WHY PAY TOO MUCH?
by Maria Ricci, General Manager
PSC’s service offering is singularly that of a Professional Employer Organization. This is our key differentiator in comparison to a 
staffing company. We do not participate in any recruiting activities. We provide 3rd party independent contractor engagement and billing services to those corporations who are manning their Independent Contractor population on their own, bringing known independent contractors back from previous projects or pay rolling independent contractors through staffing companies for long periods of time.
A staffing firm’s primary objective is to supply quality contractors to corporations when needed. Speed and quality is of the essence. In order for a staffing firm to enable this operation and maintain a high level of satisfaction within their customer base they need to continuously invest. The majority of their spend goes toward the marketing and maintenance of these contractors. The corporation pays for that of course. At the outset, that is reasonable, considering that the corporation does not necessarily have the time or the savoir faire to do their own contingent workforce recruiting. It begins to get costly for the corporation when the contractor is needed for a longer time period but cannot hire them on permanent status: head count restrictions, permanent hiring freeze, project delays, additional workload etc...
Temporary to Permanent, without any additional fee clauses, are popular and beneficial to the corporation when the corporation can hire the contractor on a permanent basis. When the corporation cannot, often the corporation nor the contractor is allowed to continue their relationship unless the corporation buys the contractor.
Why choose a PEO:
- Reduced costs
- Standard Rate across the board – rate management through established rate cards
- There isn’t Temporary to Permanent placement clauses. This means that you can end and rehire the contractor as you wish if he has already been identified by the corporation through previous projects or placements with staffing firms.
- Turnover. Although this practice lacks in professionalism and good business etiquette, it is happening in the marketplace today. Because a PEO is not in the recruiting business the risk of offering your contractor a better opportunity is nonexistent.
- Proper classification of contractors reduces risks of co employment
- Proper processing of contractors ensures the right agreements and paperwork are signed and provided by the contractors to ensure the protection of the corporation, the contractor and the PEO.
The transition to a Professional Employer Organization can represent substantial cost savings for the corporation and therefore, why pay too much?
To learn more about PSC please do not hesitate to contact us at: info@paymentservicescorp.com or take our free Risk/Reward Questionaire. click below
Fifty-eight percent of Canadian hiring managers said they plan to add new employees in the second half of the year, according to a
survey by CareerBuilder.
Information technology ranked as the top area for recruitment with 30% of hiring managers saying they are adding jobs in that area. It was followed by customer service with 26% of managers hiring in this area.
"While companies plan to hire more workers in the second half of the year, they report they will do so gradually," said Brent Rasmussen, president of CareerBuilder North America. "In addition, they will continue to focus on revenue generating positions and maintaining their current staff levels in an effort to facilitate growth and sustain their businesses through the rest of 2010."
The survey included interviews with 239 Canadian hiring managers conducted between May 22 and June 3.
Source: SIA
In an ongoing effort to continue to provide superior customer satisfaction, Payment Services is proud to announce the release of their 2010 Contractor Satisfaction Survey.
PSC recognizes that within the PEO industry, competitive differentiation is ultimately limited to the provision of superior services. Therefore, we take the process of the survey and looking at the results very seriously. The data provided enables our team to refine our programs and processes and ensure that we continue to strive to be the company within the PEO industry by which all other like companies are measured.
To gain access to the survey results, readers can click the 2010 Contractor Satisfaction Survey Cover to gain access to the report.
Click Here
The survey will reveal to the reader...
- Employment Classification Demographics of the contractor community
- Graphically represent what areas of service have been exemplary and those that can be improved upon.
- See first-hand what the contractor community thinks of PSC's services
We trust that the data provided will demonstrate to our readers why PSC is rapidly becoming the leading Professional Employment Organization in North America. We are very pleased with the results revealed in the report and applaud our team's commitment to excellence. However, as the report will teach readers, PSC operates in the Japanese spirit of Kaizen. Continuous Improvement.
Please jump on the PSC Train Blog, and let us know what you think about contractor satisfaction.
To learn more about a PEO, click here to learn more and read our popular Blog WHAT IS A PEO, HOW IS IT DIFFERENT FROM AN ASO?
Over the past few weeks we have been discussing and sharing a lot of the information that has been coming out about the IRS and the misclassificat
ion of workers. We have covered many of the tax and human resource management aspects of the mounting pressure coming from the IRS.
But what what is the cost risk. We found this article posted by a NY Lawyer and felt that it gave a good example and real numbers to the potential risks.
by Fred Abramson on April 16, 2010
I have a technology company as a client who recently retainedmy office to advise them on a relatively common employment law. The company signed a contract with financial institution to perform help desk related work. They hired ten people to perform the work and had each of them sign an independent contractor agreement. All of the workers performed the work on the job site only. The all worked solely for the technology company for 40 hours a week. The company just received an evil notice from the IRS. The IRS believes that the workers are misclassified as independent contractors and should be employees.
The technology company now wonders if there are penalties for misclassifying the workers as an independent contractor. The IRS looks in part at the intent of the employer. If the IRS reclassifies a worker from independent contractor to employee, the employer may be liable for a penalty based on the amount of the tax that was not withheld because of the original misclassification. If the IRS finds that the misclassification was an honest mistake on the part of the employer, and the employer filed proper returns, the penalty against the employer is:
• 1.5% of the wages paid to the employee; and
• 20% of the amount that should have been withheld from the employee’s wages for FICA, but was not due to the misclassification.
If the IRS finds that the employer failed to file the proper returns, then, except where the failure is due to reasonable cause and not willful neglect, the penalties double. Then, the penalties are:
• 3% of the wages paid to the employees; and
• 40% of the amount that should have been withheld from the employee’s wages for FICA, but was not.
If the misclassification on the part of the employer is intentional and therefore the employer intentionally neglected to withhold the necessary employment taxes, the limits discussed above do not apply in assessing the employer’s liability. The penalties for intentional misclassification are more severe. Moreover, the limits are not applicable to the employee’s share of the FICA taxes if the worker is a “statutory employee,” nor where the employer withholds federal income tax from the worker’s wages, but does not withhold FICA.
Lastly, if the required to pay an “employee reclassification” tax liability, the employer may not recover the tax assessed from the employee. In addtion, the employer may not deduct the amount of tax assessed from the employee’s wages. The Internal Revenue Code provides further that the employee’s liability for his or her share of the tax is not affected by the assessment or payment of the penalty tax by the employer.
If you have a legal question regarding independent contractors in New York, contact the Law Office of Frederic R. Abramson at 212-233-0666
For a free Risk/Reward assessment. Please click below and fill out our quick form.
By Lionel Valdellon of TriNet
PEOs (professional employment organizations) provide small and medium-sized
companies with outsourced human resource services including employment, payroll, benefits, safety, and risk management services.
The PEO delivers value to its customers through a shared tax ID; this model is referred to as a “co-employer” relationship. The co-employer arrangement enables a company to transfer many of its key employer responsibilities to the PEO, including aspects of employer-related risk and compliance.
A common misconception of PEOs is that employers lose control through co-employment. Companies working with PEOs retain complete control over operations, workforce management, building company culture and defining the employment brand.
ASOs (administrative services organizations), like PEOs, oversee the administrative aspects of managing a company’s human resource functions. The most important difference between an ASO and a PEO is that the service provided through an ASO does not establish a co-employment relationship with the employees.
While an ASO does not sponsor employee benefit programs or workers compensation coverage, the ASO is generally active in arranging coverage and assisting the client in securing coverage. The client company remains the sole sponsor when working with an ASO.
Which tasks does a PEO typically handle on an employer’s behalf?
Both U.S. and Canadian governments now recognize there are two employers in a co-employment situation, but for the most part, government agencies look at the PEO as being as the responsible party for the administration and HR. They consider the PEO the “employer of record” for the purposes of federal and state employment laws such as wage and hour, civil rights, and similar laws imposed on employers.
This arrangement means employees’ paychecks will carry the name of the PEO – though, to the rest of the world, they are employed by the client. And if there are any legal problems arising from the HR function, the PEO assumes some of that risk.
HR functions that are not core to the business, including payroll and workers’ compensation coverage, are handled by the PEO. The PEO also becomes the sponsor of the employee benefits programs, such as health coverage and retirement plans.
So, you think all this hype about misclassification of employees is just a scare tactic? I don't think UPS the International Shipping Company feels that way after
the state of California gave them 12.8 million reasons to monitor their independent contractors. An this was just the state of California...
Hang on because as the Carpenter's song says, "We've only just begun".
Originally published March 1, 2010
The decision to classify workers as employees or independent contractors has always been difficult. But recent events suggest that the choice, or at least the consequences of getting it wrong, is also expensive. The benefits of classifying workers as independent contractors, especially where the distinction is close, may no longer be worth the risk.
Only a few weeks ago, shipping giant UPS agreed to pay a staggering $12.8 million to settle a class action lawsuit over the company's alleged misclassification of delivery drivers as independent contractors rather than employees. In the summer of 2008, several of UPS's delivery drivers filed a lawsuit in the United States District Court for the Northern District of California. The drivers claimed they were wrongfully classified as independent contractors rather than regular UPS employees, and as a result, were denied the benefits and protections of, among other things, the Fair Labor Standards Act ("FLSA"). Particularly, the drivers focused on the FLSA's minimum wage and overtime guarantees.
According to the drivers, UPS controlled almost every aspect of the working relationship. For example, the drivers alleged that UPS required packages be delivered and picked-up at certain times, that UPS dictated the drivers' dispatches, set the prices, and even controlled what the drivers wore. Essentially, the drivers claimed they were such an integral part of UPS's business, that they could not be said to have any separate or distinct business of their own. The court allowed the case to proceed as a class action, and the group eventually included roughly 2,400 UPS delivery drivers.
UPS denied the allegations, but eventually agreed to settle the case for $12.8 million (the settlement received provisional approval, but must still receive final approval from the court). Because the case settled before either a judge, jury, or more helpfully an appellate court, could decide the issue, we cannot know whether UPS in fact misclassified its drivers. That is, it is unclear whether the examples listed above necessarily create an employer/employee relationship. What is clear, however, is that the decision to treat its delivery drivers as independent contractors rather than employees ultimately cost UPS far more than it saved.
The real question is whether this case is an outlier or a sign of things to come. There are no reliable, or at least readily available, ways to track the number of misclassification suits filed each year. Thus, we do not know for sure whether these types of cases are increasing. Nonetheless, anecdotal evidence suggest that misclassification cases are far more common today than in years past.
Accordingly, employers should be aware of the general rules for distinguishing between employees and independent contractors. Unfortunately, the distinction is not always clear or straight-forward. There is no single test that the courts will use to determine whether an independent contractor is actually an employee. With that said, there are a few tests that businesses need to be aware of when deciding whether to classify a worker as an employee or independent contractor.
For example, the IRS has adopted its own test for distinguishing between employees and independent contractors. For several years, the IRS used a complicated 20-factor test. Recently, however, the IRS abandoned that test in favor of one based upon general common law principles. Under this new three part test, the IRS considers:
- the amount of behavioral control;
- the amount of financial control; and
- the general relationship between the parties.
There is no magic formula for determining how much control is too much, and the IRS is careful to point-out that no single factor is greater than the others. Businesses must look at the entire relationship. The more a business controls a worker, the more likely it is that an employment relationship exists.
Meanwhile, under the FLSA the courts use the "economic realities" test. This test focuses on the degree of economic dependence of the would be employee on the business with which he or she is connected. The more the worker financially relies upon the business, the more likely an employment relationship exists. The courts will consider factors such as:
- the degree of the employer's right to control the manner in which work is performed;
- the degree of skill required to perform the work;
- the worker's investment in the business;
- the permanence of the working relationship;
- the worker's opportunity for profit/loss; and
- the extent to which the work is an integral part of the business.
Control is the key. The more control a business has over the workforce, the more likely a court will find that an employment relationship exists, especially where the tasks being performed are an integral part of the business. Although there are countless situations in which courts will find that a worker is appropriately classified as an independent contractor, the UPS settlement is a reminder that the consequences of being wrong are severe, and that businesses should proceed with caution.
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DID YOU KNOW THAT QUEBEC IS PART OF CANADA?
Written by Maria Ricci, General Manger, PSC
Quebec is the only Canadian province with a predominantly French speaking population and the only one whose sole official language is French at the provincial level. What does this mean to you?
All Canadian and US companies doing business in Canada need to be aware of the different provincial labor laws, which is where PEO service providers can be of great value. In Quebec, when the employee (W2) and independent contractor population (1099) exceeds 45, not only does the corporation (PEO or Client) need to be prepared to adhere to the Quebec labor laws but they also need to be aware of the Quebec Language Laws. Please take note that the language laws will differ when a corporation does not have a physical location in Quebec. Also, if the contractor requests to be serviced in English then you should do so. Please keep in mind that the service and documentation needs to be made available and not imposed.
Service in French needs to be made available to all Independent Contractors and T4 Employees for the following:
- Customer Service Reps need to be fluent in French when communicating with the contractor population in Quebec. Whether it is for the initial review of the statement of work, for any payroll issues, technology issues and ongoing service.
- The onboarding package needs to be in French. Contractor or Employment Agreement, Federal and Provincial Tax Forms, Corporate Employee Handbook, Payroll Forms/Direct Deposit forms, Background Check Authorization form, Expense Reimbursement Forms, Time Sheet/Entry Instructions, Invoicing Procedures, Copy of Policies and Procedures etc...
- Payment advice and payroll stubs need to be sent to the contractor in French.
- The time keeping system needs to be available to them in French. Any in house technology and/or standard software packages need to be available to them in French also.
- Mass communications going out to the population must be written in French.
- Your website needs to be available in French.
The Charter of the French Language, also known as Bill 101 came into force in 1977. Since then they have audited, imposed and framed fundamental language rights for everyone in the province of Quebec. A certain amount of time is allocated by them to the corporation to translate and be compliant to their rules. Non Compliance is not an option and will prove to be very costly for the corporation in the long run if the corporation does not adhere to the rules set forth by the Language Police. PEO service providers manage your HR payroll services so that your company won't find itself in expensive non compliance situations.
Please share your views with us. Also, take a moment to complete our FREE Risk/Reward assessment and let us help you determine what opportunities for savings and/or potential risks you might have.