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Hey everybody, it’s Gene Marks. Welcome to this week’s episode of the Hartford Small Biz Ahead Podcast. Thank you so much for joining me. I’m gonna talk to you today or for this week about professional employer organizations or PEOs. I’ve been like diving into this very, very deeply recently. And, and I’ll tell you the reason why. I’m writing a lot about, and I’m reporting a lot about all the regulations that are coming on employers during 2023. And there are a lot, by the way, that are coming down the road. We’ve had in the past to deal with discrimination and harassment regulations. But many, many states are now expanding, mandated paid time off, mandated sick time. They have their own local rules for discrimination and harassment. They have their own local rooms for paid transparency and minimum wage.
And that’s just at the local level. At the federal level, the Department of Labor, the Federal Trade Commission, the EEOC, OSHA, they are all working on various rules that are gonna be impacting a lot of us as employers. Just to give you an example, the Department of Labor is coming up with a changed worker classification rules sometime this year, which may cause us to have to reclassify a lot of our independent contractors as employees. The Department of Labor is also working on changing overtime rules, which means that some of our employees that are making a certain amount of money… that level’s gonna go up. So more people would be entitled to overtime. In addition to that the FTC wants to abolish a non-compete agreement. So if you have a non-compete agreement and an employment agreement, and somebody leaves your company and goes to work for a competitor, the FTC plans to get rid of that.
You can’t tell them that they can’t do that. There’s also recent noise from the National Labor Relations Board about severance payments. They have just issued a ruling saying that, you cannot tie a severance payment to keeping an employee quiet when they leave your business. They quit and then they disparage your business online or something. You can’t say, well, you won’t get your severance unless that happens and that’s going on. And that doesn’t even include the EEOCs increased enforcement on harassment and discrimination OSHA rules coming out for safety. It’s a bunch of stuff. Okay? Which brings me to PEOs professional employer organizations, they’ve been around for years. They oftentimes get intermingled in the conversation with employee leasing. It’s becoming harder and harder to have employees.
It’s harder to track not only all the different pay rules and the vacation rules, the state, the local rules, the federal rules, the regulations. You don’t wanna get into trouble. You need an HR person. And a lot of smaller companies can’t afford a full or even a part-time HR person. It’s a special expertise. It’s like anything else. If you try and do this yourself or just expect that your office manager is gonna do it for you, you’re gonna run into problems. You’re gonna be disappointed because it’s a very technical profession. What is HR nowadays. Now, a PEO does that for you. You basically outsource your employees to the PEO and again, professional employer organization, they become a co-employer with you and your employees. They’re like the technical employer of record.
So there’s this thing you gotta get through, like this hurdle in your mind because when your employees, if you work with a PEO, your employees get paychecks from the PEO. So it literally says their name on the paycheck, not your company’s name. So that’s kind of a weird thing, but you’re the co-employer. So if you partner with a PEO, you still are the employer, you still get all the advantages of an employer. You get the tax deductions and you get the credits and you get the incentives as an employer. To give you an example, any employer that had a PEO during COVID were still eligible to get paycheck protection program loans or the employer retention tax credit. So they were still, even though they were using a PEO, the employer still got all the advantages of whatever employer incentives are out there.
So you’re not gonna lose any of that. In addition to that, the PEO takes your employees, puts them into a large employee group with all their other clients, and then can negotiate lower health insurance rates and retirement rates as well. You’re not forced to go on their retirement plans or health insurance plans, but you may find that the plans that they’re offering are actually less expensive than what you’re currently paying. And so much so that whatever rates the PEO is charging can be made up for in savings in health insurance, because it’s just a, it’s a bigger pool. So there were those benefits to realize. Finally and I think just as importantly, if not more importantly, the PEO if you have a good one, is your HR firm. So any policies and procedures, onboarding and offboarding, hiring and terminating employees, rules about drug testing and workplace behavior, policy manuals, sexual discrimination, harassment issues, all of those things that you know that, that we have to deal with as business owners.
Your PEO deals with, they are your HR company. When the DOL, the Department of Labor starts this worker classification rule, and you’re gonna agonize, is this person a 1099 or if a person should be an employee. You don’t really have to do that anymore with a PEO. They’re the ones that are gonna make this determination for you. Now, a little word of warning here with like any outsourced service or professional, you’re not completely wiping your hands clean, okay? If you’re gonna outsource HR to a PEO you still have to keep a good oversight on them and understand the rules and the policies that they’re putting into place and proposing. It’s still your business and your employees and frankly, your liability if something really goes wrong.
PEOs like any outsource providers can make mistakes like anybody else, but for the most part, they really do seem to relieve the burden for a lot of employers. And I see them growing in popularity. I see a lot of my clients asking now about PEOs. They’re just fed up with dealing with all of the issues that one has to deal with when you have employees. And it’s like having a payroll company on steroids because, they’re doing all the HR stuff as well. So if you do have a payroll company, I would ask them about any PEO services. If you’re interested in this, go ahead and google professional employer organization. Feel free to reach out to me directly if you’ve got any questions. I can also make referrals. It is definitely something that you should consider to help manage your employees going forward, reduce your risk, and maybe even save some money on some of the benefits that you’re providing.
So yeah, PEOs, I think they’re in for 2023. I’m seeing a lot of movement on them. I think it’s something that you should be considering. All right, you’ve been listening to Gene Marks. This is the Hartford Small Biz Ahead podcast. I hope you’ve gotten some good information from this. If you need any tips or help or advice in running your business, please feel free to check us out at SmallBizAhead.com or SBA.TheHartford.com. Again, my name is Gene Marks. Thanks so much for joining me. Of course. I’ll be back next week with another thought or tip for helping to run your business. Hope you found this helpful as well. Look forward to speaking with you again next week. Take care.
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