What’s a PEO – and Who Needs to Know?

In the world of business, some changes get all the attention. A new law, a new technology, a fundamental change in the economy or in the marketplace will quickly command the attention of boardrooms and the business press alike – and understandably so. The ripple effects of such changes usually create significant effects that are still felt months or years later. Even more significant changes, though, often happen almost completely “under the radar,” even though they may upend whole industries or the entire business landscape.

One such example is the ascendance of the Professional Employer Organization or PEO.

In recent years, PEOs have staked out a claim to a growing portion of the HR field, supplementing or eclipsing in-house Human Resources departments in many small to mid-sized companies. Nonetheless, they remain dimly understood by many of the business owners best positioned to benefit from their services, even as they are fundamentally changing the way American business manages interactions between employers and employees.

In essence, a PEO exists as a separate, stand-alone organization focused exclusively on managing its’ clients’ human resource-related functions, including benefits administration, regulatory compliance, workers’ compensation, payroll, taxes and similar practice areas. A PEO will assume the role of “employer of record” for a company’s employees, taking on the responsibility of administering most or all of the administrative tasks – as well as a fair measure of the risk – associated with maintaining a workforce.

In doing so, client businesses gain a number of significant operational and competitive advantages:

The growing popularity of the PEO model is driven to a great degree by the increasing challenges and stressors facing small to medium-sized businesses. An increasingly technology-driven, global marketplace heightens competition and shrinks margins, even as increased regulatory and legal risks impose additional complexity and costs upon HR departments and practitioners. A PEO can deflect risk, contain costs, ensure consistency and predictability in practices, and effectively address complex taxation, insurance, and regulatory issues becomes increasingly valuable to companies operating within this challenging environment.

Few expect the business climate to become less complex or challenging in the years to come. As the burdens of regulation, competition, and costs continue to exert pressure on businesses, the ability of PEOs to buffer their clients from their effects will likely come to be perceived as a distinct competitive advantage – and not only knowing what a PEO is, but having one in hand, may make a critical difference in business success.

When Discussing Employee Performance, Stick To The Facts

Virtually all employers know that workplace communications can be a minefield. It’s always vital to maintain clear channels of communication and shared understanding between personnel at all levels of an organization. At best, failure to do so stands to impact efficiency and morale; at worst, it can result in costly legal ramifications, damage to a company’s brand, and disruption of operations.

This is especially true when it comes to communications surrounding employee performance and disciplinary measures. Federal and State laws both provide multiple levels of protection for employees claiming unfair discipline or dismissal, particularly if on grounds of discrimination. In the event that a dispute results in litigation, it can safely be assumed that the employer will face a significant burden of proof in demonstrating that it has treated the complainant fairly and equitably – and that’s the point at which earlier communications can potentially torpedo an effective defense.

A recent discrimination lawsuit filed by an employee discharged for performance reasons provides an excellent case in point. As reported in HR Morning, three vaguely phrased words uttered by the company’s CEO in the course of a meeting with the disgruntled employee were sufficient to allow the suit to advance, necessitating a costly and prolonged legal defense. In addition to documented performance problems and issues surrounding execution of job duties, the CEO cited “too much drama” surrounding the employee as part of the grounds for dismissal.

So what’s the problem? Subjectivity. “Too much drama” may seem like a statement of fact in the context of a discussion between people equally familiar with the circumstances being described. To a plaintiff’s lawyer, though, it is clearly an opinion – and would likely appear the same to a regulatory board member or a judge. In all likelihood, the CEO simply used the phrase as shorthand to describe a number of related events that both the company and the employee were well aware of; to an outside observer, though, the phrase smacks of the sort of vague, subjective complaint likely to be arbitrarily or unequally applied to employees targeted for discipline or dismissal – and thus an invitation to a potential lawsuit.

In the heat of a conflict situation, it is only human for managers and employees alike to fall prey to sloppy phrasings such as this. “Only human” impulses, though, are what companies need to guard against. The solution is to be factual, specific, and precise in all communications related to an employee’s performance, or lack thereof. Had this CEO chosen to enumerate the instances of the “drama” he was referring to – “Employee X was involved in conflicts with other employees Y times within a Z-month period” – it is doubtful that the discharged employee would have had grounds to proceed with a suit.

A solid defense against a discrimination, harassment or wrongful dismissal challenge hinges upon an employer’s ability to demonstrate that the decision to discipline or terminate an employee was based on objective, fact-based decisions. However fair the evaluation or disciplinary process may have been, imprecise or subjective language only serves to undercut an employer’s position – and open up a world of unnecessary, avoidable pain for the company.

Observe National Ladder Safety Month With These Tips

March is National Ladder Safety Month, an opportunity to review your policies, training, and equipment.

Whether you’re a small service business with a couple of step stools around for lightbulb changes or a large contractor that uses complex climbing equipment, you’ll want to read on for the latest on ladders.

According to OSHA, falls from portable ladders (step-, straight, combination, and extension) are one of the leading causes of occupational fatalities and injuries. Here’s a basic overview of what’s required for all ladders.

 

Additional OSHA requirements:

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:

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 20th 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:

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.