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It’s the Most Wonderful Time of the Year….to sign up for a PEO: The best time to make the switch

By Shraga Jacobowitz

The air is getting crisper, holiday music is playing nonstop and your children have 50 items written on their gift lists already….which for many can only mean one thing… it’s time to go shopping.  Shopping for a PEO that is!

I bet you didn’t see that coming….but yep, with everything else happening at the end of the year, it seems that the PEO industry is also geared towards this “magical time of the year.”

For one, many things handled by the PEO, i.e., payroll, open enrollment, health insurance renewal, and W2s fall out around this time as well, which is why 80% of PEO business is done in December. No, that’s not saying that PEOs are sitting around the rest of the year; there is still plenty for them to do all year round, but last quarter is when push really comes to shove.

For another, with the hectic end-of-the-year business, with many employees taking vacations and companies trying to meet end-of-the-year goals, business owners are even more overwhelmed with their HR tasks and are looking for a way to simplify their lives. Plus with everything going on, errors are bound to happen, and therefore having a professional take over sounds like a great idea. So obviously, it just seems natural that this time would be the best time to switch to a PEO.

But before you pick up that phone, there’s something you should know. If you’re only looking into PEOs now, most likely you won’t be taking advantage of them for this fiscal year.  Unfortunately, while Rome may have been built in a day, the process of partnering with a PEO can take anywhere from 30-90 days. And even if a PEO tells you that they can get the job done in a shorter period of time,

  1. take it with a very large heaping spoonful of salt, because in order for the process to be done correctly, it really does need to take that long, and
  2. we wouldn’t recommend rushing the process, as it can result in partnering with the wrong PEO and ending up with a contract and services that are all wrong for you. Plus with the over 700 PEOs in America, you really want to take the time to research which PEO best fits you.
  3. Similarly, a rushed onboarding equals problem, which in turn equals unhappy employees. And you know what they say, Happy Employees = Happy Work Life (hey, you try rhyming employees). But all kidding aside, rushing the onboarding process will prevent a seamless transition and most likely will result in mistakes costing you time, money and frustrations in the long run.

But you ask, isn’t it preferable to switch at the beginning of a fiscal year?

And while the answer to that is yes, to ensure that you are not being taxed twice or have other financial implications, a January 1st transition is most recommended, it doesn’t mean if you’ve missed the boat for this year (and unfortunately, as mentioned above, you have), then you have to sit around until next year waiting to make the switch.

This is where a PEO consultant or PEO Broker (such as ARC Consultants, of course) comes in handy!  When making a mid-year switch to a PEO, your consultant/broker will work with the PEOs to ensure that there is no financial impact to a company joining the PEO at any time of the year. Furthermore, if you decide that a CPEO  is the right fit for you, the IRS allows for mid-year switches without financial or tax repercussions.

So if you’re looking to switch to a PEO, really any time of the year is the ideal time to make the move.  PEOs are here to make business owners’ life less complicated, why would you wait for a specific time of the year to do so?  If you’re ready to make the switch, just do it! And do it now….because like I said, unfortunately, it’s ain’t happening overnight.

Okay, you can pick up that phone again now! Give ARC Consultants a call and let’s get started on partnering you with the right PEO for you.

6 Reasons Why you Need a PEO Consultant or PEO Broker NOW!

 

By Shraga Jacobowitz

There are many reasons why you should use a PEO (not sure what they are? You can check out any one of the many blogs I’ve written about it such as this one). Every business owner, including hopefully you, has their own unique reason for partnering with a PEO. Perhaps you are just fed up with your administrative tasks eating up huge amounts of your time, overpaying for your company’s health coverage, or losing out on hiring top talent to companies that can offer better benefit packages.  Regardless of the reason is (although I do hope my newsletters had at least a little bit of bearing on the decision), you are now ready to make that leap and join the thousands of companies who partner with PEOs.

You ready? Let’s go, pull out the yellow pages–who am I kidding– turn to the all trusty Google and type in PEO providers. In 0.49 seconds 1.56 Million results come up (trust me, I tried it). Now what?

How do you know which PEO provider is the right fit for your business? Will get you the best service? Best prices? Understand you? With over 700 PEO companies servicing businesses throughout the country, finding the one that meets your business’s needs can be a huge headache.

Enter the PEO Consultant (AKA PEO Broker). And while the word consultant conjures to mind the famous adage “Those who can’t do, teach. Those who can’t teach, consult,” this is one case where a consultant can really DO a lot.  A PEO consultant/ broker will do all the research and negotiating for you so that you sign a contract with the PEO that is perfect for your industry and your particular organization. I mean, after all, your time is so precious; why bother researching and reviewing dozens of companies or even worse having to sit through countless sales pitches and lengthy (read: boring) presentations (although the swag and refreshments are always a nice perk, you have better things to do with your time) when you can have someone do it for you?

But hiring a PEO Consultant / PEO Broker is so much more than just the research. Here’s the top 6 reasons why you should use a PEO Consultant/ PEO Broker when partnering with a PEO:

  1. Comparison shopping made easy 

We all love the option of comparison shopping online, just click a couple buttons and have all the data to make an informed decision right in front of you. Unfortunately, it’s not that easy when it comes to PEOs. Pricing is going to be a huge factor in your decision about which PEO provider to use. But getting quotes from several companies can take loads of time, energy and endless paperwork on your part.  PEO proposals tend to be lengthy and as discussed in my last newsletter can be complicated, i.e., containing many easy-to-miss small details and varying pricing structures making comparison-shopping extremely difficult. A PEO Consultant/ PEO Broker can provide you multiple quotes to review at once, making your decision that much easier, and they can advise you to which PEO is the best fit for your needs and the best value for your company.

  1. Saving you time

When choosing a PEO, you’ll have to choose between a National, Regional or Niche PEO. You’ll need to do research into each kind of PEO, and once you’ve made that choice, you’ll need to do further research into PEO providers within each category. That’s a lot of research for one decision!

Think of the Consultant / Broker as that one guy who just knows everyone at the party….because honestly a good Consultant/ Broker will have already established dozens of relationships with PEO providers within each class. This way, they can guide you with this part of the process so you can make your final decision sooner.  In addition, as mentioned above, knowing which type of PEO is the best fit for your business, eliminates the need to even sit down, never mind listen to sales presentation from PEOs that don’t fit your company’s needs (you’ll just have to do without the keychain, hand sanitizer or Danish).  That’s why working with a PEO Consultant / PEO Broker will save you time and energy (and frustration), ensuring that you only sit down with those PEOs that services, technology and financial structure suit your business’ specific needs. 

  1. Better pricing 

Like every decision you make about your company, it’s all about the money, money, money! And to paraphrase the saying, “If you think hiring an expert is expensive, try doing it yourself.” Not hiring a consultant/broker can sometimes end up costing you more than any savings you might have thought you were gaining by doing it yourself. If you want to get the most value for your money with a PEO provider, hire a PEO Consultant / PEO Broker. An experience consultant / broker can negotiate on your behalf to get you the best service for the best price. And a good consultant / broker will use their exclusive relationships with PEO providers to draw up a deal that is favorable to everyone involved.

Hiring a PEO is a huge decision that will affect your bottom line for years to come. Why not get the most for your money? 

  1. Simplified paperwork 

Ever try to apply for something and simply give up just because of the sheer amount of paperwork?  We know that feeling! In order to provide you with an accurate quote, a PEO will need to gather a large amount of data from you, including your employees’ salaries, insurance policies, health care requirements, workers’ compensation history, and a whole lot more. Since each PEO uses a unique proposal system, you’ll need to fill out all that paperwork each time you research another PEO. That’s paperwork times infinity, or at least it will feel like that.

When using an experienced Consultant / Broker though, you only need to submit this information once. The Consultant/ Broker will evaluate your company’s data and give you quotes based on your specific needs so that you can make an informed decision with minimal paperwork involved.

You’ve got enough on your head already; why not save yourself some paperwork—and lots of time?

  1. They have your best interests in mind 

If you were in the market for a new computer and are not sure which one to get, do you go to a Dell store or an electronic store like Best Buy?  Unless you know you want a Dell, I’d suggest going to Best Buy, because the Dell representative is only going to sell you a Dell which may not be the best computer for you.

Similarly, when you work with a PEO directly, the company will try to convince you that they’re the best fit for your business. In contrast, when you work with a Consultant / Broker, they only have your own interests in mind and will help you make a decision that is best for you. They don’t make more money when you choose a particular PEO over another; they only want to make you happy.

It’s always best to work with someone who has your best interests in mind.

  1. They’re in the know 

When most people think about partnering with a PEO, it is to get competitive insurance rates or better employee benefit packages, but the pros of a PEO far exceed just saving your time and money. Many PEOs offer employee training, safety compliance assistance, creating company culture and employee engagement, workers comp insurance, assistance with onboarding, hiring and firing techniques, government compliance and regulation guidance and so much more. For more benefits of the PEO, check out some of my past blogs. But it’s hard to take advantage of all these amazing benefits if you don’t even know about them. A PEO Consultant/ PEO Broker can give you the complete rundown of all the myriad of ways a PEO can help your business.  And really, why would you want to miss out on something, simply because you didn’t know to ask for it?

Want to see exactly how a PEO Consultant / PEO Broker can help your business get the most out of your PEO? Call ARC Consultants today and let them not only consult you, but DO all the work for you.

The Economics of PEOs: The 411 on what PEOs cost and how they invoice

By Shraga Jacobowitz

Okay, it’s time to address the elephant (or should we say the piggybank) in the room.  I know as you read all my (I hope, helpful) articles, you’ve been wondering about one thing…..What’s the bottom line?  While PEOs seem too good to be true, offering an array of benefits for so little cost, they really are THAT good!

So how do PEOs do this? And how much is it going to cost you?

PEOs are able to offer so much for so little because of their very structure.  Companies using PEOs are entering into a co-employment arrangement, which actually means that your employees are not only employed by your company, but also by the PEO (much LARGER) company.  This co-employment allows your company to offset some of your liabilities and receive benefits usually only offered to much larger companies.

You may already know the benefits of PEOs. If not, you can always check out our inaugural newsletter article or any of the other newsletters that covered this topic.  And once you understand how a PEO can save you money, you can get down to the crux of things. As the saying goes, “there are no free lunches.”  And we’re back to that all important question, “What’s it going to cost me?”

So, of course, a PEO will charge you for their service, but their cost outweighs the savings you receive from partnering with a PEO tenfold.  Keep in mind when partnering with a PEO that in many cases even after factoring the fees of a PEO for their service, they are delivering a much bigger net savings to their clients.  As part of a PEO, you are being offered savings on your health benefits, workers comp and creating a lower-risk environment. In addition, partnering with the majority of PEOs can eliminate the need to have a HR department and will definitely eliminate the need to use a Payroll processing company, saving you even more money across the board.  As for the PEO cost, like everything else in the PEO world, every PEO is different. But there are three basic price models offered by a PEO:

The Flat Rate

The Percentage

The Bundle

I’m sure you’ve all already picked out your favorite pricing structure, but just in case you’re not sure which is best for you, here’s a quick rundown of the three options:

  1. The Flat Rate: Here the PEO will charge you a flat rate per employee. People like this because they know what they’re paying. The downside of this is you’re paying the same amount no matter how much time each of those employees put in and how much they benefit from your PEO partnership. Rates usually vary depending on company size and/or a number of other variables and fall between $60 and $200 per employee.
  2. The Percentage: These PEOs charge a percentage of your gross payroll each month. The downside is as this will fluctuate payroll to payroll, there’s no consistency in fees and you never know what to expect. In addition, this pay structure may throw you some surprises along the way, in the form of higher service fees when you give an employee a raise or provide bounces further increasing your cost/fee for the PEO. Its simple math, the percentage on a $1000 weekly pay is going to jump up when you raise that employee’s pay rate to $1500/week. The upside is in many cases, it can actually end up cheaper than the flat rate. Again, this is simple math, i.e., dividing your percentage fee by your number of employees may show you that your percentage rate WILL often fall out cheaper than the flat rate amount. Rates are usually based within a range of 2 and 4 percent.
  3. The Bundle: While we generally like bundle deals (I mean, who doesn’t like the TV, Internet, Phone packages), you generally don’t want a bundled PEO rate. This means the PEO invoices you one percentage which includes your payroll taxes, workers comp costs, (and in some cases your employee benefits cost) and their administrative fee in one lump percentage against your gross wages per pay cycle.  Honestly, I don’t see any upside to this price structure, unless you just don’t want to be bothered with the actual cost of things and prefer to pay bills blindly (and if that’s the case, I have a bridge to sell you).   The downside to this is that you have no idea what your costs are and therefore have no way of tracking, reconciling or reporting your individual expenses. Besides that, not knowing what you pay, makes it quite difficult to shop around or negotiate lower rates for those items that are experience rates.

But be aware, not all bundles are created the same, some PEOs will bundle everything while others will bundle Workers Comp and Administrative fees.  If you’re looking for something bundle, the latter may be a better bet.

Regardless of which price structure you decide is best for you, it’s good to know that most PEO quotes will include six standard costs (whether they are bundled or not):

  1. FICA
  2. FUTA
  3. SUTA
  4. Workers Compensation
  5. Employee Benefits Premiums
  6. Administrative Fees

Not sure what these are, you can check out Unscrambling the ABC’s of the PEOs and Wrapping up the ABC’s of PEOs, but for our purposes, all you have to know is the first two, both federally mandated employee withholdings will not (or I should say SHOULD NOT) differ from PEO to PEO. When it comes to the next three, that is when you will see a difference in your quotes. Because SUTA (State Unemployment Tax), Workers Compensation and Employee Benefits Premium rates depend on a variety of factors (such as operating state, number of claims –whether unemployment or workers comp claim, and the workers comp code they are using), each PEO will offer these at different rates. This is where you can start comparing prices.  And finally, as discussed above, the administrative fees will depend on how the PEO decides to charge you.

Like I said above MOST PEOs will have these six standard costs (and if they don’t, that’s an immediate red flag), but it is also important that these six costs are broken down on the invoices you receive from the PEO.  While this seems obvious, many PEOs proposal will show you this breakdown but not include it on their invoices. Before signing on with a PEO, make sure you ask about their invoicing practices or ask your handy PEO consultant (like ARC) how to navigate the billing and invoice process.

My final word of advice, ALWAYS LOOK FOR HIDDEN FEES.  These fees can be anything from additional charges for HR Services, EPLI, additional support or added technology modules, employee training. Many times, these fees will not be included in the original quote. Before signing on, ask the PEO for documentation of all fees and read everything word for word, including footnotes, endnotes, addendums (and any other way a PEO can sneak in additional charges).

Sounds like a lot of work? It can be, but it doesn’t have to be.

My ultimate word of advice that will always stand true: Contact a PEO Broker or consultant such as ARC Consultants (of course) to do the heavy lifting for you. Because these consultants have relationships with many PEOs, they know the ins-and-outs of each PEO’s price structure, whether there are hidden fees, who offers supplementary services for free, who charges for them, and just about everything you need to know about choosing the right PEO at the best rate for you.

Want to know more information about price comparing PEOs and selecting a PEO that fits all your needs? Contact ARC Consultants today.

When it’s time to fire…And how to do it: 4 steps to firing an employee without any drama.

By Shraga Jacobowitz

In our last two newsletters (see here and here), we discussed how to hire the perfect employee, but despite all our good intentions, sometimes the day comes when we have to fire an employee.  (Insert Gasp and sigh of dread here) If you speak to most business owners, they’ll most likely say firing employees is one of the hardest tasks that falls on their plate. In fact, the average employer waits way too long to fire a non-performing employee because they are dreading the task, although retaining them is costing them money, time and even customers in the long run. Which is why dreadful or not, firing is a necessary evil in business and should never be avoided.

However, keep in mind that just like hiring the perfect employee is a process, firing the not so perfect employee is a process as well. But since there are laws that govern who you may or may not fire and what you may or may not be allowed to fire for, firing someone can actually be a lot more complicated than hiring them. So what do you need to know before firing someone in your organization?

#1 Weigh your Options

Like our discussion with hiring, the first step is to consider if you really need to fire this employee. Realize that not all employees are suited for every position. Before firing someone, consider whether perhaps they would be better fit at a different job within your company.  Obviously this is only if the employee has done nothing wrong and exhibits great qualities and work ethic, but is sinking at their current position. Sometimes the difference between an amazing employee and an employee you are rearing to fire is TRAINING, TRAINING and more TRAINING (refer back to my second newsletter on hiring practices to see just how important training is). It may be that the employee you are considering firing, just needs some additional training and/or development. Offering them that training or development can gain you the perfect employee.  And not to toot the PEO horn once again, but PEOs often offer this training and courses to employees of their clients.

#2 Protect Yourself and Company

If you’re in the legal right to fire the employee (again, a PEO provider can assist in determining whether this is the case or not) you want to leave no room for a fraudulent case.

  1. Only fire someone face-to-face! Besides being courteous to your former employee, face-to-face leaves no room for miscommunication.
  2. Do not fire anyone without warning! Again, it’s a simple courtesy, but also, a warning legitimizes your claim against the employee. If you’ve told them already you’re not happy with their performance, they shouldn’t be surprised to be fired when they don’t improve. Also, no one wants to work in an environment where firings happen out of the blue. It just creates an environment of fear and distrust among your remaining employees.
  3. As a follow-up to #2 above, DOCUMENT, DOCUMENT, DOCUMENT! (I don’t need to tell you what it means when I repeat myself three times, you know already that it just indicates how important this advice is. And IT IS! So don’t ignore it.) So what to document? Everything!! Okay not clear enough, here are some examples of important things to have records of:
    • How well or un-well (isn’t that the antonym of well?) they performed their job. If someone is excelling write down….not so much so, write that down as well.
    • Any infraction they did with time, place, details and witnesses names if applicable.
    • Any disciplinary action that was taken at the time of each infraction
    • The amount of time given to rectify the situation
    • Any warnings given before disciplinary action was taken. Make sure to record each time a warning was issued and by default each time said warning was ignored.

As with any other types of documentation, have concrete proof of everything. And if something was relayed verbally, follow it up with an email so you have written proof of all interactions.

  1. Don’t fire an employee without a witness! The reason for this one should be obvious. If you have someone who is there to attest to your reason and method of firing, it is harder for someone to make a claim of employment discrimination.
  2. Protect your property and data. Terminate the employee’s access to all your systems immediately and change any passwords you may have, and don’t allow them to access their work area. Ask the employee to hand over their key, door pass, badge and any electronic equipment that is company owned, i.e., smartphone, laptop, tablet etc.
  3. Keep it short and simple! The more information you give, the more fuel they have to fight you. If you’ve given them the proper warnings (see #2), then they know why they are getting fired and there’s no need to rehash it. Honestly, it might just be cruel to do so.
  4. Don’t end the meeting on a low note! Sounds like odd advice for a termination meeting, but the reality of the situation is no one wants a disgruntled former employee (especially in the world of social media). If the firing is done respectfully, you are accommodating and acknowledge the employee’s positive attributes, you are more likely to have an employee who won’t bash you on social media or TP your house. Unless they’ve truly been awful, don’t deny them unemployment benefits and encourage them in their next steps towards employment. If applicable, you can even offer to be a reference for their next job.  If you are able to and if the situation warrants it, offer a compensation package. Basically, be nice and you’ll make a very hard situation a bit easier (although, I’m not promising that there still won’t be tears, because unfortunately, most likely there will be tears!)

#3 Be Prepared

Like we mentioned above, some classes of workers are protected based on race, color, religion, national origin, gender, disability….you get the point. Therefore, when you are firing anyone, especially someone who falls in these protected classes, make sure you have a clear reason why you are firing them and have documentation. Don’t wait until an employee becomes a problem to begin documenting. Have a clearly defined method of tracking and documenting employee performance, establish uniform policies on what is expected and what is a fire-worthy offense, and if possible, discuss and correct problems as soon as they occur. If you’re really not sure if you have a leg to stand on, reach out to a professional (just saying, your PEO can most likely help you with this).

#4 Interview, Interview & Interview

And, no I’m not talking about hiring the replacement for your fired employee just yet (that we covered in our last newsletters), but I’m actually referring to Exit Interviews.  All too often, this important step is skipped, but they are a valuable tool for any business owner. They can help bring to light issues within your company. After all, a fired employee has nothing left to lose, so they’ll be as blunt as possible and everyone needs to hear the blunt truth every once in a while.  Now obviously, if your employee is leaving on bad terms and has a “burn the company down to the ground” mentality, you may want to take what they have to say with a heaping tablespoon of salt. But otherwise, be open to the criticism and see how you can improve both the work environment for your current employees, and implement ideas to attract better new hires.  This step holds true whether you are firing someone or they are quitting.

#5 Be Transparent

There’s nothing that strikes fear more in employees’ hearts than hearing that a colleague was fired!  Unless you want to run a company on fear (trust me, you don’t – it’s not really the motivator you think it is), be open with your remaining employees about the circumstances of the firing. You don’t have to share the intimate details, but recognize that a change has been made to the staff and assure them that their jobs are still safe (unless they’re not, and if that’s case, go back to #1 and repeat).

Obviously, the best option is to not have to fire at all, but when you do, keeping these points in mind can definitely make the process a lot easier, smoother and minimize your stress, dread and fear.

Want to find out how a PEO can help you attract and retain quality employees or how they can help you with your HR administrative tasks so that both hiring and firing can be easier? Contact ARC Consultants today.

Turning the Dream Employee into a Reality: The Last 2 Steps to Hiring the Perfect Employee

By: Shraga Jacobowitz

In our last newsletter, we discussed the first two steps of hiring the ideal employee for your company (here’s a quick refresher  if you want to review those steps).  In this week’s article we get to the meat and potatoes of the hiring process, and explore how to ask the right questions to potential hires and how to ensure the best candidate for the job becomes the best employee for your business.  Because as you will soon discover, hiring the dream employee goes beyond the hiring process. Just read on to see how…

Step 3: Ask the right questions & offer the right incentives

This is really two separate parts of the same process: one is making sure your interviewees put their best foot forward, while the second is making sure you put yours forward.

Knowing what to ask potential hires is essential to the interview process.

Rule #1: YOU SHOULD NOT BE ASKING THEM ANYTHING THAT YOU CAN READ OFF THEIR RESUME! The interview is not about learning about their experience, education, etc., but instead it is a way of gauging their personality, work ethic and character and seeing how they will fit in your company’s current workforce and culture.  In addition, don’t just ask about their expertise, but provide a hypothetical scenario in which they apply that expertise to a company related problem or situation.

Rule #2 is therefore, GET CREATIVE WITH YOUR QUESTIONS.

Some creative questions can include (but then again, you SHOULD try to come up of some of your own that fit your company needs best):

  1. Turn the question back on them and ask them, “What question didn’t I ask that I should have?” Their answer will reflect a lot about what they feel is important; what they are more and less confident in and may dig up a nugget of information you never would have dreamed about asking.
  2. What would you do if you were CEO? Again, this reveals a confidence level and allows you to see if the hire is more comfortable in a leadership or follower role.
  3. Why wouldn’t you want to work here? They’ve got the “why I want to work here,” answer down pat, so reverse the script and ask them why they wouldn’t want to work here. This is the candidate’s opportunity to show that they have a great understanding for the business, but also that they recognize that no opportunity is perfect – but that they have solutions for coping with those obstacles.
  4. Have fun with your questions: What super power would you most want? If you can have lunch with one historical figure, who would it be? In general, interviews should be a conversation rather than question and answer, so anything that opens an avenue of discussion is a great question to ask.

As for putting your best foot forward, make sure you are offering an attractive benefit package (a PEO can help you compete with the big dogs for this), a competitive salary and potential for growth. Having top employees requires competing for those employees, so make sure you’re in the game.  Like your interview questions, get creative for ways to entice potential employees. A froyo machine in the break room isn’t sealing the deal, but it certainly doesn’t hurt and lets hires know that you’re a company that cares about the happiness of your employees (now that’s a win-win).

Step 4:  it’s not always about the hiring process.

Hooray! You finally hired the employee of your dreams! Now what?

Guess what, hiring the right employee is just the first step (or I guess according to this article, the third step) to having the perfect employee. And it’s not even the most important step– this final step is probably the most important step in the process and can make the difference between having an Employee Stud versus an Employee Dud. So what is this all important step?

TRAINING! TRAINING! & MORE TRAINING!

There, it’s so important I said it three times. There are no two-ways about it, good employees no matter their education, background, experience or super powers, need to be trained in working for YOU.

To drop them in the deep-end of office management may very well show you how adaptive, self-sufficient and innovative your new employee is, but it really isn’t the most efficient way to getting the job done. Take the time to properly train your employees and keep them well informed about company changes, policies and what’s happening in the office.  Trust us that extra time you take will definitely pay for itself in the end.

Some of the things that you should make the time to tell ANY new employee are:

Your USP (unique selling point) and how you compare to your competition. Every employee is a potential networking and sales person for you. That oh, so innocent question, “Oh, you work at So & So Inc. — are they any good at what they do?” can actually lead to a new customer/client. Not having the correct information to deliver an elevator pitch, may mean the difference of a new client or not.

How to Solve a Customer Problem on their own. You’ve (or your employees have) been there and done that, so you really know most of the clients’ problems, although you must never underestimate the power of clients coming up with unique and crazy problems, but on the most part, you or someone on your team should know how to handle most complaints and issues. Give new employees the resources, the skills and the AUTHORITY to handle these problems instead of having to pass the buck to upper management when problems arise.

It may also be worthwhile to assign a buddy/mentor for every newcomer. In this way, new employees have an address for their myriads of questions and they need not to feel like they are bothering management or feel stupid in asking questions. In addition, building a trustworthy relationship with someone with more experience in that company can help guide the newcomer and allow them to adapt and grow as part of the team.

Through following these (albeit not simple but essential) steps you can ensure that you hire the best employee for your company and needs. Now if you think hiring someone is the hardest part of being a boss, just wait until you have to fire someone. Look out for tips on that in a future newsletter article.

Need help with your HR administration or need more tips about the hiring/firing process, contact ARC Consultants to see how a PEO can help you with all your HR needs.

Should a PEO be your business’ New Year’s resolution? 7 Signs that will tell you if a PEO should be on the list

 

By: Shraga Jacobowitz

With New Year’s just past (Do we all remember Y2K pandemonium? Can you believe it was 18 years ago?), it’s time to reflect on those resolutions. For many that means personal resolutions. But believe it or not, New Year’s is also a good time for business resolutions, especially if your business is showing any of the following seven signs. And with the help of ARC, this is a resolution you can actually keep.

So what are the 7 signs you might need a PEO?

Read on and see if any sound familiar.

#1: Your administrative duties overwhelm you 

If you’re desperately searching for more hours in the day to get through your entire workload, a PEO is the ideal solution for you. A thriving, growing business translates into growing administrative duties that you may not be able to keep up with.

A competent PEO will streamline all of your administrative processes, such as overseeing payroll, new hire and termination processes, HR compliance and medical coverage for your employees. They assume the bulk of hiring and recruiting new workers, supervise employee data management and more.

This might especially apply to you if: You have multiple locations, recently underwent an expansion, or experienced a large growth surge.

#2: You’re not 100% certain you are compliant with regulations and laws related to your industry

Running a lawful business has never been more complicated. New rules and regulations are constantly being passed, and just keeping yourself and your business updated with these laws can consume most of your time and energy.

Free up your brain space and drive for the things that really matter – like launching a new line of products or expanding your clientele beyond its current base – by outsourcing this tedious task to a PEO. They’ll do the hard work for you and ensure that your business is always fully compliant with all relevant laws.

This might especially apply to you if: Your industry is high-risk and is governed by many complicated rules and regulations.

#3: You want access to a Fortune 500 benefit employee benefit package 

Small businesses sometimes have to resort to hiring less-than-ideal candidates because they don’t have access to the handsome benefits package offered by larger firms. In an employee’s market, job-hunters can afford to be choosy and might not even give your business a chance if you can’t offer an attractive package.

By using the services of a PEO, you’ll have access to a much wider pool of benefits you’d otherwise never be able to reach. This way, you can give your employees what they really deserve.

While this is true with all employee benefits, it’s especially true with regards to medical coverage. A smaller business is often stuck with less-than-ideal coverage at ridiculously high premiums.

This might especially apply to you if: You are a smaller company but have exorbitantly high premiums and/or deductibles. 

#4: You’ve outgrown your current administrative system but don’t yet have the financial resources to build an internal HR department

Your business used to run perfectly well with its current administrative practice, but now it’s outgrown itself. You might be entertaining the thought of building an internal HR department and are wondering what this might run you in costs.

While the exact price tag varies with need, establishing an HR department is always time-consuming and relatively expensive. It can mean recruiting and hiring an HR director, using the services of a payroll company, and paying host of cost and fees that can be incurred by doing your HR in-house – all of which can total up to $200,000!

Do you stick with the system you have in place even though it’s not working too well or drop a ton of money on establishing an HR department?

You might think you’re stuck between a rock and a hard place, but there’s a simple solution: Hire a PEO! You’ll outsource all of your HR and you’ll have a greater depth and breadth of services at a reasonable price.

This might especially apply to you if: You’ve already experienced the fallout of administrative practices that aren’t sufficient for your current level of growth.

#5: You recently acquired a company

Acquiring another company is an exciting step for growing businesses and opens a plethora of new opportunities. Unfortunately, though, this process often leads to the realization that the current HR process was undermanaged or insufficient for the business’s needs. This can present a significant risk to acquirers, particularly in a stock purchase. You don’t want to end up losing out on the acquisition because of faulty administrative practices. By using a PEO, your HR will be handled efficiently and competently, removing all the employer risk inherent in an acquisition.

This might especially apply to you if: Your administrative process was already floundering prior to the acquisition. 

#6: You’ve just lost a long-time employee who handled all aspects of HR

Every business owner likes to think their best employees will stick around forever, but this is hardly true. Employees leave their places of work all the time – even ones they’ve worked in for decades. If you have an employee you depend on to manage HR, you might be lost if this worker leaves your company. It’s best to have a PEO working together with your employee so that you’re not up a creek if this key worker leaves.

If the inevitable happens and you did not employ the services of a PEO before it did, it’s not too late to start now. A PEO can swoop in and save the day when you feel like you’re completely lost without your key employee managing HR.

This might especially apply to you if: You’ve never played any part in the HR department at your business.

#7: Your industry has higher Workers Comp exposure causing higher workers comp rates and premium

Every business does it best to keep its employees safe, but understandably some work environments provide higher risk to their employees than others. When you are in an industry that has higher risks to your employees, the cost of your workers comp insurance can be quite high.

Because PEO’s are shopping for this insurance in higher quantities they can provide better rates on workers comp insurance plans. And since the company partnering with the PEO can often take on the EMR (Experience Modification Rate) of the PEO, even those companies with high EMRs can benefit from the PEOs lower rate.  In addition, PEOs can provide safety compliance guidance, improving your environment’s risk factors and your personal EMR to qualify your business for lower rates even if taking on the PEOs EMR is not an option.  So essentially a PEO can both make your business a safer place to work and save you money on workers comp insurance. Now what’s not to love about that?

This might especially apply to you if: You are in the construction or manufacturing industries which have high risk environments.

Okay, you have to admit it, at least 2 or 3 of those signs apply to you. If that’s the case, you definitely can benefit from a PEO.

Still not convinced? Contact ARC Consultants today so that they can determine if a PEO is right for you and if so, which PEO is the right partner for your exact business! Now, that’s something to cheer about! Happy New Year to all!  Wishing you a stress-less and successful new year.

Unscrambling the ABC’s of the PEO’s: PART I

By: Shraga Jacobowitz

So you’ve finally decided to partner with a PEO or maybe you’ve been partnered for one for years already. I’m sure you’re excited at the prospect of no longer spending hours of precious company time dealing with issues like payroll and other aspects of HR management, and you’re completely excited about the opportunity to outsource the work to the professionals!! After all, you’ve been told numerous times (in these articles alone) that a partnership with a PEO can save you tons of money and hours of work.

And yet…when researching PEOs or interacting with your current PEO, you’re constantly baffled by the terms the companies are throwing around, and it seems like you are spending almost as much time just trying to navigate and decode the PEO world and terminology.

Like anything else in life, when you partner with a PEO, there is definitely a learning curve, which is of course where a PEO broker and consultant comes in handy — they can literally help you skip to the front of the class and answer all your questions.  But just in case you want to feel like your PEO is speaking English rather than Chinese to you…here is part one of a comprehensive list of PEO terminology and related words broken down into clear, simple English. (Hey, did you really expect us to get all of them into one article?)

Read on for our comprehensive list of PEO terminology and related words broken down into clear, simple English.

  1. ACA – The Affordable Care Act, more famously known as ObamaCare (although we’re not sure what our current president has to say about that) is a federal law that became effective in 2010, requiring all American citizens to be covered by health insurance. While talks of repealing the ACA has been taking place since Trump took office, the ACA is still firmly in place, so whether you’re a fan of the new administration or you’ve terminated your Twitter account in the last year, it doesn’t make a difference, you and your employees must comply with the ACA or risk being fined. 
  1. Admin Fee – An administrative fee or service fee is a monthly fee charged to their clients by the PEO. It can be a fixed dollar amount per employee per month (PEPM) or a percentage of your gross annual payroll. 
  1. Administrative Employer – The Employer of Record in a co-employment relationship, in other words, the PEO. This doesn’t mean the PEO has suddenly become your boss, but instead that they will be responsible for all administrative tasks of HR and compliance, including tax payments, payroll processing and more. And like I’ve said before, no need to feel like you are handing over the keys to the castle. You, the PEO client maintains full direction and control of your company. 
  1. Ancillary Benefits- Sometimes called Voluntary Benefits. This refers to a secondary health insurance that covers miscellaneous medical expenses such as vision, dental, STD, LTD, Life, Group Life, 401k, FSA, HSA, hospital indemnity plan such as AFLAC or other similar programs; to name a few. 
  1. Applicant Tracking System- An applicant tracking system (ATS) is software designed to help an enterprise recruit employees in the most efficient way possible. You can use an ATS to post job openings, screen resumes and schedule interviews with potential employees. 
  1. Carve-Out – While carving out is something you do at Thanksgiving Dinner or wood-working class, this term actually refers to a hybrid PEO arrangement where the client company still maintains their own workers’ comp policy instead of obtaining coverage through the PEO’s master policy. This will occur when you simply already have an attractive policy in place, so why would you mess with a good thing? But no worries, the PEO can still assist you with the administrative side of your own policy. 
  1. Classification Code – Often referred to as workers comp code or class code. This code allows your policy holder to see how the risk exposure your work has (think dangers of real deep sea fishing vs. the relative safety of fishing for sales leads) and classifies the type of work being performed. The classification code provides an associated code so that premium rates can be established in accordance to the work’s level of risk. 
  1. COBRA – No, it’s not about finding a venomous snake in your facilities. The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives qualifying employees and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time. This way, you won’t be leaving your employees without coverage. 
  1. COI – A Certificate of Insurance is a document issued by an insurance company that certifies that an insurance policy has been purchased by a specific party. You can’t use this as a substitute for the actual policy, but it is proof that you’ve got insurance. (As if your monthly premiums aren’t proof enough.) 
  1. CPEO – If you’ve been reading my newsletters religiously (which of course I’m sure you have been), you should already be familiar with this term from my July newsletter on the topic. But in case you missed that one, here’s a quick rundown. This term is only a few months old. Effective June 1st, 2017, a Certified Professional Employer Organization is one who’s been certified by the IRS. Like everything else the IRS oversees, becoming qualified as a CPEO involves lots of paperwork, applications and a strict background check. And just in case you want to read that original article (for review purposes only of course) you can check it out here. 
  1. Dividend – A refund of premiums for workers’ comp policies. How cool is that? It’s almost like getting free money! The refund is paid when the claims of the members on the plan did not exceed the premium payments. Dividends are offered, but not guaranteed, by some PEOs. 
  1. DOL– The U.S. Department of Labor; (some of you may know them as Big Brother, because the DOL is always watching). In reality, the DOL is there to promote the welfare of job seekers, wage earners, and retirees by improving their working conditions, advancing their opportunities for profitable employment, protecting their benefits, and helping employers find workers. The DOL also protects workers’ rights to safe working conditions; a minimum hourly wage and overtime pay; freedom from employment discrimination; unemployment insurance; and other income support. What you have to know: treat your workers well and the DOL won’t be a problem for you. 
  1. EEOC – The Equal Employment Opportunity Commission is a federal agency charged with ending employment discrimination in the United States. The EEOC can bring lawsuits against private employers on behalf of alleged discrimination victims. So make sure you always hire fairly! 
  1. Emod –“Experience modifier” is a rate modifier used by the NCCI (National Council for Compensation Insurance) to define the risk of a particular employer. Obviously, the guy who cleans skyscraper windows will have a higher risk than the one who changes the paper in your copy machine. 
  1. Employee Census – Don’t worry; this isn’t a bunch of CEOs knocking on random doors and asking intrusive questions. Rather, it’s a report prepared by an employer that provides the insurance companies the necessary data for the underwriters to determine insurance and benefit rates. In addition an Employee Census may also help ensure that a company’s retirement plan is in compliance with Department of Labor laws and Internal Revenue Codes. 
  1. Employee Handbook – Remember that thick student handbook they gave out in high school? This is kind of the same thing. Sometimes known as an employee manual, staff handbook, or company policy manual, this handbook is distributed to employees and details the company culture, policies, and procedures. 
  1. EPLI– Employers Practices Liability Insurance is insurance purchased by an employer to protect himself/herself against errors in willful and accidental employer practices,  such as wrongful termination, harassment or other ugly situations that can come back to bite you. This way you’re never at risk of losing a year’s profit on one lawsuit! Thankfully, this is something that is usually included and provided to you as part of the services you get when you sign up to partner with a PEO. 
  1. ERISA– The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industries. You don’t need to fund their retirement cruises, but you do have to give your employees enough to live on in their golden years. 
  1. FICA– The Federal Insurance Contributions Act (FICA) tax is a United States payroll tax imposed on both employees and employers to fund Social Security and Medicare. You have to know that money for these programs is coming out of someone’s pockets, and in this case, it’s yours. 
  1. FLSA – The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and child labor standards for full-time and part-time workers in the private sector and in all levels of government. And while child labor is a thing of the past in the US, many of these other things can be a real problem for a business owner who doesn’t comply. 
  1. FMLA – We all think family is important, and thankfully for your employee, the government thinks so too. Covered employers must grant employees up to a total of 12 work weeks of unpaid leave during any 12-month period for one or more of the following reasons: the birth and care of a newborn child; placement with the employee of a son or daughter for adoption or foster care; caring for an immediate family member with a serious health condition; medical leave when the employee is unable to work because of a serious health condition. 
  1. FUTA – This one sounds waaaaay cooler as an acronym. The Federal Unemployment Tax Act authorizes the IRS to collect a federal employer tax to fund state workforce agencies as well as half of the cost of extended unemployment benefits.

As the title indicated, this is only Part I of this series…Who knew there were so many relevant terms to the PEO industry?  Stay tuned for the continuation of these terms in our next newsletter.

Or can’t wait for the next newsletter and you rather not wade through the confusion alone? Call ARC Consultants and see how we can help clarify the process and navigate PEO partnership for you.

70% of American Companies Have Got this Wrong! Is your company one of them? And can a PEO help you get it right?


By: Shraga Jacobowitz

With Labor Day firmly behind us and the end of summer officially marked, employees around the nation have begun yet another year of work. And while some may have anticipated this return to regular schedule with excitement, (including many Moms & Dads), most employees wake up each morning with a sense of dread at the prospect of facing yet another work day. In fact, according to a recent Gallup survey, shockingly, 70% of the US workforce are not happy with their jobs.   And this, my friends, is simply too many people who are not productively contributing to their companies to facilitate economic growth.  As any good manager or boss will tell you, unhappy employees always equal unproductive employees.

It is clear that being a task master and snapping the whip (figuratively, of course…or at least I hope so), is not the way to get more productive workers.  Employee job satisfaction and work happiness rank highest in creating a productive environment and getting the most out of your employees.  It is for that reason that EMPLOYEE ENGAGEMENT has become the new buzz word among some of the biggest corporations. In fact, like the apple, check mark and coffee of our last article (click here for a quick review if you missed it), it is some of the biggest firms that rank highest in employee engagement and satisfaction.  We’re not going to drop names here (who are we kidding, of course, we’re going to name drop), but you may of heard of some of these companies, i.e., a little website called Facebook and small search engine called Google rank in the top 5 for Employee Engagement.

Surprising?  Perhaps not. These are known as some of the coolest places to work at. I mean, just check out their cool office spaces here and here. But what you may find surprising is that these same firms also rank high in the amount of work they demand from their employees and the stress that the work entails.  In fact one Google employee’s review of the company was that it is both “the best place [to work] and most demanding.” Similarly many of the Facebook employees in their company review stated both their love for the company and how busy they are at work almost simultaneously.  I know it seems contradictory–to love work when having a heavy workload– but guess what, it’s not!

That’s right, the amount of work and stress these employees have does not detract from their job satisfaction and overall happiness at working for these companies. So hard work and high stress can still equal happy employees? Definitely worth exploring, no?

So what are these three companies doing right that you (and apparently 70% of businesses) may not be doing?

According to a poll of their employees, nothing major. However, small changes in how you treat your employees can change the entire atmosphere of your company and create a place where people are happy to return to work.

One Facebook employee summed up Facebook’s attitude towards their employees, simply stating, “You won’t find a place that cares more [than Facebook] about its people.” Now close your eyes and imagine your employees talking about your company like that. If you can’t imagine it, it may be time to make some changes.

You can always take a cue from Facebook and Google whose employee engagement policy includes small perks, such as free lunch and snack to large ones, such as on campus health and dental centers.  Some of the benefits listed by employees as reasons they loved working at these companies include:

  • Incredible benefits including stellar health insurance (even offered to part-time employees), gym/wellness reimbursement, daycare reimbursement (up to $3k a year), donation matching and 401k matching.
  • Amazing maternity and paternity leave. Facebook actually pays out “baby cash” to employees for new births and adoptions.
  • Excellent compensation that rewards strong performance and fair, well thought out review processes.
  • Lots of vacation days and paid time off.

Okay, I know exactly what you are all thinking at this point…thanks a lot. Obviously, these companies have the money to allow them to offer such great perks and benefits to their employees, but how am I supposed to be able to do the same for my employees?

I shall insert a shameless plug here. But it simply is true that this is exactly where a PEO can help…and we mean really help!  A PEO gives you the resources of a bigger company, so yeah, you can compete with a Facebook or Google….at least in the benefits you can offer. In addition, with HR professionals on staff, your PEO partner can help you work out programs that reward strong employee performance and/or think of extra perks that your specific employees would appreciate. Your PEO’s HR specialist can even help create those fair and well thought out employee reviews that Facebook and Google are so famous for, so that your employees feel appreciated, but better yet, you have a clear picture of how happy, satisfied and productive they are being. Now what’s better than that?

So stop being part of the majority, especially, when in this case, they’ve gotten it, oh, so wrong.  Instead, let a PEO help you create an environment that your employees will look forward to coming to work each day.

Want to find out more about how a PEO can help you with your Employee Engagement, contact ARC Consultants for more information.

The Apple, the Check Mark & Coffee: What they have to do with your business & why a PEO can actually help improve it

By: Shraga Jacobowitz

Okay, if I did my job correctly, you are right now scratching your head and are intrigued by the title of my article.  Because what do apples, check-marks and coffee have in common? And further, what in the world can these three things have to do with the business world, my business specifically and even more confounding, PEOs?

However, it’s really quite simple. These three seemingly unrelated items each represent three mega-corporations: Apple, Nike and Starbucks. One of the core things these three corporation hold in common is that these three companies distinguished themselves from the thousands of companies across the country by clearly establishing their company culture.

Think Apple, and you think simplicity, serviceability and quality. The Nike swoosh brings to mind athletic prowess and reaching for impossible goals. Similarly, Starbucks is synonymous with fantastic customer service and even better lattes.

Okay, you’re thinking, you’ve piqued our interest, but you still haven’t answered our more important question, “What do these companies have to do with my company and a partnership with a PEO?”

Again, the answer is simple. Creating your company culture is one of the key components of attracting faithful customers, (ask an Apple user to use an Android, a Nike enthusiast to wear any old sneaker or a Starbucks connoisseur to G-d forbid drink home brewed coffee and you’ll see what I’m talking about). But this culture is not just about retaining your customers. Having a strong company culture is almost as important to retaining your employees as it is to retaining your customers.

Back to our apple, check mark and coffee, all three of these corporations have excelled in retaining their employees, with Apple retaining about 81% of its worldwide employees. Nike was listed as one of the top 100 companies to work for with a mere 9% voluntary turnover rate.  Meanwhile, Starbucks has bucked the trend for quick serve restaurants, which usually has a 150-400% turnover rate, with an astounding 65% turnover rate, beating the industry average by 140%.

So, we know now that creating and maintaining a strong company culture can be the key to increased employee productivity across the board. This is because when there is a strong culture attached to your company, employees feel like they belong to something important, and they want to be part of making it better. In turn, your employees will love coming to work when they are part of something bigger than themselves. When employees feel like they fit into a company’s culture, they will develop deeper relationships with their colleagues, be more loyal to the company, and be more productive than ever.

Of course, employers benefit from a strong company culture, too. Having happy, productive employees who are giving their job their all, is one of the best things you can do for your company.  In fact, having a winning company culture cannot be overstated. According to a Bain & Company Survey America, 81% of 365 companies throughout Europe, Asia, and North America believe that a company lacking a high-performance culture is doomed to mediocrity.

But again, you’re probably asking yourself, “What in the world does all this have to do with PEOs?”

Elementary, my dear Watson (a change from my normal answer of “It’s simple”). Your company’s culture is the personality you infuse in your company. It defines your office environment, the way your employees feel about their work, and creates your company’s goals. It includes a range of elements, including company mission, values, ethics code, and expectations.  And because it fosters a great work environment it increases productivity across the board.

The importance of establishing and maintaining a strong company culture leads many business owners to question if partnering with a PEO or a current PEO partnership will affect their well-established company culture. It is normal to wonder if it’s possible to still maintain the mission, goals, attitude of their company, when their employees are now being dealt with by an outside party.

Worry not, business owners. As I stated in the title, partnering with the right PEO shouldn’t change anything about your company culture. Seems a little too good to be true? Are you having flashbacks to your last co-living arrangement that went south really quickly or your elementary school science project that you “co-worked” on, and thinking co-anything (whether co-living, co-working or co-employment) has to change everything?

Many business owners worry that partnering with a PEO or their existing PEO partnership will make employees feel disenfranchised or set aside or that they will not know who they are working for or what company goals they are working towards.

I repeat, if implemented correctly, joining a PEO or being part of a PEO should change NOTHING about your company’s culture. In fact, handing over all your HR duties to a PEO, allows you to focus more fully on developing and maintaining your company culture. In addition, by utilizing the services of a PEO, you’ll be better equipped at finding the right employees for your business that fit your company’s culture. A PEO can assist you with the tedious recruiting process, including interviewing candidates, resume-screening and performing background checks on prospective employees. A PEO can also help you create, implement and change company policy. And in doing so, PEOs enable you to create a team that personifies your company’s culture.

So what is the SECRET to joining or being part of a PEO, without upsetting your current company culture?

It really is simple this time: KEEP THE LINES OF COMMUNICATION OPEN!

Honesty and transparency are crucial to good company culture, so if you’re considering partnering with a PEO, simply TALK to your employees about this decision. Simple, right?

This lesson can be learned from Zappos, another leader in maintaining a thriving company culture. One of Zappos’s ten core values is “Build open and honest relationships with communication.” Zappo’s founder, Tony Hsieh embodied this value when he announced Amazon’s $850 million acquisition of Zappos in an open letter to all Zappo’s employees in 2009, eliminating the normal panic that ensues when rumors of a corporate takeover begin to circulate.

Let your employees know of your decision to partner with a PEO and why you’ve made this decision. Explain to them the benefits to THEM in bringing the PEO on board, including better benefit packages, access to better health, dental and vision insurance plans, and a safer work environment. In addition, because PEO has access to technology that an average company cannot afford, your work process is made that much easier.

Be upfront about what the PEO will handle and what your company will handle. Most importantly, explain that while you and the PEO are now co-employers, your company is still the one leading your employees and therefore your company still holds the same values as before.  A PEO should align with your company’s existing infrastructure to provide complementary expertise– they should not be taking it over.

In fact, if the transition to joining a PEO is handled correctly, working with a PEO can actually improve your company’s culture. After all, happy employees is one of the key elements of having a strong company culture. With the new benefits and the streamlined responsibilities, employees will be glad to know that your company is still looking out for what’s best for them and the company. A PEO consultant/broker and the PEO you choose to partner with should be able to help you complete this transition seamlessly. Communication between your company and the PEO throughout the transition period and the partnership is essential to maintaining your company’s culture in this arrangement. In addition, because PEOs employ seasoned, certified HR professionals who have experience with various industries, these experts can also help in making shifts in company culture, when necessary. This expertise can prove invaluable when structuring, maintaining or changing your company’s culture, and as a partner of the PEO, it’s at your disposal.

So, take the advice of the apple, the check mark and the coffee, and build up your company culture for optimal customer and employee retention, but don’t let this goal stop you from taking advantage of all the benefits a PEO can offer your business. Now, all of a sudden, I’m in the mood of wasting endless hours on my iPhone, running a mile and getting a coffee simultaneously…. I can’t begin to imagine why.

Still not convinced bringing a PEO will not adversely affect your company’s culture?  Call ARC Consultants and let them help you partner with a PEO that aligns best with your company’s culture.

The IRS has given their stamp of approval to PEOs; What does that mean for your business?

By Shraga Jacobowitz

Earlier this month, the IRS released a new standard for PEOs — the ability to become a CPEO, or a Certified PEO. With the conferring of this new, coveted title on a handful of existing PEOs, the IRS has given their stamp of approval, acknowledging that these PEOs have met specific standards set forth by the US government. Ok, this is so HUGE, it’s worthy of being repeated – the IRS is giving their STAMP OF APPROVAL to PEOs!

Why am I so excited about this news? Well for one, having the IRS certify select PEOs lends the entire PEO industry credibility. By certifying PEOs the IRS is acknowledging that there is legitimacy to the PEO business model, and that this not some “back alley” concept that is skirting around the law to manage your business’ employee related tasks, obtaining competitive employee benefits, WC insurance and administer payroll taxes and compliance.  Instead, the IRS is essentially saying PEOs are a valid and reasonable method to obtain these items and services for your business. Something I’ve been saying all along, but it’s always nice to be backed up by one of the biggest government agencies in the USA.

In addition, having the IRS’s stamp of approval also ensures that these CPEO’s are secure and trustworthy. In fact, to ensure this security for PEO clients, PEOs that wish to become certified, must go through the following processes:

  • Annual Financial Audits
  • Quarterly assertions and CPA confirmation regarding payment of all employment taxes.
  • A third party surety bond of a minimum $50,000 or for an amount equal to 5% of the federal employment tax liabilities for the prior year.
  • Background checks of PEO and controlling persons at the PEO
  • Present a client service agreement that meets certain IRS standards.

But that’s not all! Besides the newfound security CPEOs will bring to this industry, this news carries with it tax implications for those looking to join or switch PEOs midyear. In the past, a midyear transition often resulted in a restart on your payroll tax calculation. That’s because in the past the IRS didn’t recognize the PEO as a continuation of your current employment status, but rather that all your employees were now employed by another entity; the PEO.

CPEOs now have clear authority to collect and remit federal employment taxes (Social Security, Medicare, Federal Unemployment Taxes, etc.) for the worksite employees and to do so under the EIN of the CPEO. In addition, because the IRS now recognizes the CPEO as a successor employer, a business joining or switching to a PEO midyear will not have their FICA and FUTA wage bases reset. But before you run out to switch midyear, be aware that while this will affect your Federal taxes positively, it will have zero impact on how your state taxes are calculated, and therefore, the state tax implications of signing up for or switching your PEO must still be taken into account.

In added good news, being part of CPEO ensures that special tax credit programs designed for small business clients will still be awarded to clients of the CPEO.  This means that your small business will still be viewed as a small business, and will not be denied these tax credits just because you are part of a larger PEO organization.

However, the final cherry on this CPEO cake is that having PEOs certified by the IRS, can help to take some of the guesswork out of choosing a qualified PEO. I repeat can, not will, because while having certified PEOs may be helpful, it is important to realize that not necessarily  are they the end all in determining what is the best PEO for you.

Firstly, there are many factors in determining the best PEO, and not necessarily will a CPEO meet your specific business’ needs. Secondly, the PEO industry has had in place already for many years means of keeping tabs on PEOs, ensuring that PEO customers are completely protected and that PEOs are meeting the needs of clients. So even before this news was announced, businesses joining a PEO had other assurances that they were working with either an accredited or at least privately audited PEO.

In fact, the Employer Services Assurance Corporation (ESAC) has been doing exactly that since 1995! ESAC provides accreditation and financial assurance programs for the PEO industry. Their process verifies the PEOs’ ongoing financial solvency and compliance with government regulations and important industry standards. Even more so, ESAC gives more security through underlying surety bonds held on behalf of each ESAC accredited PEO, plus a $15 million excess bond covering all program participants.

But even those PEOs that are neither certified by the IRS nor accredited by ESAC, are often vetted or audited by third parties or privately owned by investment firms, and therefore can be just as reliable, if not more so than a CPEO or ESAC.

After all, becoming a CPEO is a voluntary choice made by the individual PEOs, not a mandatory obligation. Which means while being a CPEO says a lot about that PEO, i.e., there is a standard you must uphold to be certified, (according to the IRS website, “To become and remain certified under the CPEO program, CPEOs must meet tax status, background, experience, business location, financial reporting, bonding and other requirements described in the statute and regulations”), it does not say anything about those organizations that are “just plain old simple” PEOs.

Which begs the question…

What really is the most important letter in this industry? The “C” or the “P”?  What is really more important to your business, the certification, i.e., the “C” or the professionalism, i.e., the “P”?

And even more so, what does the presence of CPEOs on the market mean to you? To your business? To the industry? To us as a PEO consulting firm?

But finally and most importantly, which option is really the best choice for you? A CPEO, PEO, ESAC, or some other combination of letters that we haven’t even heard of yet?

Well, I can’t give away all my secrets in one breath. Sorry, but for that answer you’ll just have to give us a call….after all having someone to help you navigate through the alphabet sea of PEOs, CPEOs, ESACs is exactly why using a PEO consultant is so important.

To find out if your PEO is the right fit for your business, or if you should sign up for a PEO, click here or contact one of the ARC Consultants today.