NAPEO: National Association of Professional Employer Organizations

September 2014
“Cowabunga!” This slang from 1960s surf culture is the joyful cry of a surfer climbing a 12-foot wall of water and getting ready to “take the drop.”
    It’s also the joyful cry of a PEO salesperson following a small business trend and getting ready to close some major business.
    Opportunities for both surfers and PEO salespeople come in waves. Surfers know that everything that goes into making a good wave is not evident on the water’s surface. Surfers must know their surf spot geography, keep an eye on local weather conditions, and be aware of the tides. To PEOs, the small business market is like the ocean—constantly moving, with waves visible as they near shore, but their duration and strength somewhat of a mystery.
    As PEOs scan the water looking for that next big wave, they can make use of their own surf reports. Knowing the general tide of small business provides a wealth of information: how is small business job growth, what are the fastest-growing job markets, which industries are growing?
    Much of the information reported in NAPEO’s annual Financial Ratio & Operating Statistics Survey reflects the condition of the small business market, as well. Many of the ratios—including gross profit per worksite employee, worksite employees per internal employee, and client retention—provide insight in the PEO context, as data analyzed in the survey results is provided by PEO participants.
    Developments in your local business market are often hard to spot unless you see them first-hand. That’s why it’s a good idea to use your sales team as market reconnaissance. Your sales reps can bring back invaluable information just by talking to prospects, whether or not they make the sale, pointing you to new services and new market segments, as well as giving your PEO a heads up about business responses to the changing environment.
    Following small business trends—such as mobile technology, crowd funding and niche lending, and the focus on HR brought on by regulation and the competition for talent—can lead you right to prospects that are ripe for PEO services.
    These small business prospects, especially entrepreneurial ones, are valuable to PEOs, despite their low headcounts. They are focused on setting themselves up right and making good hires, and they have shorter sales cycles.
    In surfing, “drop in” is when a surfer catches a wave that already has a surfer on it, and it is seriously frowned upon. The word in PEO is “churn.” The PEO word is actually more descriptive than the surfer word (bringing to mind violently rolling water that is dangerous and un-surfable). It also perfectly describes the PEO sales paradox: the same clients being sold and resold to PEOs, while untapped prospects wait in a wide-open ocean. With a concerted industry effort, PEOs could educate the marketplace and end the churn.
    So, grab your surfboards, watch the surf report, and get ready to catch some epic waves. Cowabunga!...

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health care
The Hobby Lobby Case
What it Means (and Doesn’t Mean) for Your Client Employers

Seth T. Perretta, Esq. and Malcolm Slee, Esq.
On June 30, 2014, the U.S. Supreme Court issued its decision in Burwell v. Hobby Lobby Stores, Inc., and ruled that certain regulations issued by the U.S. Department of Health and Human Services (HHS) imposing the contraceptive mandate violate the Religious Freedom Restoration Act of 1993 (RFRA) under certain circumstances. The court’s decision received an enormous amount of media attention—but there was also a great deal of misinformation about what the Hobby Lobby case really means for employers ...
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legal currents
You May be in the Crosshairs of a New Florida Statute, Even if You are Located Outside of Florida!
James J. Giszczak, Esq.
Do you receive or maintain any personal information, or health related information, of a Florida resident? If so, there has been a dramatic change in a Florida statute that most likely applies to you, and failure to comply will result in substantial penalties. On June 20, 2014, Florida Governor Rick Scott signed into law the Florida Information Protection Act of 2014 (FIPA) after it received unanimous support by the legislature. FIPA took effect on July 1, 2014, and will replace Florida’s existing data breach notification law. FIPA dramatically increases the breadth of Florida’s data breach notification law. This article highlights these new requirements...
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risk management
Workers’ Compensation Predictive Modeling for PEOs
A New Tool to Improve Business Performance

Stephen R. DiCenso, FCAS, MAAA
When a client company employee is injured and a contract is in place with a PEO, it’s hard to envision a greater mutual incentive than the employee’s prompt return to work. After all, no company or PEO wants to enter into a contract when workers are continually struggling with health recovery, incurring avoidable medical costs, and not spending time on the job being as productive as possible...
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Recruiting, Educating, and Managing PEO Sales Professionals
Rodney Diekema
It’s not surprising that one of the most common questions asked of NAPEO is: How do I recruit, educate, and manage salespeople? Once a PEO has its core product offerings in place, the ultimate success of the PEO will be based on how successfully it attracts and retains clients through its sales efforts. This article will cover the basics of creating an internal sales operation, although for those PEOs who use PEO brokers, the same processes could apply...
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the inside word
Moving the Ball Forward
Mark C. Perlberg
2014 NAPEO Chairperson

It is hard to believe: this will be my final note as NAPEO chairman of the board. I realize it is a cliché to say it, but it is astounding how quickly the year has gone! However, the calendar does not lie: our annual conference approaches and with that exciting event, my tenure will come to an end.
    As has been the custom, I would like to use this opportunity to reflect on our progress this year. First, let me admit that I cannot pretend to be objective. Who, after all, would you blame for a lack of progress? Notwithstanding that caveat, I believe it is important to offer a brief assessment.
    On balance, I think...

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napeo notebook
World-Class Keynote Speakers, Insightful Education, and NAPEO’s 30th Anniversary at Annual Conference
Patrick J. Cleary
As I write this, we at NAPEO are totally consumed with preparations for the Annual Conference & Marketplace to be held September 15 to 17 in Miami, Florida. Hopefully, you are sitting in the Fontainebleau as you read this. Much behind-the-scenes preparation goes into an event like this. The Annual Conference Planning Committee starts almost a year in advance, kicking around ideas and discussing a wide range of possible topics. The call for papers goes out—we always get a tremendous response—and then we begin the process of sorting through what we have, working with the committee to ensure that we deliver the most valuable, high-impact content we can...
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up front
NAPEO Releases Second White Paper Highlighting Impact of PEOs
Data Shows PEO Clients Have Lower Employee Turnover and Higher Survival Rates than Other Firms

Kerry Carruthers
PEO clients have lower employee turnover rates and lower rates of business failure than comparable national averages, after controlling for factors such as industry, size, and state of location, according to the data analyses reported in the second release in NAPEO’s white paper series, “Professional Employer Organizations: Keeping Turnover Low and Survival High.” Released in conjunction with the association’s 30th anniversary during NAPEO’s 2014 Annual Conference & Marketplace on September 16, the new study further explores the positive impact of PEOs and their significant potential to help small businesses better meet the challenges of today’s demanding economic conditions. Noted economists Laurie Bassi and Dan McMurrer applied a variety of different data specifications and examined employee turnover and business survival rates for small businesses using PEOs and compared them to national data available from the U.S. Bureau of Labor Statistics (BLS)...
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napeo advisor
FUTA Rates, Hobby Lobby Decision, Pregnancy Discrimination Act
Brendan W. Williams, Esq.
Q. Why are FUTA rates varying by state?
    A. The federal unemployment tax (FUTA) rate is 6 percent of the first $7,000 of a worker’s income; a credit of 5.4 percent generally reduces this rate to .6 percent (or $42 per worker). During the recession, federal loans...

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peo index
PEO Employment Index Recovers from First Quarter Low
John Slavic
After turning sharply downward in the first quarter of 2014, the PEO Employment Index has recovered substantially in the intervening months. The economy in the first quarter was decidedly very weak, even after considering the unusually harsh winter weather to which many attributed the weakness. The -2.9 percent GDP was the worst number in 58 years for a non-recessionary quarter, so it was more than just cold temperatures; however...
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capitol comment
A Look Ahead at the November Elections
Thom Stohler
This column is supposed to report on the activities of Congress and their impact on the PEO industry. Because that column would be a one-sentence update, I will instead report on what Members of Congress are really focused on: the November election. In fairness, Congress has passed legislation to reform the Veterans Administration and to extend the Highway Trust Fund, but other issues, such as tax and immigration reform, languish due to the strong and deep partisan disagreement between the two parties...
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The Michaeline A. Doyle Award
The Person Behind the Honor

Greg Packer
Every industry has it pioneers, and for an industry as young as the PEO industry, many of them continue to be involved. Generally, these pioneers and leaders are well known to most of their industry colleagues, but some avoid the spotlight and prefer to lead quietly with no fanfare. Michaeline Doyle was that sort of leader and pioneer, but her passion was infectious. I remember meeting her for the first time at a National Staff Leasing Association (NSLA) meeting, where she shared her vision to form the Midwest Chapter. Her enthusiasm was contagious and you would have thought she was talking about finding the cure for heart disease, not the creation of a new local association. Fifteen minutes later, Dick Light and I were officers and board members of the new association and Michaeline was making plans for us to fly to Chicago for the first meeting...
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small business perspective
Young Entrepreneurs Honored, Determined to Persevere Despite Government Challenges
Dan Danner
To run a successful business takes a great deal of hard work, determination, and resilience. Many say that we see fewer of the young generation exhibiting these traits and that the entrepreneurial spirit is on the decline. However, after looking at this year’s crop of applicants for the Young Entrepreneur Foundation, you can tell that there are plenty of young people who not only defy this perception, they exemplify the very definition of entrepreneur. LeiLei Secor and Zach Haney are entrepreneurs who have started small firms prior to graduating from high school. They have been celebrated with top honors by the NFIB Young Entrepreneur Foundation for their pursuits of free enterprise...
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peo spotlight
NAPEO’s Annual Conference & Marketplace
You Are Here!

The program for the first-ever NAPEO education conference is photocopied on yellow paper. The conference took place on May 18 and 19, 1986, in San Antonio, Texas. This was just two years after the National Staff Leasing Association (now NAPEO) was formed, and it fulfilled two of the association’s founding purposes: to educate members in all the different disciplines needed to successfully and properly run their PEO companies; and to foster a culture of information exchange and professional networking. That first conference’s theme was “Commitment to Professionalism.”
    Every year since 1986, NAPEO has welcomed its members to its annual conference and marketplace, continuing this tradition. Many of you are reading this from this year’s event at the Fontainebleau in Miami Beach, Florida. As you can surely attest if you have been to even one of NAPEO’s annual conferences, the learning is serious, the networking is immeasurably valuable, and the rest is, well, FUN!
    It is truly heart-warming to see members greeting one another with smiles, hugs, and laughter at these annual gatherings. Take a look back with us at NAPEO’s annual conferences over the years. You will probably see someone you know...

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global insights
Stop the Regulatory Madness
Thomas J. Donohue
Recently, the Dodd-Frank Act—a sweeping law intended to reform our financial regulatory system—turned four years old. But it’s no milestone to celebrate. Dodd-Frank has become the poster child for all that’s wrong with our regulatory system, which errs on the side of excess, overreach, complexity, and costliness...
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NAPEO Medallion Partners
NAPEO Thanks its 2014 Medallion Partners
Diamond Partners

F.W. Davison and Company         Risk Transfer Holdings        
Platinum Partners

Artex Risk Solutions, Inc.         Compass Consulting Group, Inc.         Humana         MassMutual Retirement Services         McHenry Consulting

Summit Software         ThinkWare Corporation         Transamerica Retirement Solutions
Gold Partners

ALLInsurance Solutions Management, LLC         Avalara         MetLife         PayPlus Software, Inc.         Pinnacle Financial Services, Inc.
Silver Partner

eflexgroup, Inc.         Fisher & Phillips LLP         Human Resources Mexico, S. de R.L        
Bronze Partners

Capital Alliance Corp.         Complyright Distribution Services, Inc.         NetWise Technology

ResourceDirect         SaaShr / A Kronos Company         U. S. Risk Inc.      

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