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Protecting Your PEO From Payroll Fraud

While the PEO industry has experienced cases of payroll fraud sporadically for years, a pronounced uptick in member reports to NAPEO of payroll fraud incidents began about six months ago. Reports have come from across the country, with fraudulent client prospects reported in several industries, including transportation, car washes, dry cleaners, construction companies, hair salons, and gyms. In some cases, fraudulent prospects pose as legitimate companies whose identities they have stolen. Fraudsters have also perpetrated schemes through phishing and email scams to steal login credentials or impersonate company officers to request fund transfers.

When the uptick in fraud reports from members began, NAPEO not only started keeping track of them, but also:

  • Mobilized the Payroll Fraud Task Force under its Accounting Practices Committee;
  • Contacted the FBI about the problem;
  • Initiated regular email alerts to members;
  • Began developing educational resources for members such as webinars, magazine coverage, and sessions at upcoming conferences; and
  • Posted a regularly-updated, members-only resource related to payroll fraud on its website, www.napeo.org/fraudalert. This resource includes: a document outlining steps you can take to protect your PEO; an email to report fraud incidents to NAPEO (ffielder@napeo.org); a link to the FBI’s Internet Crimes Complaint Center (www.ic3.gov); and a listing of recently reported fraud schemes.

The task force is drafting a document, “Best Practices for Reducing the Risk Associated with PEO Payroll Fraud,” for release in the next few weeks. Early this month, NAPEO presented a webinar, “Payroll Fraud and Its Impact on PEOs,” discussing how to identify payroll fraud risk, how to proactively protect your organization, and how to respond to fraud incidents. The recording and PowerPoint presentation from this webinar will be added to webinar archive at www.napeo.org/peo-resources/tools/webinars for those who missed it or want to revisit it.

Even as members have been put at risk by the recent onslaught of payroll fraud attempts, they have come to NAPEO with information about their experiences and lent their expertise to produce educational materials to be shared with the entire membership. This feature presents a detailed picture of the many facets of the problem and a comprehensive approach to preventing fraud attempts and protecting the PEO.

Know More

Departments

Legal Currents

Best Bang for Your Buck

Many of the major players in the PEO industry are blessed with dedicated and highly skilled in-house counsel, several of whom play key roles on NAPEO’s Legal Advisory Council. When legal issues or questions arise for them, CEOs and CFOs can simply walk down the hall for advice and answers. But what of the smaller to mid-size PEOs and PEO groups whose economics cannot sustain the ongoing expense of in-house counsel?

Human Resources

Practice What You Preach

At its core, a PEO exists to serve businesses with back-office needs, including payroll, workers’ compensation coverage, benefits, and human resources. But what about the internal needs of the PEO? While ensuring the highest levels of customer service for its clients, the PEO must also maintain and manage its own human resources to better its own business operation. The PEO should heed its own HR expertise to keep its back-office functions from overwhelming the business from the inside out. In essence, a PEO should practice what it preaches by instituting the tools outlined in this article to promote healthy internal human resources.

Benefits

Employee Benefits Plans, Cybersecurity, and PEOs

Employee benefits plans require some of the most sensitive personal information for their administration, and lots of it. For PEOs sponsoring benefits plans for employees, and in some cases providing administrative services for their customers’ plans, the data security risks are heightened. A data breach involving the plan data of worksite employees could be very costly, especially considering the reputational harm the PEO may suffer, and particularly if the PEO did not have appropriate safeguards. To minimize these risks, PEOs should identify and assess significant risks to plan data and implement reasonable safeguards that can minimize those risks. PEOs might even find that doing so could help them become more attractive to potential customers.

Marketing

What’s Better than Free Stuff? Not Much!

In today’s digital environment, marketing tools are becoming more readily available, and many tools offer free versions. In my past, I had a team of professional marketers of varying disciplines at my disposal and a relatively large budget with which to implement the marketing strategy. Nowadays, I am a one-person marketing department with a limited budget. If you are in the same boat—small company, limited resources, lone marketer (or part-time marketer)—read on for some helpful tips.


Columns

Inside Word

A Blueprint for the Future Barron L. Guss, 2018-2019 NAPEO Chair

Which came first, the chicken or the egg? Although I still don’t have the answer to that one, it leads me to similarly ask: Which came first, the trade organization or the trade? I have a reasonable basis for my belief that the PEO industry was first started by a few early pioneers and then came the trade organization. Our founders shared a vision of growth, unification, and representation (legitimacy) for their fledgling industry. Hence, in 1984 the National Staff Leasing Association was formed.

NAPEO Notebook

Historic Day for NAPEO Patrick J. Cleary

January 8, 2019, was a historic day. On that day, Pam Evette, a PEO owner and a member of the NAPEO Board of Directors, was inaugurated as lieutenant governor of South Carolina. This day was historic for a couple of reasons: She is not only the first woman to hold that post, but she is also the first PEO owner to be elected to statewide office. 


Statehouse Update

NAPEO’s State Government Affairs Plan Daniel Harris

Last year proved to be great year for the industry’s legislative and regulatory efforts as we successfully worked to achieve many of the goals outlined in the State Action Plan developed by the State Government Affairs Committee. For instance, we enacted PEO registration statutes in Massachusetts and Missouri after spending multiple years trying in both states. Last year also saw the adoption of favorable PEO rules in Ohio that placed a bow on an effort that spanned over five years. We also successfully fought a misguided proposal in Washington state that would have prevented PEOs from contracting with colleges and universities. And you are surely familiar with our exploits in the District of Columbia that prevented the enactment of a proposal that would have significantly altered the services PEOs could provide. This is addressed in detail in the second half of this column.

PEO Index

PEO Index Leading Indicator of Economic Trends John Slavic

For some time, I’ve wondered which is the leading indicator: GDP (Gross Domestic Product) or the PEO Employment Index. Finally, this last report resolves the tension. The PEO Index is the lead.


Legal Q&A

Government Shutdown and E-Verify, Browning-Ferris, Code § 199A Farrah L. Fielder, Esq.

Q. Does the partial government shutdown have any effect on my business? Specifically, what about E-Verify requirements? (At the time of this writing, the government is still partially shut down.) A. Expect there to be delays in any business you have with the Internal Revenue Service, for example. IRS and Treasury are affected by the shutdown and are working with extremely lean crews. The Certified PEO (CPEO) staff is among those currently on hiatus.

Ask the CFO

Tax Cuts and Jobs Act Johnathan Taylor

Q. I heard entertainment expenses are no longer deductible. Is that true? A. President Trump signed into law the Tax Cuts and Jobs Act (TCJA) on December 22, 2017. It affected many different areas of the tax code. Section 199A allows a 20 percent deduction of “qualified business income,” otherwise known as “pass-through” income, i.e., partnerships, S corporations, LLCs, and sole proprietorships. The change in the law related to the deduction of entertainment expenses has gotten less attention.


PEO Spotlight

Stratus.hr: Michelyn and John Farnsworth Chris Chaney

If it’s the first Wednesday of the month, you can be sure to find the employees of NAPEO member and Sandy, Utah-based Stratus.hr huddled together enjoying breakfast for “Winning Wednesday.” Employees get the chance to recognize the employee of the month, share highlights of the prior month, and present new ideas and insights to company leaders. It’s one tool that Michelyn and John Farnsworth, president and CEO, respectively, use to build a supportive, family-style office culture.

The Big Picture

Good Government Wish List for 2019 Thomas J. Donohue

The U.S. Chamber of Commerce welcomed all new and returning senators and representatives to the 116th session of Congress, which got underway last week [January 3]. Our nation’s elected officials are key partners in our efforts to grow the economy, create jobs for workers, and help businesses succeed. As we look ahead to a busy year that will bring both opportunities and challenges, we’re urging leaders in Congress and the administration to focus on areas of agreement and work together to advance our country’s best interests. 


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