Dodging the Hazards of Out-Of-State Expansion

For many successful local businesses, it’s an idea that seems enormously appealing: Build your company by establishing a beachhead in neighboring states. It makes perfect sense on the face of it: If a product or service is a market success in Michigan, for example, it stands to reason that it will fare well in Indiana or Ohio. And there’s seldom a reason why a restaurant chain that’s popular in Florida would fail to gain traction in Georgia.

It makes perfect logical sense – but business is not always logical, particularly not when government regulation is involved. While market conditions may be nearly identical from one state to the next, regulatory and taxation environments usually are not – and those differences can go a long way towards torpedoing the success of an expansion effort, often almost as soon as it begins.

As is often the case when it comes to the hazards facing growing businesses, the biggest problems are caused by the issues you don’t know exist and the hazards you can’t see coming. Unless your company is already a major corporation with an established presence —and on-the-ground expertise—in other states, it is a virtual impossibility that you’ll be fully aware of all of the potentially problematic differences between your new place of business and your home base. That’s a problem.

Taxation and regulation are the first and most obvious pitfalls. Tax and regulatory codes naturally differ from one state to the next; each state has its own centuries-long index of whys and wherefores that have come to constitute its current-day regulatory and taxation environment. In virtually all cases, these are the cumulative end product of decades of capricious governance: Local and state officials, acting in self-interest or in the interest of special interests, enact a welter of tax and regulatory burdens that remain on the books for years and which usually multiply their reach and impact exponentially over time, creating an impenetrable tangle for businesses to wade through. Income tax, sales tax, property tax, workers’ comp, health and safety, environmental issues – the list of distinct areas potentially affecting a would-be new business are endless.

These are sizeable problems in and of themselves – but they are not the only consideration. Laws and regulations don’t exist in a vacuum; rather, they function within the unique local political, legal and social framework. In practical terms, Ohio doesn’t function identically to Michigan, nor Atlanta to Orlando. Each state, county and municipality is subject to its own localized customs, power structures, and idiosyncrasies. Even when a company operates fully within the letter of the law, capricious local officials and arcane provincial practices can draw new businesses into the regulatory quicksand.

Knowing both what and who you need to know to sidestep these pitfalls is essential – and that’s where Trion has proven its worth to many of our growing clients. As an established national PEO with a solid on-the-ground presence and a wealth of localized institutional expertise, we’re able to navigate the payroll tax and regulatory minefields wherever there’s business to be done – and we shield our clients from costly, time-consuming entanglements with local compliance authorities. Clients usually come to us to handle the routine daily hassles that they know and expect, but we often deliver much of our value in dealing with the ones they don’t expect. As many of them will tell you, that can make a big difference – often between success and failure where out-of-state expansions are concerned.

New Overtime Rules Spell Big Challenges For Business

Statistics show that the median salary increase in the US is a rather moderate 3.1% thus far in 2016, but that doesn’t mean that the cost of labor isn’t about to go up for many businesses—way up.

New regulations issued by the U.S. Department of Labor stand to make potentially millions of previously-exempt workers eligible for overtime pay. Personnel previously classed as exempt executive, administrative, and professional (EAP) employees now may qualify for overtime if the terms of their employment don’t meet increasingly stringent requirements.

Perhaps most notably, the salary level at which EAP employees may become exempt from overtime has effectively doubled, jumping from $455 to $913 per week (or from $23,660 to $47,476 annually). In practice, that means that, for example, a midlevel restaurant manager earning a salary in the mid-thirties and working a few hours above the statutory 40 per week just might be about to become quite a bit more costly.

The Department of Labor (DOL) has issued its Final Rule for new overtime exemptions, focusing on the “white collar” exemptions (executive, administrative, professional, and certain computer employees. These new rules will:

Raise the minimum annual salary level required for “white collar” exemptions to $47,476 ($913 per week) from the current $23,660 ($455 per week). The salary level test does not apply to doctors, lawyers or teachers, and certain computer employees can be exempt if paid at least $27.63 per hour and meet applicable duties tests.
Allow employers to use non discretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standards salary level (up to $91 per week, or $4,732 total annually), provided that these payments are made on a quarterly or more frequent basis. The remaining 90% of the required new salary level is $822 per week, or $42,744 annually. Together, these total $47, 476.
Raise the minimum salary for those covered under the “highly compensated employee” exemption from $100,000 to $134,000 in total compensation annually.
Impose an escalator provision automatically “updating” the above salary levels every three years beginning on January 1, 2020 by tying the levels to certain economic measures.
Impose no changes to the “duties tests.”

Misclassification of salaried-exempt employees is among the fastest growing civil actions in both federal and state courts. With the final rule, the incentive for employees (and/or the DOL) to claim misclassification has increased. We advise clients to begin assessing whether they wish to pay the higher salaries and/or take other measures. We also advise them to review the duties of their employees that are or may be classified as salaried-exempt to ensure that they meet the various duties tests for the white collar exemptions.

The rules’ applicability is extensive: The DOL estimates that 4.2 million currently exempt workers will become eligible for overtime. In addition, overtime protections will be extended for an additional 5.7 million white collar and 3.2 million blue collar workers.

The new regulations’ effect will be profound on many small- to medium-sized businesses, particularly in areas where prevailing compensation levels fall at or below national averages. Employers will have to wrestle with whether to cut hours, reassign work, increase wages, or simply pay overtime to eligible employees.

Despite the stated intention to simplify both the overtime eligibility rules, the newly-issued rules remain highly complex. The new DOL regulations take effect on December 1, 2016. In the meantime, Trion will assist its clients in adapting to a greatly changed overtime landscape – and implementing strategies to help ensure compliance within it.

The Challenge of Seasonal Employees

As the seasons change, many people start to think about vacations and maybe taking things a little easier. For anyone involved in hiring and managing seasonal employees, though, that’s the time that things heat up in more ways than one.

Agricultural concerns, hotels, restaurants, resorts, theme parks, golf courses and a host of other industries depend on a high volume of seasonal labor, most of which must be recruited, on-boarded, trained and deployed anew each year, only to be offloaded a few months later. For managers, recruiters, and in-house HR personnel, it is usually a tiresome, time-consuming and costly annual ritual that becomes a little bit more difficult each year: Changes in local, state, and federal regulations and tax law, in particular, must be reviewed and accommodated. In many cases, the costs of recruitment continually rise, even as the available pool of credible, qualified recruits diminishes. That puts dents in productivity, profitability, and efficiency.

Each new, unproven seasonal employee also poses some significant risks: at the time of hire, ethics and performance are unknowns. To mitigate these effects, companies can be tempted to limit – or eliminate – seasonal staff, or to keep on employees on the payroll after their utility has passed. While a measure of risk may be averted, it’s a virtual certainty that business performance is compromised.

For PEOs, the challenge of seasonal employees is an opportunity to shine. It makes perfect sense: The HR tasks that most companies struggle with are a matter of daily routine to a well-run, high-functioning PEO, and there is little difficulty in administering them for seasonal personnel. As in other industries, HR processes can be managed much more expeditiously and economically by a good PEO.

More and more companies are becoming aware of the PEO’s utility in minimizing the pain of seasonal employment. In particular, the hospitality and resort industries are proving to be especially fertile ground for PEO growth. At Trion, we’ve witnessed the evolution of businesses’ thinking on this issue firsthand: Companies are increasingly realizing that the effort, costs, and risks associated with seasonal hiring can be mitigated with a scalable, pay as you go solution by choosing the right PEO partner to handle it for them.

Not all PEOs have chosen to focus on serving seasonal enterprises – and some haven’t figured out how to do so effectively. For our part, we’ve made seasonal employers a key segment within the industries we serve, and have developed specialized processes suited to their unique needs, and we work collaboratively with clients to develop customized programs aligned with their specific business’s objectives. It’s a formula that has added up to success for many of the companies we work with. We’d be happy to explore your specific seasonal employment needs with you.

It’s Not Just Tax Season – It’s Deadline Season

Tax season isn’t really anybody’s favorite time of year – not even the legions of accountants and preparers who earn their living by working inhuman hours for a month or more in the run up to April 18.

If anyone has a reason to complain about the Ides of April, though, it is small business owners. April 18 is the deadline for filing personal income taxes, which of course is a hassle enough on its own – but it also falls on, before, and after a succession of other tax and reporting deadlines. Taken together, they are enough to cause plenty of headaches, consume a lot of time and energy, and increase the likelihood of mistakes on the part of business owners.

Small businesses’ employees probably aren’t aware of it, but March 15 is actually the tax filing deadline for corporations and S corporations, a full month before personal taxes are due (sole proprietorships and single-member LLCs still file on April 18). The March 15 deadline falls just before two headaches facing almost every small business owner four times per year: Quarterly SUTA filings and payment and FUTA payments.

SUTA (State Unemployment Tax Act) and FUTA (Federal Unemployment Tax Act) reporting requirements and payments are no joke. By the end of April, businesses need to submit in-depth documentation along with an amount equivalent to a substantial percentage of every employee’s earnings to date. Federal rates come out to 0.60% to over 2% on each employee’s first $7,000 in earnings. SUTA rates are variable, based on employer experience from under 1% to over 12% depending on your location.

For most businesses, unemployment taxes are a lot to pay out in a single quarterly payment. As part of our services to our clients, Trion enables a more balance sheet-friendly “pay as you go” process, allowing payments to be evenly prorated throughout the year. Along with handling the onerous reporting requirements, this takes a significant strain off of companies who’ve got still more deadlines to worry about.

You’d be forgiven for thinking that this was enough to worry about – but these are tax issues we are talking about, so of course there’s much more. Somewhat helpfully, the IRS has published a tax calendar for employers. While not especially easy to understand or user-friendly, it does provide a reliable resource for many of the deadlines most smaller companies are likely to face throughout the course of a year.

Trion’s clients frequently find the range of deadlines, obligations, and due dates to be challenging under the best of circumstances – and in a changing regulatory environment, that effect is intensified. Successfully managing to meet IRS and state requirements demands constant vigilance, lots of planning – and a good deal of knowledge and experience doesn’t hurt, either. We do our best to put our knowledge to work for our clients in any way we can; we can’t take on all their tax issues, but handling SUTA, FUTA, local municipal income taxes, and other complex payroll task tasks, we can make the deadline relay race a lot easier.

OUTSOURCING’S EXPENSIVE ALTERNATIVES: Why The PEO Model Is Gaining Ground

Throughout the last half of the 20^th century and the first part of this one, we had the opportunity to learn the same lesson over and over: For business, “business as usual” wasn’t working – at least not as well as it needed to or should. Traditional models of ownership, management, investment, employment, marketing and distribution all underwent repeated phases of major disruption as technology, demographics, wealth distribution and market demand experienced major change. With each upheaval, the choice was stark: Adapt or perish.

Sure, you could try to stick with the way you’d always done things – but chances were that there would be a new, aggressive upstart ready and waiting to eat your lunch. The rise of the Japanese auto industry, Chinese consumer goods, and Silicon Valley tech startups were all made possible by seismic changes in old-guard industries. Smarter companies adapted, evolved, and survived; those who didn’t disappeared. RIP, Packard. RIP, Howard Johnson’s. RIP Union Carbide.

One upheaval that hasn’t been broadly addressed: The slow, steady decline of the old employment model. American business still maintains hundreds of thousands of atomized individual HR departments, doing what HR departments have always done: reviewing resumes, managing paperwork, negotiating contracts, and administering benefits. While practices have remained largely the same, though, costs have not: Estimates have shown that the average company now spends $5,000 per year per employee on HR administration expense alone. In an era of narrow margins and savage competition, such nonproductive capital expenses seem not only unjustifiable, but unsustainable.

Many companies have tried to blunt the impact of this inefficiency and expense by turning to temp agencies. Companies that once were called on to provide only short-term or ad hoc personnel now are called on to handle a significant portion, if not all, of many businesses’ staffing needs. While this can be a valuable short-term solution, it probably isn’t the best way to address all long-term needs..

Over time, cost and consistency can emerge as issues. Temp agencies depend upon the availability of a steady supply of skilled personnel willing to work in a temporary capacity. In an economic downturn, that doesn’t pose a tremendous challenge as the labor supply rises; in a tightening labor market, though, it becomes a bigger problem as temp workers find long term or permanent employment, or create their own businesses or individual consultancies. The continuing need for new recruits, and to handle the associated paperwork, adds to infrastructure costs which are passed on to clients.

Traditional employment models are becoming less suited to many of today’s efficiency-driven, stability-seeking businesses. That’s why Professional Employer Organizations (or PEO) like Trion Solutions have prospered. The ability to provide a high-quality, stable, and affordable labor pool while containing costs has become a pivotal competitive advantage—and one that more and more forward looking businesses are finding impossible to ignore. There will always be temp agencies, of course, and there will always be companies that insist upon maintaining their own extensive HR infrastructure—but as labor and administration costs rise and as a technology-empowered workforce becomes ever more mobile, these will become more challenging to sustain.

Doing Workers’ Comp Insurance Right

Recently, Trion Solutions renewed our agreements with 2 major insurance companies to continue obtaining Workers’ Compensation insurance through their firms. In both cases, it marks the third successive annual renewal.

That may not sound like a big deal – but it is. Here’s why.

If you’ve been in business for any length of time, you already know about the risk and expense that Workers’ Compensation insurance and claims can pose to your company. Unless you have incredibly deep pockets, claims mean trouble – usually in the form of skyrocketing premiums, and sometimes the inability to obtain affordable coverage, or even any coverage at all.

Considering that the cost of almost all types of insurance is steadily and dramatically rising, it is especially striking that Workers’ Comp insurance remains a dominant concern among business owners and management. Health care, liability, property and other insurance rates have gone through the roof for many businesses, but none of these pose the direct existential threat that workers’ comp often entails. When it comes to worker’s comp, companies need predictability, stability, and a reasonable cost structure—not to mention an appropriate level of coverage. More and more often, they’re finding that these aren’t easy to come by, even when they’re working with a PEO.

Unfortunately, most PEOs haven’t been successful in truly stabilizing the insurance environment for their clients. As with other companies, the volatility of the workers’ comp landscape finds many PEOs scrambling every year to secure affordable, reliable coverage. Even when they find it, switching between providers causes confusion and disruption, contributing nothing positive to their clients’ comfort levels.

Trion Solutions is proud to be an exception to this rule. Thanks in large measure to the best practices processes we’ve put into place, our strong track record in effective Workers’ Compensation management, and the leverage afforded to us by our size, we have been able to forge enduring, sustainable relationships with our insurance providers. These days, it’s pretty much unheard of for a company of our type to maintain positive successive multi-year relationships with insurers, but once again we’ve managed to pull it off.

So far as our clients are concerned, that means a lot. It means that they will continue to enjoy the same high level of protection, the same manageable costs, and the same processes that they’ve gotten used to. It means that for another year, Workers’ Compensation insurance is something they don’t have to think about or worry about, and they can focus on other, more productive aspects of their businesses. And they can be confident in knowing that any concerns are being capably, effectively, professionally handled by people who know what they’re doing and who can be counted on to act in their interest.

We’re glad to be working once again with some of the most reputable, solid companies in the Workers’ Comp insurance industry, and we are pleased to be able to say that at Trion, we’ve built the strong, enduring relationships it takes to do it right. We’re betting that our clients are pretty happy about that too.

The PEO Industry Footprint is Growing in Florida and Michigan

The PEO industry is growing – there is certainly no doubt about that. Consider that a few short years ago, a large percentage of even the most informed small to medium sized business owners had no idea what a Professional Employer Organization (PEO) was, and certainly had not considered working with one. That’s changed, in a big way: Changes in the marketplace, uncertainty surrounding health care, increases in Workers’ Compensation costs and other factors have given PEOs greater visibility, and a more central role in safeguarding the success of growing businesses.

A recent study conducted by McBassi & Company estimates the PEO industry’s gross annual revenues at between $136 and $156 billion. The study further cites between 156,000 and 180,000 PEO client companies, and somewhere between 2.7 and 3.4 million employees receiving services from PEOs. Obviously, none of these are small numbers, and virtually every current and emergent trend would indicate that they are likely to continue to rapidly grow in the near-term future.

While the industry’s overall national growth is impressive in and of itself, the study includes another remarkable, little-noticed fact: Two of the states leading the nation in the numbers of PEOs who call them home aren’t necessarily the country’s biggest (although they could perhaps be considered the most forward-looking). Both Florida and Michigan boast impressive numbers of resident PEOs, with Florida leading the pack at 107 – beating out much more populous states, including New York and California. Meanwhile, Michigan’s PEO census nearly equals New York’s at the low estimate (47 vs. 49) and handily beats it at the high-end estimate (59). Michigan is similarly neck-in-neck with population- and business-dense California.

To us, that means several things:

Businesses in states with economies hit hardest by the 2008 economic downturn, as both Michigan and Florida were, have found that PEOs offer both competitive and survivability advantages that they can’t afford to ignore.
States forced by adverse market conditions to adopt new approaches to business are leading the way in demonstrating the efficiencies and economies of scale that PEOs make possible.
States where PEOs prosper, and where by extension the increased operational efficiencies PEOs have to offer are more easily leveraged by small to mid-sized businesses, will play a strong hand in reshaping the HR landscape in the coming years as the PEO/HR outsourcing model is further proven in practice and gains in prominence.

We have to say that these are developments we’ve seen coming, and have had a hand in helping to make happen. Trion maintains a strong presence in both Michigan and Florida – the consequence of our early recognition of these states’ potential as powerful centers of activity with high growth prospects. We also were quick to recognize that these states’ unique business climates and unique business needs lend themselves particularly well to serving as environments where a truly professional, efficient PEO could effectively serve its clients, and prosper in doing so.

The PEO business is growing ever stronger in the mitten and sunshine states, and Trion is pleased to be helping to lead the charge.

Taking Care of Business for 2016 and Beyond

We are now nearly two months into 2016. For many business owners, the close of 2015 was an opportunity to take account of where their business stood – what it had accomplished in the past year, and where it’s likely to go in this one.

From our perspective, our year-end analysis found the overall US business climate to be an interesting one—a mixture of good and bad news, with both bright and daunting prospects on the horizon. By nature, Trion is a company that thrives in times of change and challenge, but that certainly doesn’t hold true for the majority of businesses. Stability, order, and a logical progression of events create the best overall business climate, but 2015’s close found all three in somewhat shorter supply than many companies might like.

Here’s where it seems we stand. On the plus side, the economy is still enjoying general growth overall, though it is faltering in some sectors and growth never really started in others. The unemployment rate is edging back towards something resembling normal levels. Interest rates remain at historically low levels for the moment. There are few signs of significant inflation, and we’re just starting to see some slight upward pressure on wages.

That’s the good news. Now, the other side of the coin.

Nobody has to tell you that globally we are experiencing tremendous uncertainty and upheaval—the broadcast news networks will certainly never let you forget it. Headlines are filled with terrorist attacks, plunging oil prices, downed airliners, military skirmishes throughout the Middle East and dotted throughout Asia. We’re facing the distinct possibility that US troops may be called to take an active role in Syria; the US is simultaneously in significant diplomatic and economic disputes with Russia and China; and there’s no clear favorite in sight for next year’s presidential elections, leaving considerable uncertainty as to future tax and economic policies. From a business owner’s standpoint, any and all of these circumstances have the potential to be disruptive.

As a business owner, you can’t control national or global events – but you have at least some control over your response to them. That control is amplified when plan ahead for them, and are ready to make changes on the fly as consumer sentiment changes, economic conditions shift, prices rise, or supply chains contract. Just as in the natural world, adaptation is the key to survival, and the advantage goes to companies ready to right-think, right-size, and right-strategize for the times they’re in and the times to come.

As human resource services specialists, that’s what Trion is all about. A big part of our business is helping our clients adapt constructively to change and meet emerging business challenges head on. We work to give companies the flexibility to adapt, both responsively and proactively as needed, making sure they have the right number of the right people in the right positions to get the job done—and freeing management up to focus on handling today’s urgent business needs, strategizing to meet tomorrow’s demands, and laying the groundwork for stability and success, no matter what the coming years may bring.

Trion Solutions is a NAPEO Member

To Trion Solutions’ clients, it’s no secret that our company is constantly striving to improve itself. We have the same mania for optimizing efficiency, cost savings and company performance within our walls as we do for our client companies. What can we say? Trying to do things a little bit better—better than the other guy, better than we did yesterday—is in our DNA: A big part of Trion Solutions’ identity and operating methodology are grounded in the concept of continuous improvement.

That’s for a pretty good reason: When it comes down to it, business improvement is the main “product” we have to sell. Naturally, it makes sense to start with our own company.

In our experience, it’s paid off well:

Trion Solutions has grown consistently, becoming one of the nation’s most stable, successful, and highly reputed human resource services companies.

As such, it seems only appropriate that we formalize our quality and service commitment in a clear, unequivocal way. While we are accustomed to acting independently, and have had great success through doing so, we make it a point to pursue memberships and certifications from the organizations that are doing the most to advance the integrity of our industry and the quality of our services.

The National Association of Professional Employer Organizations (or NAPEO) is the largest national organization devoted to PEOs and human resources services companies such as Trion. In recent years, NAPEO has emerged as “the voice of the PEO industry,” advancing public knowledge about PEOs, supporting public policies that make sense for PEO companies and workers, helping to establish industry best practices, and supporting the integrity of the industry.

Nearly 1,000 PEOs currently operate across the United States; as is the case in most industries, quality, stability, and integrity can vary greatly from one company to the next. NAPEO’s Code of Ethics helps to ensure that reputable PEOs adhere to common baseline ethical standards with regard to the services they provide and the treatment of their employees. NAPEO supports ethics, good corporate conduct, best practices, and expertise amongst participants. This helps assure prospective PEO clients that the company they’re considering working with will truly work on their behalf, and will conduct its activities honorably and professionally.

NAPEO’s standards align closely with those of Trion Solutions. We have built our business on a foundation of professionalism, integrity, and expertise, and we applaud all efforts to improve our industry and the results we are able to achieve for our clients. That’s why we are glad – and proud – to be a NAPEO member.

Within our own sphere of influence—in our own company, and in the companies of our clients—we are working hard every day to achieve many of the same goals NAPEO is striving for: A better PEO industry that delivers better results for PEO clients.

NAPEO serves a vital role within the human resources ecosystem and within the PEO industry. As an active and engaged NAPEO member organization, Trion is doing its part to advance NAPEO’s quality agenda, creating a winning outcome for all concerned: Integrity, sound business practices, and industry stability are good for our industry and our clients—and ultimately, they’re good for the economy and for the country as well.

The Downsides of Outsourcing Alternatives

Trion Solutions specializes in HR outsourcing, but this is by no means the only option for supplementing your HR department and tackling HR needs. Many people ask us why they should consider HR outsourcing when traditional temp agencies have supported companies for years. While traditional temp agencies do provide similar services to HR outsourcing, there are many downsides that people do not consider.

In this blog post, we’re going to address some of the weak points of temp agencies that HR outsourcing avoids.

Higher costs. Temp agencies are fairly expensive. Temp employees will need to be paid roughly 15 or 20% more than ordinary employees. Additionally, if you seek to hire a temp employee, you will usually need to pay extra to offset the cost of them breaking a contract with the temp agency.

Risking morale. Temp staffing can challenge office morale in a number of ways. First, temporary employees may harbor resentment when contemplating how they are doing the same job as other employees but without any of the same benefits. Additionally, existing employees often see temps for what they are– temporary employees. This makes it difficult to engage in team-building, as long-term employees may not be motivated to care much about temporary employees who are quickly coming and going. Lastly, existing employees may see temps to be a threat to their job security.

Problem employees. Many companies also report difficulties with temps. One of the most common complaints is that temps are usually not as motivated as long-term employees. This is human nature– why would someone be as motivated at a job that they know is only short-term? It’s tougher to be invested in a company’s success when you know you will only be there for a short period of time. Many studies have shown that temp employees are generally less reliable. Additionally, companies rely upon the temp agency to properly screen temp employees. This can make a lot of companies uncomfortable, as they are unable to screen the employees themselves to determine if they are a good fit.

If you’d like to learn more about the pros and cons of temps versus HR outsourcing, then call or email us today to talk to our experts. We can walk you through the ins and outs of any HR difficulties and help you find the perfect solution for your business.