How would you describe the PEO value proposition? While it’s intangible, you may imagine it as something that flows. It’s constantly evolving as PEOs change to meet small business needs, keep up with developments in HR, benefits, and technology, and adapt to the changing workforce. You may envision the PEO value proposition as an ethereal thing, composed of many different colors that blend, change, and flow in different directions.
You may envision it this way because of the many different ways PEOs structure and promote their offerings, and the many different variations and combinations of the offerings themselves. However, it is possible to identify themes running through:
Pure-play PEOs, PEOs also offering some mix of non-co-employment such as ASO, specialized and niche PEOs, and PEOs appealing to a broad business base;
Disruptors to the PEO value proposition, such as the Affordable Care Act (ACA) and online-only HR technology entrants such as Zenefits; and
Indications of where the PEO value proposition is going, for example, PEOs taking advantage of the opportunities created by the ACA, adapting to compete with the latest market entrants determined to take market share, adding compliance assistance as a major focus, preparing for technology to become a bigger part of the value proposition, and recognizing the opportunities the Small Business Efficiency Act (SBEA) presents.
It’s always interesting to see what PEOs do. And the value proposition is a beautiful thing.
The Small Business Efficiency Act (SBEA) was supposed to go into effect on January 1, 2016, but now you have another year to think about it. It appears that the most recent intelligence is that the IRS will start accepting PEO certification applications on or about July 1, 2016. There have been many articles and discussions about everything this means for the PEO industry, but my goal here is to drill down on one specific component for qualification: the surety bond. What information do you have to provide? Can you qualify? What will it cost? Most PEOs are not strangers to surety bonds. As many as 22 states already require surety bonds for PEOs to be licensed. PEOs have to provide a separate bond for each state where they do business. The federal SBEA bond will be in addition to any state bonds that are held. The SBEA bond amount will range from a minimum of $50,000 to a maximum of $1 million and is calculated as a percentage of your federal withholding taxes.
Have you ever thought about whether your PEO-sponsored health plan might violate the Affordable Care Act (ACA) because it’s discriminatory? When we ask that question, most PEOs respond, “No, our plan treats highly compensated employees in the same manner as everybody else. Anyway, I thought I heard that the ACA’s nondiscrimination rules were on hold.” Well, that answer is only partially right.
I recently participated in a workshop for business owners on the subject of scaling your business. My part of the presentation dealt with the various ways the PEO outsourcing arrangement might contribute to this. It appeared to be a pretty straightforward presentation, not unlike others I had presented in the past. After all, helping our clients grow has always been an inherent benefit of the PEO arrangement.
You have probably heard this before, but the average PEO customer has 22.5 employees, according to NAPEO’s 2015 Financial Ratio and Operating Statistics Survey (bit.ly/1OCsYjJ). It is safe to say then that small businesses are in the PEO sweet spot. PEOs should take note that some of the factors that make small businesses attractive customers also may put them at higher risk for data breaches. This dilemma creates a challenge, one that can be an opportunity for PEOs to provide greater value to their customers.
Nothing is more painful to an entrepreneur than sitting through a strategic planning session. Defining the goals of an organization is challenging enough, but bridging the space between goals and action items is a Herculean task. The NAPEO Board of Directors defined its strategic plan most recently in 2015 and it needs to review it to see if it is accomplishing its goals and continuing to drive the association forward.
In the early part of my career here in Washington, I had the privilege of working as a policy advisor for Bill Brock when he was U.S. Secretary of Labor. Brock became a mentor and a friend over the years, and we worked together for a decade or so. He represented Tennessee as a Member of Congress and a Senator, was chair of the Republican National Committee and U.S. Trade Representative, and finally, Secretary of Labor. Throughout his career, he has been known as a very bright and principled guy, and a guy who reached across the aisle to get things done.
We hope by now you’ve had an opportunity to visit NAPEO’s brand-new website, set up your personal NAPEO website login, and poke around a bit. We also hope you like what you see so far. There is certainly no question that things have changed at www.napeo.org!
As 2016 progresses, NAPEO continues to track the activities of the National Conference of Insurance Legislators (NCOIL) and the changes they are considering making to their Model PEO Act. A little background is perhaps in order. NCOIL has been around since 1978. Its purpose is to advance the knowledge and effectiveness of legislators and legislatures when dealing with matters pertaining to insurance law. It holds meetings three times per year where the legislators in attendance discuss various issues affecting the insurance marketplace.
Q. When do the Department of Labor’s proposed changes to the current overtime regulations take effect? A. Many employers expected the proposed regulations to drop by the end of 2015 or early 2016. However, according to the Department of Labor’s (DOL’s) fall regulatory agenda, mid-July 2016 appears to be the earliest that the regulations will be released. The DOL is in the final rule-making stage, and it is undoubtedly sifting through the thousands of comments it received last summer during the comment period. To prepare for the changes, employers should...
As implementation of the Small Business Efficiency Act (SBEA) continues, the IRS is working on putting into place the internal operations and rules that will allow PEOs to become certified under the law. The SBEA set July 1, 2015, as the date the IRS was supposed to have completed the PEO certification program, allowing it to accept applications and making the benefits of the SBEA available to certified PEOs on January 1, 2016. In August of 2015, the IRS announced it was delaying the original completion date until July 1, 2016. Without a PEO certification program, it is not clear whether the benefits of the SBEA will or will not be available to PEOs and their clients, even though the law is in effect.
Philanthropy (n): “Goodwill to fellow members of the human race; especially active effort to promote human welfare” (www.merriam-webster.com). Corporate philanthropy is the act of a company promoting the welfare of others generally via charitable donations of funds or time. Are philanthropy and charity interchangeable? For the purpose of this article, I will say yes, though there are some who say charity relieves the pains of social problems while philanthropy attempts to solve problems at their root causes.
According to the NFIB’s latest Small Business Economic Trends report (www.nfib.com/surveys/small-business-economic-trends), optimism among small business owners was slightly higher in December, though still below average. The Small Business Optimism index rose 0.4 points in December to 95.2, under the 42-year average of 98. NFIB Chief Economist William Dunkelberg said of the current economic situation, “Below average growth for small businesses has not been offset by strong growth in large firms.” Additionally, “with the manufacturing sector in decline, large firms aren’t likely to add as much to growth in 2016.” Dunkelberg projected that in 2016, auto sales will likely decline, and while service industry growth is strong, “health insurance costs will likely also rise, an unfortunate outcome for small business owners.”
It’s pretty standard for MBA candidates to do case studies, work in teams, and manage projects as part of their programs. Sometimes, if you’re lucky, you get to gain practical business experience at the same time. That’s how it happened for Rick Bartholomew, chief executive officer of A Plus Benefits, Inc., in Lindon, Utah. His father, Larry Bartholomew, had co-founded A Plus in 1990, with his business partner, BJ Wright. In the fall of 1994, Rick was approaching graduation from Brigham Young University with plans to pursue an MBA. It was about then he heard that A Plus had an opening to fill an administrative position. Learning the position required a commitment of at least two years, he decided to take the job and pursue his MBA through an evening program at the University of Utah.
As we look ahead to 2016 and consider the policies we need to grow the economy and put Americans back to work, we must not buy in to the conventional wisdom that it’s impossible to get anything done in an election year. Isn’t that what they said about 2015? Well, a funny thing happened on the way to 2016—working with Congress, the business community got a lot done for the country.