Category HR News

When is a worker an employee?
The IRS and state tax authorities are targeting the workforce that is incorrectly being classified as “1099 contractors” when in fact they are employees.

Why Are They Cracking Down?
The loss to tax authorities by treating legitimate employees as 1099 contractors is substantial. The employer is avoiding withholdings for workers’ comp premium, income tax, social security and Medicare. But the big reason?

Unemployment taxes.

This has become a serious issue not only on a state level, but also federal. Many states have depleted their “re-employment” funds and are relying on federal loans to pay benefits. Several states are behind in their loans and have seen their federal unemployment tax rate increase. Florida, for example, is three years behind in their loan payments and the rate has been increased from 0.8% to 1.7%. (The current federal procedure is to increase the rate 0.3% every year the payments are not made.)

So the employers who are incorrectly paying “employees under 1099” face serious fines, interest, back taxes and penalties.

In the following video, Remax of Avalon Park interviewed agent John Will Tenney to discuss the question:
When is a Worker a W-2 Employee vs. a 1099 Contractor?

Employers should be wary.  Under a recent initiative from the White House, the IRS is taking a dim view of incorrectly classified employees.

For the record, there is no such thing as a “1099 Employee.”  It’s W-2 employee or independent contractor.

So How Do You Know?
The State of Florida uses a list of questions which can be described as “enigmatic” at best:

A “Yes” answer for the following questions indicates that the worker is an employee:
1. Does the business provide instructions to the worker about when, where and how he or she is to perform the work?
2. Does the business provide training to the worker?
3. Are the services provided by the worker integrated into the business’ operations?
4. Must the services be rendered personally by the worker?
5. Does the business hire, supervise and pay assistants to the worker?
6. Is there a continuing relationship between the business and the worker?
7. Does the business set the work hours and schedule?
8. Does the worker devote substantially full time to the work of the business?
9. Is the work performed on the business’ premises?
10. Is the worker required to perform the services in an order or sequence set by the business?
11. Is the worker required to submit oral or written reports to the business?
12. Is the worker paid by the hour, week or month?
13. Does the business have the right to discharge the worker at will?
14. Can the worker terminate his or her relationship with the business any time he or she wishes without incurring liability to the business?
15. Does the business pay the traveling expenses of the worker?

A “Yes” answer for the following questions indicates that the worker is an Independent Contractor:
16. Does the worker furnish significant tools, materials and equipment?
17. Does the worker have a significant investment in the facilities?
18. Can the worker realize a profit or loss as a result of his or her services?
19. Does the worker provide services for more than one firm at a time?
20. Does the worker make his or her services available to the general public?

Some of the questions make sense while others have employers scratching their head and saying “huh?”

Where Can I Get Answers?
We strongly suggest consulting an HR expert or even your CPA.  If you can’t get answers there you can always contact us at PEO Pros – 800.788.8343

Can things go wrong for an employer? Of course. What can an employer do to ease the pain When Things Go Wrong?

Proper preparation can prevent problems. Having a professional partner can help solve problems.

Having a professional employer organization on your side can help prevent problems be the difference between making or breaking during an employee crisis. Things can go wrong. Things can go wrong with employees and administration, too. There are times having an experienced and professional group on the same team as the employer can help clean up the mess.

Some of the problems that can cripple a business that goes solo are:

Payroll/Tax errors.
No business owner is happy to receive letters from the IRS. Wouldn’t it be great if this could become Somebody Else’s Problem? Wouldn’t it be an advantage if all the employees were on someone else’s Federal ID number?

Workplace injuries.
It happens. Employees can get hurt on the job. What are the procedures? How does an employer avoid legal issues? Workers’ Comp Insurance is expensive for a reason. Doctors, Lawyers and Hospitals love comp claims, since there are no co-pays, deductibles or limits. How can employer make this problem “go away”? How does an employer keep the workers’ comp insurance premiums from rising? How do they avoid costly, end of year audits?

Disputes between Employees.
What are employers allowed to do? How do you handle a fight? How do you terminate a bad employee without incurring risk? How do you avoid an unemployment claim? How can you minimize the damage?

Employment Practices.
Is everything being done right? In compliance? Are there any potential lawsuits sitting out there? How can employers protect themselves from employee lawsuits?

Bad Employees
What can employer do to get rid of a bad employee without opening the gates for wrongful termination? What are the documentation procedures? Is there counseling required? Who knows the answers?

These are challenging questions. Is having a PEO an answer for all of them? Maybe. It depends a lot on the employer, the PEO and the relationship defined in the Client-Service agreement. Do you need an expert to help you select a PEO that matches your needs? That’s where PEO Pros comes in.

If any of the problems listed here sound familiar, or keep you up at night, perhaps you should contact us using the form below, or give us a call at 800-788-8343.

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As if Obamacare isn’t bad enough, now small employers have to worry about the complex issue of rising unemployment insurance and tax rates. Formerly a rather simple calculation, things have happened in several states that make things complicated.

Just what an employer needs, another thing to worry about.

It is a justified headache to worry about, too. Failure to properly pay unemployment taxes in a timely and correct fashion can result in penalties, interest and fines that far exceed the original amount owed.

So why the confusion?
Many states are not paying back loans they have drawn from the federal unemployment fund per the original Federal Unemployment Account act. In fact 19 states and the US Virgin Islands currently have loan balances (see the chart below)
The Federal Unemployment Account (FUA) provides for a loan fund for state unemployment programs to ensure a continued flow of benefits during times of economic downturn. According to the U.S. Department of Labor, Employment and Training Administration, 19 states and the U.S. Virgin Islands currently have loan balances in their Trust Fund accounts.

As of January 3, 2013, the most recent balances of outstanding state loans from the FUA are:

Source: National Conference of State Legislatures

Why is This Raising our Rates?
Previously, the FUTA, or Federal Unemployment Tax Act, was assessed on the first $7,000 of each employees wages. That number may be raised to $8,00 or $8,500, (depending on who you talk to) largely because the states have not paid back their loans. There is also another negative effect from this. The Standard Federal Tax Rate is set at 6.0% (formerly 6.2% but the extra .2% was repealed in 2010). This is high, and would be an excessive burden on employers. To counter this, the federal government has been extending a discount of 5.4% to all those states that are not in arrears. That makes the national rate 0.6%. However, since states are now “raiding” the unemployment funds for various expenses, including but not limited to unemployment benefits, they find themselves unable to pay back the loans. The discount is being reduced by a rate of 0.3% per year to all those states in arrears.

In Florida for example, 2012 marked the second year in arrears, so the FUTA rate in Florida for 2012 is set to 1.2%. Since it does not appear likely that Florida will pay back the loans this year (or any year for that matter) we can expect the FUTA rate to keep increasing until it reaches the maximum of 6.0%.

Is it a tax or insurance?
Good question. Since it is required by ALL employers, does it make a difference? Employers mustpay it: to the state quarterly (usually) and to the Federal fund annually (form 940). The checks are written to the IRS or the state equivalent so for working purposes, call it a tax.

What can an employer do about it?
The most important thing to do about it is to stay on top of it, and make sure that there are enough funds to pay the correct amount of unemployment taxes at the end of the fiscal year, when filing the 940. This is best served by consulting with an expert in the field, or making it someone else’s problem.

Who are the experts?
CPAs are trained in tax laws. Most of them do an excellent job of making sure an employer is in compliance.

Wait, How Can an Employer Make it Someone Else’s Problem?
More and more employers are placing their employees in a co-employment situation with a PEO or Employee Leasing company that shares a large part of the responsibility of tax compliance. In this way they know they have an expert as a partner.

For more information on this subject please use the contact form below:

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“What effect will Obamacare have on employers?”

It’s a question being asked by many small and medium sized business owners.

Recently overheard at a NAPEO convention: “If PEOs help business owners navigate through complexity, then we just got 2200 pages of complexity.”

“I don’t want any more employer problems” one business owner told us, “I’ve got enough headaches as it is. Now I have to follow all the guidelines in this 2200 page mess? Help me make all these problems go away …”

Using a custom PEO solution may not be the answer for all employers. Some do not have problems in any of these areas:

• Payroll and W-2 compliance
• Workers’ Compensation Insurance coverage
• Workplace safety procedures
• Drug free workplace procedures
• HR compliance and Homeland Security directives (I-9s)
• Unemployment Insurance Rates and issues
• “Re-employment” assistance
• Proper paperwork and documentation of disciplinary procedures
• Employee handbooks
• Proper application of the Affordable Health Care Act
• Proper benefits administration
• Employment Practices procedures and liability insurance
• Workplace signage and posters
• ADA compliance and required access
• Payroll deductions and compliance with garnishments
• Preventing employee tort situations
• Legal assistance in employee lawsuits

Common problems for employers? Maybe not. Possible? Yes. Keeping employers up at night? Definitely.

The new tax laws are aimed at small and medium sized business owners. They will carry the burden of funding our growing government. They do not have full-time lobbyists to prevent it. They have a target painted on their backs.

So how can an employer make all this “go away”?

In a Custom PEO Solution, the co-employment contract allows the PEO to become the employer of record and assume responsibility (and shared liability) for many of these concerns. Even in cases where complete liability is not assumed, isn’t it preferred to have a professional partner?

So if an employer wants to get rid of the headaches and worries that keep them from sleeping well, why not push off some of the liability and responsibility to a PEO?

Why not make it Somebody Else’s Problem?

Contact us using the form below if you think you would like to get rid of some of these problems.

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Is it worth it to go get a workers’ comp exemption from the state?

“Oh I don’t need comp, I’m exempt.” Have you heard this before?

Perhaps it is best to start with a few definitions to clear things up.

In Florida, Every employer is subject to the workers’ compensation act, regardless of how many employees they have¹. The statute more or less states that an employer shall cover the expenses and lost time of any employee hurt on the job.²

An exemption from outside coverage is available from several states when there are certain conditions met, such as 1 employee or less, all employees are also 25% or more owners, etc. This exemption must be applied for, paid for and filed with the state.³

There are no “automatic exemptions.” No one is “exempt” by default. The state must approve the exemption.

Once an employer has received such an exemption, he or she is making a promise to the state that they will pay for all workers’ compensation claims with their own funds. In a phrase, they are “self-insured.”

Some employers argue that being self-insured is enough, since a lawsuit will only proceed against an insurance company. Please be advised that lawyers are aware that most small business owners have other assets, such as homes, cars, retirement funds, children’s college funds, etc. Since some collect a percentage based on what is recovered, it can be profitable to pursue private assets.

Exemptions No Longer Being Honored
Add to this confusion that many larger contractors and municipalities are no longer accepting workers’ comp exemptions in lieu of an actual policy. They have found that lawyers have learned to pierce the veil of an exemption and perform what is known as “climbing the ladder” to the actual contractor in the case of a sub-contractor injury. Exemptions do not protect the contractors.

So is it worth the fee ($50 to $100 for “construction” business based on the state) and the application to get an exemption? A small business owner may consider getting comp coverage instead. There are many options available, including direct policies, “pay as you go” polices from payroll companies (even Paychex and ADP are offering this now) or even the more extensive liability coverage available from a PEO (formerly Employee Leasing Company).

It is true that initially it would appear that an exemption is indeed cheaper. But as is the case with all insurance, consider this: What if something happens? What if someone gets hurt? What if the OWNER gets hurt seriously? Loses a limb or loss of an organ? A properly written and paid workers’ compensation policy will pay for all medical expenses, legal fees and up to two-thirds of lost wages for as long as the injury is in effect.

Choices: It’s left up to the business owner.
The business owner has a decision to make, to run with an exemption or to have peace of mind through a somewhat more expensive workers’ comp policy.
If a small business owner wishes to know more about exemptions, their relative uses and other options available, please use the contact form below.

The authors of this article had assistance from the members of The PEO Message, a Facebook group used to communicate within the PEO and Workers’ Comp industry. Specifically, thanks go to Doug Lilak, Christopher Yarn, Chad Filley, and Jeffrey Rendel for their valued input.

Notes:
From Florida Statutes Chapter 440
¹ 440.03 Application.–Every employer and employee as defined in s. 440.02 shall be bound by the provisions of this chapter.

² 440.02 (16)(a) “Employer” means the state and all political subdivisions thereof, all public and quasi-public corporations therein, every person carrying on any employment, and the legal representative of a deceased person or the receiver or trustees of any person. “Employer” also includes employment agencies, employee leasing companies, and similar agents who provide employees to other persons. If the employer is a corporation, parties in actual control of the corporation, including, but not limited to, the president, officers who exercise broad corporate powers, directors, and all shareholders who directly or indirectly own a controlling interest in the corporation, are considered the employer for the purposes of ss. 440.105, 440.106, and 440.107.

³ 440.05

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While there are many advantages to having a PEO manage your workforce, many times it is troubles with Workers’ Compensation Insurance that brings the client to a PEO.

Is it better to be with a PEO? To have a professional partner to assist you with risk management? We of course, have a bias, but here is another point of view. This is an excellent article written by Antony Kelly
Antony Kelly’s Article

Here are some excerpts we particularly liked:
“Simply put, traditional workers comp coverage will require a small business owner to make an upfront deposit, based on an estimate of their gross annual wages. The company will send quarterly information to the insurer, who then calculates the bill and requests payments. Since these are all estimates, however, an audit is required, including a reconciliation process that will help bring the numbers together. Unfortunately, if the deposits and quarterly estimates do not cover the total amount due, the company is mandated to reimburse the carrier at the end of the year. This could potentially be a substantial cut to the small business person’s cash flow. Interestingly enough, payments that extend beyond the balance may roll over into next years beginning balance; nice for the carrier, bad for the business owner. ”

“PEO companies not only provide you with pay as you go workers compensation but also outsourced benefits and a variety of resources that help you comply with employment related issues and administrative paperwork. In fact, many businesses under 100 employees should be able to significanly reduce their in-house administrative burden through the use of a PEO, which provides additional value over traditional and pay as you go workers comp plans. ”

Thank you to Antony Kelly for writing this article, and to Shane Underwood for finding it.

Alabama is a friendly state towards PEOs, so there is rarely a problem finding a match for your specific needs here.

Alabama is a “loss-cost” state, where the workers’ comp carriers can set their own rates by showing their own claims history. The rates must be approved, but still, it is possible to be competitive by changing carriers from time to time, and that includes PEOs.

We have PEO partners in the following locations:
Birmingham, Dothan, Mobile, Montgomery, Muscle Shoals / Florence, Columbus, and Gadsden just to name a few.

Here is an article that explains a little more about PEO Services: Why Use a PEO?

If you would like to get some more information on a quote, please use the form below:

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PEO Services Workers Compensation Pay As You Go Comp Services Construction General Liability Health Insurance Broker/Agency Alliance Other Business Insurance Agent Appointment Other

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Please tell us more about your business? What do you do? Your line of business?

Comments - for PEO services it would be helpful to know how many employees you have, what states do they work, what do they do, and an rough idea of what your payroll is and how often (weekly, bi-weekly, etc)

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Florida is the birth place of PEOs, so there is rarely a problem finding a match for your specific needs here.

PEO Pros is an independent broker, not affiliated with any one PEO but has contracts and agreements with over 125 choices. Doesn’t it make sense to let the Pros find the best match for you?

PEOs in Florida can provide the following services to name a few:

• Payroll Service in Florida
• Workers’ Comp in Florida (or Florida Workers’ Comp)
• Assistance with Unemployment Insurance in Florida
• Assistance with Health Insurance in Florida

We have PEO partners in the following locations:
Orlando, Tampa, Jacksonville, Miami, Ft. Lauderdale, Sarasota, Bradenton, Ft. Myers, Port Charlotte, Panama City, Ft. Walton Beach, Tallahassee, Pensacola, Destin, Orange County, Lake County, Osceola County, Seminole County, Volusia County, Brevard County, Okaloosa County, Santa Rosa County and Polk County; just to name a few.

Here is an article that explains a little more about PEO Services: Why Use a PEO?

If you would like to get some more information on a quote, please use the form below:

Your Name

Company Name

Email

Phone #

Information Concerning

PEO Services Workers Compensation Pay As You Go Comp Services Construction General Liability Health Insurance Broker/Agency Alliance Other Business Insurance Agent Appointment Other

How Did You Find Us?

Please tell us more about your business? What do you do? Your line of business?

Comments - for PEO services it would be helpful to know how many employees you have, what states do they work, what do they do, and an rough idea of what your payroll is and how often (weekly, bi-weekly, etc)

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Shown here with strategic partner Jason Irving of Urban Recruiters Staffing, PEO Pros CEO John Will Tenney has written an article for Google Knols discussing the history of PEOs and how they differ from Staffing Companies.

“We get asked this question all the time.” Tenney tells us, “It’s not a simple answer. I expect this will only be the first of a few articles discussing it. For example, with a recovering economy such as we are in today, Staffing makes a lot more sense for business owners that are cautiously expanding their business.”

Here is the link to the Knol. Your comments and reviews are welcomed.

Excerpt: “In many ways, PEOs and Staffing companies are similar, but in fact they cover the opposite ends of the HR spectrum. In this article, John Will Tenney of PEO Pros explains the history and formation of PEOs, and a little of the differences and similarities between PEOs and Staffing.”

Why should an insurance agent work with a PEO Broker?

Here at PEO Pros / PAY-surance HR, we are often asked that question. Since many PEO Brokers are also insurance agents, the strategic partnership may not be obvious. However, most PEO Brokers are smart enough to leave traditional commercial insurance needs to the traditional commercial insurance agents. We certainly do. We figure they are experts at what they do, and we are experts at what we do. Why would we take business away from Agents who could use us for certain niche clients?

So What is That Niche?
There are several:

1: Difficult to place workers’ comp clients. Often times, a client who has difficulty procuring workers’ comp can get coverage by placing their employees with a PEO. This could be a smaller client who doesn’t have a lot of premium, a higher risk client or even a client who has had some claims history in the past.
2: Clients who have had a lot of unemployment claims. There is nothing better than a professional HR partner to assist in reducing unemployment claims.
3: Clients who have had HR difficulties, such as lawsuits from employees. Again, a professional HR partner can assist a client in putting in proper procedures to avoid unnecessary lawsuits.
4: Clients who wish to reduce employee turnover. Often the benefit solutions available from a PEO can offer that high level environment to a smaller client, in such areas as health insurance, 401k benefits, group life insurance and other areas.

We at PEO Pros / PAY-surance HR are always willing to talk to traditional agents and agencies about strategic partnerships. Often times our clients need a service they should get from those agents, such as commercial auto, property & casualty, general liability or even surplus lines and bonds.

If you are an agent, or an agency that is interested in this type of strategic partnership, please feel free to contact us using the form below.

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