If you’re like most of us these days, we’re taking time and carefully evaluating what we need versus what we want, what’s necessary and what’s a luxury. This is happening in households, and yes, in corporate boardrooms across the globe. Things are changing, they’ve been altered, modified and there can be a price to be paid. One thing that has changed is how governments are scrutinizing businesses today. In North America, both U.S. and Canadian governments are cracking down on companies who have a misclassified workforce, and the penalties for misclassified workers or contractors are steep. These government initiatives may be putting your company at an increased risk. So the question becomes are you certain that your needs in this area are adequately met by your current practices or should you be considering PEO (professional employer organization) services?
With that in mind here are:
5 ways a PEO services company can benefit your company
- Standardize the processing of all legal documents- Is all of your company’s documentation in order and meeting all the current requirements? PEO’s will implement a program that ensures your company is not at legal risk (very costly) for incomplete agreements, intellectual property exclusivity, non solicitation etc.
- Strict on boarding and engagement processes for every contractor- How is your company’s new hire process? Is it ironclad? Or are there shortcomings? Misclassification of workers is being felt by companies like Fedex and Microsoft and the government penalties have been in the millions of dollars. PEO services mitigate or eliminate these risks.
- Process automation- Each contractor is processed through an automated system with built in safeguards that control approvals, rates etc. that streamline your operations saving time and money.
- Expense processing automation- How does your company manage this? Is it failsafe? How much valuable time is being taken up with this task? How much are errors costing? PEO services automate the process dramatically reducing the risk of error and saving the time and effort staff are currently spending on this matter.
- Record and payroll management- Can you imagine not having to address all of the questions and concerns of your contractor workforce? What about co-employment issues, has your company ever had to cross that bridge? A PEO manages all of these issues and there can be significant cost savings both in staff time and legal fees associated with many of the issues that come up.
If you have all of this well in hand, great! But if you have any questions or concerns, get them looked into, contact a PEO and see how they can help, with the risks and penalties that are associated with companies who are found to be non compliant in regards to their workforce classification, we believe this is a necessity, not a luxury!
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
FedEx Ground has agreed to pay the state more than $3
million to settle claims that the company misclassified its drivers as independent contractors, Attorney General Martha Coakley’s office announced Thursday.
Coakley’s office had alleged that Pittsburgh-based FedEx Ground had made insufficient payments to the state for payroll taxes, worker’s compensation and unemployment assistance as a result of the misclassification.
In the announcement of the settlement, Coakley called it a “step to level the playing field for businesses.”
The settlement followed a joint investigation by Coakley’s office, the Executive Office of Labor and Workforce Development and the Department of Revenue. The investigation revealed that FedEx Ground’s misclassification of employees had resulted in “significant underpayments” to the Department of Revenue, Division of Industrial Accidents and Department of Unemployment Assistance, according to Coakley’s office.
The settlement also provides for a payment for the 13 drivers named in the attorney general’s citation, according to Coakley’s office.
FedEx Ground drivers in the state have also brought their own lawsuit against FedEx Ground - which is pending and not affected by the settlement with Coakley’s office - and FedEx Ground denies liability in the settlement, according to Coakley’s office.
As our readers know by now, that the IRS is continuing to look at alternative means of revenue generation. Attacking the area of misclassified work
ers was one that we have focused on and now this is possibly the next.
IRS may not only use this to to generate revenue, but find a way to solve for the growing Social Security shortages. Many of us hear varying numbers describing the shortfall in Social Security funds for retiring baby-boomers. Several plans have been submitted to the Obama administration that would put more government control over 401(K) plans as a means to help support those shortfalls.
IRS Employee Plans Compliance Unit has launched its 401(k) Compliance
Check Questionnaire Project. The will be sending instruction letters to 1,200 random sponsors of 401(k) plans that filed an Annual Report for the 2007 plan year.
IRS intends to use the information to identify key compliance issues for future guidance on, and enforcement of, these issues. The questionnaire is not an IRS audit or investigation, however,failure to respond will result in IRS enforcement action, which may include an examination of the 401(k) plan.
The Questionnaire seeks detailed information on a wide range of topics. Topics include: demographics,participation, employer and employee contributions, top-heavy and nondiscrimination testing, distributions (including plan loans), automatic contribution arrangements, designated Roth features, plan operations
and administration, and IRS voluntary compliance programs.
The Questionnaire can be seen on the IRS website at 401(K) Questionnaire (Click on "View/Print the Guide to Completion of the 401(k) Questionnaire").
If you receive the instruction letter, the Questionnaire must be completed and submitted to the IRS within 90 days of the date on the letter. While the Questionnaire is publicly available on the IRS website, plan sponsors completing the Questionnaire must do so through a secure on line system on the IRS website.
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?
The Department of Labor (DOL) will find employers in violation of the law an
d will take legal action against them if they do not have an effective plan in place to protect workers from violations of their workplace rights. Companies without such a plan are breaking the law.
The DOL Spring 2010 publication, issued this week, specifically says, “Employers and others must ‘find and fix’ violations — that is, assure compliance — before a Labor Department investigator arrives at the workplace. Employers and others in the Department’s regulated communities must understand that the burden is on them to obey the law, not on the Labor Department to catch them violating the law. This is the heart of the Labor Department’s new strategy. We are going to replace ‘catch me if you can’ with ‘Plan/Prevent/Protect.’”
This means that companies must have a plan to prevent the misclassification of workers as independent contractors. The DOL investigates violations of the Fair Labor Standards Act (FLSA), which includes misclassifying workers as independent contractors. The DOL applies its own test (the Economic Realities Test, which has a different emphasis than the IRS’ 3 Areas of Control Test) for determining whether a company has misclassified an employee as an independent contractor. If the DOL determines that the worker was misclassified, and otherwise would have been entitled to minimum wage and overtime pay under the FLSA, the company may be required to pay the employee back wages and prospectively re-classify the worker as an employee entitled to minimum wage and overtime. These expenses can be cost-prohibitive.
This aggressive new policy exposes employers to investigations by the DOL – investigations in which employers will need to prove their innocence by showing that they have an effective plan in place to protect workers from violations – including violations of the FLSA.
Does your company have a plan?
PSC can help create and prevent. Contact us or take our Free Risk/Reward Assessment.
As we continue to report on the impending changes regarding the misclassification of workers, it is obvious that the changes being implemented will have long 
reaching effects on much of the Human Resource Related Services. As the article below shows, these changes will have an effect on the Fair Labor Standards Act (FLSA). Share with us where you're seeing impact.
Employee Misclassification Bill Proposes Changes to FLSA [Compensation.BLR.com]
Employers who misclassify their employees as non-employees are the target of a bill brought before Congress earlier this month. The bill would require organizations to keep accurate records of non-employees, such as independent contractors. Employers would also face new penalties for misclassifying employees.
The bill, referred to as the Employee Misclassification Prevention Act, proposes to make amendments to the record keeping and notice requirements section of the FLSA.
The bill would require employers who are subject to FLSA to keep accurate records of all workers, employees and non employees (e.g. independent contractors). Records would include the hours worked, payment, and classification of each worker.
Employers would have to give notices to all of their workers, employees and non-employees, upon hire or if there was any change of the employee's classification status. Written notices would need to:
- Inform the worker of their classification
- Direct them to the appropriate Department of Labor (DOL) website for further information
- Provide contact information to the local DOL office
- Include a special paragraph for non-employees regarding their rights
The bill would prohibit organizations from firing or discriminating against any worker, employee or non-employee, for filing a complaint, testifying in a hearing, or serving on an industry committee regarding misclassification practices.
The language of the Special Penalty for Certain Misclassification, record keeping, and Notice Violations-Section 16 of the FLSA would be changed to include "individuals" in addition to employees. In addition, civil penalties for misclassification practices would be increased to up to $1,100 per worker, and up to $5,000 per worker for willful repeat violations.
The bill also includes a provision for the Secretary of Labor to establish an employees' rights website.
In addition to the amendments proposed to the FLSA, the bill aims to make changes to the Social Security Act (42 U.S.C. 503(a)). The changes are intended to increase enforcement by:
- Improving auditing and investigative procedures
- Issuing quarterly report s to the Secretary of Labor on findings
- Establishing administrative penalties for misclassification practices
To increase effective enforcement of misclassification, the bill seeks to promote inter-department communication. The bill proposes that if any section of the DOL has evidence of an employer participating in misclassification, they should report the information to the Wage and Hour Division (WHD), who then can choose to refer it to the Internal Revenue Service (IRS).
The act would also allow the WHD to target employers for auditing purposes if they are in industry with a history of misclassifying employees.
The bill was referred to the Committee on Education and Labor and the Committee on Ways and Means for review.
The entire bill, H.R. 5107, is available online at the Library of Congress website.
To determine if your firm is at risk...take PSC's free RISK/REWARD assessment. Click sign below.
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.
President Obama has signed into law the Hiring Incentives to Restore Employment (HIRE) Act, which is focused on accelerating the hiring of unemployed workers.
The HIRE Act has many provisions that impact employers, including a payroll tax exemption, and increased tax credits for employers that meet certain eligibility requirements. The legislation immediately enhances employers’ cash flow by permitting employers to retain the employer portion of the Social Security tax ordinarily remitted.
Social Security Tax Exemption
The 6.2% Employer Social Security Tax exemption applies to previously unemployed individuals hired after February 3, 2010 who have worked less than 40 hours during the 60-day period prior to employment and whose 2010 earned wages after March 18, 2010 and before January 1, 2011 do not exceed $106,800.*
- Employers can save the 6.2% Employer Social Security Tax, whether they hire a $40,000 worker, or a $90,000 worker. Employers, including nonprofit organizations, and colleges and universities, would not have to wait until 2011 to benefit from this tax relief because savings would accrue with each payroll processed.
- The legislation also encourages businesses to hire workers earlier in the year because the tax benefit will be greater. For example, a $60,000 worker hired on April 1 saves an employer about $2,800 in taxes. Delaying the hiring until June 1 would reduce savings to about $2,200.
- This exemption has no cap or limit as to the total amount of tax benefits that can be claimed by an employer. Employers can save up to $6,622 per qualifying worker, whether they hire one worker or hundreds of new workers.
Tax Credit
Employers will receive an income tax credit, which is either $1,000 for each qualifying worker hired after February 3, 2010, and employed for at least 52 consecutive weeks, or 6.2% of wages paid to the qualifying worker over the 52-week period, whichever is less. Wages during the last 26 weeks must be at least 80 percent of wages paid for the first 26 weeks.
- Any new hire must certify "by signed affidavit," under penalties of perjury, that he/she has "not been employed for more than 40 hours during the 60-day period ending on the date such individual begins such employment."
- Neither the 6.2% Employer Social Security Tax exemption nor the retention tax credit is permitted if a person is hired to replace another employee "unless such other employee is separated from employment voluntarily or for cause."
The information on this site is provided solely as a courtesy and should not be construed as legal advice. Your legal counsel should be consulted for updates on law and guidance that may have an impact on your organization and the specific facts related to your business.
* The 6.2% Employer Social Security Tax exemption applies to previously unemployed individuals hired after February 3, 2010 who have worked less than 40 hours during the 60-day period prior to employment and whose 2010 earned wages after March 18, 2010 and before January 1, 2011 do not exceed $106,800. If an otherwise qualifying individual earns more than $106,800, then the Employer Social Security Tax exemption only applies to the first $106,800 of qualifying wages. Other conditions may apply.
Additional Details: To qualify for the $1000 business tax credit, an employee must be hired after February 3, 2010 and employed for at least 52 consecutive weeks. Other conditions may apply. Wages paid to otherwise-qualifying individuals prior to enactment of the HIRE Act are still subject to the Social Security Tax. As part of this calculation, it is assumed that all February wages and half of March’s wages are subject to the Social Security Tax. Actual results may vary and may depend on when the HIRE is finally passed into law.
by Maria Ricci, GM, PSC The Contractor Engagement Checklist we produced last week prepares the employer of record for the proper on-boarding of a contractor to avoid any 
problems later. The continuity and ease of this administration ultimately gives the client, where the contractor is working, a positive experience.
However, you and your contractor have an important role to play to ensure that the relationship is a successful one. Below you will find some keys to professional conduct that will make the relationship go smoothly and insure a positive outcome for all involved.
CONTRACTOR RESPONSIBILITIES: