NAPEO: National Association of Professional Employer Organizations

April 2015
PEOs operate on thin margins. There is no mystery about that. Mix in the fact that PEOs need to grow to sustain themselves more so than most other businesses, and it's obvious why maintaining those margins as other operational resources are adjusted to facilitate growth is so important. There are so many different levels, and so many elements to balance, for example: customer service capacity, growth plateaus, flexible technology, profit and loss, cost controls, overhead, staffing levels, service model adjustments, and cash flow, just to name a few. Adjusting something in one area affects the levels in other areas. It requires many micro and macro adjustments, constantly.
    It's clear that every PEO needs to find its groove. While each PEO's groove and adjustments will be different, the formulas are similar
  • Focus on the foundational elements of scalability, such as technology, service levels, and employee ratios, and make use of analytics;
  • Identify profit and loss elements that need attention, budget, control costs, and prioritize;
  • Plan and organize departmental work levels, roles, and teams to keep pace with planned growth;
  • Keep your service model adaptable and nimble by allocating resources to the most important client-facing functions;
  • Manage cash flow by understanding it, setting up a robust accounting function, and forecasting growth and investment; and
  • Set up a strong foundation by relying on trusted advisors, matching your model to your long-term strategy, and aligning your products and services, technology, and human capital

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ACA Reporting Requirements
Mark Lam, CFCI, CAS
It's 2015, and that means the Affordable Care Act (ACA) employer mandate is now in full swing for employers with 100 or more full-time equivalent employees. Along with the mandate also comes the ACA's new reporting requirement. PEOs and their clients need to keep a close eye on these rules and make sure they are collecting the right data in the right way to fulfill them.
   At first glance, the requirements seem...

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risk management
Underwriting for Workers' Compensation Profitability
David E. Carothers, CSP, ARM and Dindi DeAngelo, MPH
Many workers' compensation carriers in today's marketplace continue to revisit their underwriting appetites. A concern remains among carriers that in at least certain states, workers' compensation premium rates may not be sufficient to support claims expenses. The result is that some carriers no longer offer stand-alone workers' compensation policies to their clients, but rather require the clients to place other premium-producing coverages, such as property, general liability, and/or auto liability, with the carrier to obtain a workers' compensation policy.
    This market environment can increase the pressure on...

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30 Lessons Learned in 30 Years of Selling HRO
As of April 15, this author is blessed to have been in the PEO business for 30 years. In this article, I wish to impart to you 30 lessons experienced in the last 30 years to help you in your pursuit of success in your selling. Some of these lessons are no-brainers—take them as a reminder and apply them anyway.
    These lessons are not in any particular order; this is an exercise in stream of consciousness. The goal, as always, is...

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Dismissive Injustice and the PEO industry
Jeffrey Martin
No doubt you have seen—perhaps too late—those automated cameras at intersections that record any driver rash enough to run a red light.
    The resulting citations are so impersonal and so dismissive of circumstance and context. They allow you no chance to explain, no chance to interact with a human. Sometimes, when my imagination gets the better of me, I picture those cameras going rogue. Instead of flagging careless drivers for tickets, they target pick-up trucks or Subaru station wagons, under the assumption that the former are reckless and the latter are sanctimonious.
    Should those cameras ever pursue some random vendetta, the owners of those vehicles could only hope that someone in charge would fix the apparatus and remedy the wrong.
    Many of the nation's employers are waiting for such a fix and...

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start-up guide
Setting Up Payroll and General Ledger
Angela L. Costello
Starting a PEO? Worried about signing up new customers and growing your business? Yes, that is important, but many times a start-up PEO fails to recognize the importance of setting up its payroll/general ledger system. A PEO just starting out should really sit down with its accountant and IT staff or vendor to get this set up correctly right from the start.
    Running a PEO is so much different than a traditional business. You are managing critical and confidential employee information for many other businesses, as well as your own internal employees. It is imperative to have the accounting done correctly in the beginning so you do not have inaccurate information being reported, which will be very detrimental to your business as well as to your customers. You will want to be sure you look for a system designed to handle the...

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the inside word
Growing the Industry
Brent R. Tilson
2015 NAPEO Chairperson

In the most recent NAPEO membership survey, when asked “What should NAPEO be primarily focused on?” the overwhelming choice was: Growing the Industry/Industry Promotion, which received more than 46 percent of the votes, with second place going to Federal Government Affairs, at 32 percent. To me, this is a clear mandate that the membership wants NAPEO focused on growing the industry. The question becomes, “How much can NAPEO do to move the needle?” NAPEO certainly has a role to play in helping the industry grow through tactics such as broad marketing efforts, building awareness, market research, and having a compelling and educational website to drive traffic to the membership. Yet, without a substantial increase in our budget, we have limited resources to truly move the needle. However, we can grow this industry together...
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napeo notebook
Highlights from Around the Country
Patrick J. Cleary
Last month in this space, I talked about my trip to Florida in January and visiting members with Robert Skrob of FAPEO. This first quarter seems like the heavy travel season for me, as I've been on the road for most of February and early March. Given our concentration of NAPEO members in Florida and Texas, I've spent time in both places.
    Shortly after the Florida trip mentioned in last month's column, I returned for FAPEO's annual PEO Industry Legislative Summit...

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NAPEO Begins Discussions with the IRS on SBEA Implementation
Thom Stohler
On February 12, NAPEO SBEA Working Group Chair Greg Packer, along with Randy Hardock and Courtney Zinter of Davis & Harman, William Sweetnam of the Groom Law Firm (on behalf of ADP), and Thom Stohler of NAPEO, met with representatives from the Department of Treasury and the Internal Revenue Service (IRS) to begin discussions about the implementation of the SBEA.
    The focus of the meeting was...

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capitol comment
SBEA Working Group Update
Thom Stohler
NAPEO's Small Business Efficiency Act (SBEA) Working Group has only been in existence for two months, but it has already been quite busy. The reason for the activity: The SBEA has tight statutory deadlines for creating a PEO certification program. The PEO certification program must be established by July 1 and the requirements of the SBEA are effective as of January 1, 2016...
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napeo advisor
Immigration Enforcement, Old and New Laws
Brendan W. Williams, Esq.
Not Everything Can be Outsourced
The partisan fight over President Obama's executive order on immigration may obscure the fact that the Obama administration is actively enforcing immigration laws.
    Case in point: In January, a federal administrative law judge upheld a finding by U.S. Immigration and Customs Enforcement (ICE) that a Minnesota-based PEO had violated federal law by completing 242 I-9 form employer attestations without being both in the presence of the employees being screened and having the documentation required for a I-9 form. The client company in Texas had...

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peo community
Training and Workforce Development Activity a Perfect fit for Lyons HR
Bruce Cornutt
Lyons HR was founded March 3, 1995, as a staffing company and will celebrate 20 successful years in 2015. The PEO division began in 2008 and the company evolved into a human resources management company with services available to clients needing help with both the sourcing and management of employees. As a company with operating divisions that place people in jobs (staffing) and provide services for the management of those employees once they're placed (PEO), we're keenly aware of the ever-increasing need for skilled workers.
    In our home state of Alabama, we've seen a tremendous amount of economic development activity in...

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peo spotlight
Alcott HR Group, LLC: Dawn Davidson Drantch, Esq. and Lou Basso
High-Touch Synergy: Greater than the Sum of its Parts

Stephanie Oetjen
Dawn Drantch's employment law career began in 1990. While in law school at the Washington College of Law at American University, in Washington, D.C, she started working at the Department of Labor (DOL), Civil Rights Division. Although her focus in law school was foreign relations and international law, she needed a job, and a school friend who worked there let her know the agency was looking for part-time help. Even though her stint at the DOL ended three years later when the Clinton administration cut back on funding to rid federal agencies of waste, she has been in employment law ever since.
    After leaving the DOL, she moved back home to Long Island, New York. A family friend knew of an open position for an associate with discrimination law experience at an employment and labor relations law firm. She ended up...

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guest column
SBEA-ESAC: A New Era in PEO Credibility
John Slavic
There are only a few times in most of our lives when we can accurately predict the future, but this is one of those times. The Small Business Efficiency Act (SBEA) passed in December, much to the surprise of most. Now, everyone is speculating about its effect on the PEO industry. Further, many ask why they should go to the expense and effort to be Employer Services Assurance Corporation (ESAC) accredited. The answer, of course, is in the data...
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global insights
Trade: America's Next Big Success Story
Thomas J. Donohue
Dramatically increasing American exports is one of the best opportunities we have to create jobs, spur growth, and reassert American leadership. Exports have been one of the rare bright spots in the American economy, and they have risen by more than 50 percent over the past five years. More than 38 million American jobs depend on trade...
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NAPEO Medallion Partners
NAPEO Thanks its 2015 Medallion Partners
Black Diamond Partners

Diamond Partners

Artex Risk Solutions, Inc.         Compass Consulting Group, Inc.

Massachusetts Mutual Life Insurance         McHenry Consulting

Risk Transfer Insurance Agency, LLC
Platinum Partners

MetLife        Summit Software         ThinkWare Corporation

Transamerica Retirement Solutions
Gold Partners

ALLInsurance Solutions Management, LLC         EAP Consultants, LLC

PayPlus Software, Inc.         Pinnacle Financial Services, Inc.

Stonehenge Insurance Solutions
Silver Partners

Barrow Group, LLC         Eflexgroup, Inc.

Fisher & Phillips LLP         Kronos SaaShr, Inc.
Bronze Partners

Capital Alliance Corporation         Holland & Hart LLP         Jackson Lewis P.C.

NetWise Technology         U.S. Risk, Inc.

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