solutions to auto, truck, motorcycle, marine, recreational vehicle, and heavy equipment dealers throughout the world. For more information about ADP or to contact a local ADP sales office, reach us at 1.800.225.5237 or visit the company’s Web site at www.ADP.com. 22
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  • 24. The ADP logo and ADP are registered trademarks of ADP, Inc. In the business of your success and ADP TotalSource are service marks of ADP, Inc. All other trademarks and service marks are the property of their respective owners. © 2011 ADP, Inc.