A New Lease on Life: Company Helps Firms Trim Personnel Management Cost
By Charles Holt

The high cost of workers' compensation insurance forced small-business owners Gloria and Arlan Gaus into corporate America's expanding "outsourcing" market last year.

The Columbia couple figured they could cut costs by contracting with another company to handle some tasks they used to do themselves, despite their fear that it would mean a loss of control over their businesses.

But they went one step further. The Gauses, owners of Gaus Construction and a 14-year-old horticulture business called Creative Surrounding, actually fired all their employees.
The move wasn't as drastic as it might sound.

Moresource Inc. hired all their employees, then leased them back to the Gauses. In the process, the Gauses cut down on administrative expenses and their employees got better benefits.

As a professional employer organization, or PEO, Columbia-based Moresource pools employees it hires away from small- and mid-size companies to secure cheaper benefit packages that come with volume purchasing. It then leases the workers back to their original employers.

The arrangement allows companies -- especially those in tight labor markets like Boone County -- to better compete for employees by offering medical benefits that they would not be able to afford on their own.

"The leased employees perform the same jobs for the same wages, only their paychecks say Moresource," said Kat Cunningham, 36, who started the company two years ago.

Moresource also manages other employee-related matters, including workers' compensation, payroll and a 401(k) plan for which it matches all funds contributed by employees.

The Gauses entered into their leasing arrangement with Moresource last February and were relieved to find their fear of losing control of their operation was unwarranted.

"We're still the same company," said Gloria Gaus. "We still place the ad and decide who we hire and who we fire."

Before starting Moresource in March 1994, Cunningham spent several years as personnel director for a trucking company in her hometown of Fulton. That was followed by a short stint with an employee leasing company in Illinois.

Cunningham said it was her desire to move back to Mid-Missouri that brought her to Columbia. The fact that Boone County has an unemployment rate of less than 2 percent didn't hurt either because she knew there would be demand for her services.

Within a few months of its inception, Moresource had amassed 150 employees serving seven companies. Today, the company leases more than 1,000 employees to 80 companies in eight states. Cunningham's largest client leases 110 Moresource employees.

Moresource projects a growth rate of at least 100 leased workers each quarter this year.

"Employee leasing is a newer variation of the tremendous trend toward company outsourcing," said Michael Corbett, director of research and co-founder of the New York-based Outsourcing Institute. "It has quickly become a strategic alternative to in-house personnel management."

A recent national survey conducted by Buck Consultants Inc. in New York found that 56 percent of the 231 business polled outsource at least some of their human resource and employee benefit functions.

Of those companies, 23 percent reported a 10 percent reduction in their human resource and employee benefit administration staff, with an average loss of three to 13 jobs.

Critics point to the loss of jobs that sometimes comes with outsourcing.

For example, outsourcing is one of the key issues in a 6-week-old strike by a machinists union at McDonnell Douglas Corp. in St. Louis. And unions at Trans World Airlines were angered recently by the St. Louis-based airline's decision to temporarily contract with two smaller carriers to fly a handful of routes.

But Corbett said employee leasing is a kinder, gentler form of outsourcing. "Companies get to retain their trained workers, while PEO's like Moresource get to make a dollar, usually without costing anyone their jobs," he said.

Cunningham added that job loss is not much of an issue for her company because most of her clients never did have staffs to handle the administrative duties she provides, leaving the paperwork to the owners.

David Hockett, owner of IB Nuts & Fruit Too in Columbia, was in that boat until Moresource bailed him out.

"It's such a time-saver that it's like having an in-house human resource staff," said Hockett, who now leases his eight employees through Moresource. "I don't have to mess with payroll anymore. I just fax them the time sheets and write them a check each week and they take care of the rest."

Published by the Columbia Daily Tribune, July 15, 1996.

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