Japan Association of PEO (JAPEO) Video Letter Script

Kenneth A. Polcyn, Ph.D.

Senior Consultant

November 16, 2004

Tokyo, Japan

Good afternoon. It is a pleasure to be speaking before you. I am Dr. Kenneth A. Polcyn residing in Cape Coral, Florida, United States of America.

I am the author of the U.S. published book, “Outsourcing: PEO to HRO Operational Issues” and co-author, with Karibe-san of the Japan published book, “Employment Revolution with PEO/ The New Employment Business in the USA”.

My company, Deva Industries, Inc. has been providing Organizational Development products and consulting services to the U.S. PEO Industry since 1993, with clients throughout the U.S.

Let me provide a brief history of the U.S. PEO Industry. Its origin began in the 1960s as a result of pension laws. According to the federal pension law temporary employees were not eligible for qualified pension plans. To take advantage of the law, among other things, to build large pensions for themselves and none for their employees, some small business owners established separate companies, transferred their employees to the new company leasing them back as temporary employees.

Entrepreneurs capitalized on the law, establishing employee lease back companies to service businesses who desired to take advantage of the law. They offered leasing and other services to businesses eventually becoming known as Staff or Employee Leasing companies.

The U.S. 1986 Tax Reform Act ended the use of leasing as a pension advantage, and the Staff Leasing Industry evolved into a service provider for small and medium sized businesses.

The foundation for this new type of business was the “economies of scale” concept. The leasing companies, servicing many small businesses, could meet their needs at less cost whether providing or purchasing products or services. Consequently, while Leasing Companies performed the administrative functions for the businesses, the small business could pay attention to and execute its direct business functions saving time and money. Also, because the Staff Leasing companies were experts at performing administrative functions they were less prone to error than the typical small business.

Staff Leasing companies provided and/or administered, for example, payroll and related tax matters, health benefits, workers compensation and Human Resources functions. The HR role included such matters as insuring adherence to related laws and regulations, conducting personnel recruitment and outplacement, and managing unemployment and employer-employee relations.

In 1993, at the National Staff Leasing Association Convention, the Staff Leasing name was changed to “Professional Employer Organization (PEO)” and the national organization to “National Association of Professional Employer Organization (NAPEO)”. Since then the industry has continued to grow in the number of small to medium sized businesses served as well as becoming partners and co-employer with these businesses.

Why has the PEO business grown in the U.S.? Small businesses drive the U. S. economy! A small business in the U.S. is defined as having less than 500 employees.

Let’s look at the small business market in the 1990’s.

Small businesses provided nearly 99% of the net jobs.
They employed 53% of the private workforce.
Produced 50% of the gross domestic product.
And, created 75% of the 2.5 million new jobs in 1995 alone.
Basically, companies with 1-99 employees drove the U. S. economy in the 90’s.

Looking into the future, by 2005 small businesses are expected to create 60% of all new jobs in the U.S. The PEO Industry continues to be a major contributing factor helping small businesses survive and grow.

The application of the PEO Industry concept in Japan has considerable potential for contributing to small businesses stability and economic growth. The Japan Association of Professional Employer Organization (JAPEO) has recently been established, under the leadership of Karibe-san. JAPEO will provide assistance in understanding the PEO, its application in Japan as well as assisting in the establishment of PEO businesses. Please contact Karibe-san for more detailed information.

Our book Japanese book provides important information about the PEO concept and operational requirements. Further, moving into the future, the evolution of the PEO Model is also discussed. Kiribe-san provides an excellent Japanese perspective in the beginning and concluding chapters. The book should be on your “books to read list”.

I’ve have enjoyed the opportunity to speak before such a distinguished group of Human Resources professionals. Best wishes and thank you.