Federal 2010 Budget Provisions Effect Employee Leasing and PEO Arrangements.

Bruce Silver
Employers Rx LLC

President Barak Obamas recently announced 2010 budget proposal contains some payroll-related provisions that will have a major impact on the way that payroll taxes are reported after December 31, 2009.
Currently, there is uncertainty as to whether the employee leasing company or its client is liable for unpaid federal employment taxes arising with respect to wages paid to the client’s workers. When an employee leasing company or professional employer organization files employment tax returns using its own name and employer identification number, but fails to pay some or all of the taxes due, or when no returns are filed with respect to wages paid by a taxpayer that uses an employee leasing company, there can be confusion as to how federal employment taxes are assessed and collected.

The proposal establishes standards for holding employee leasing companies jointly and severally liable with their clients for federal employment taxes. The proposal also sets standards which will place responsibility for, and hold employee leasing companies and PEOs solely liable, for payment of taxes in some cases. The provision would be effective for employment tax returns required to be filed with respect to wages paid after December 31, 2009.

Employers Rx Among Odesk.com's 100 Best Outsourcing Blogs

HR Outsourcing consulting firm Employers Rx LLC, is proud to announce that their blog, HR Outsourcing Solutions, was included among the top blogs in the HRO and PEO field. The blog was recently named by Odesk.com as one of their 100 Best Outsourcing and Offshoring Blogs, and was recognized as one of only four in the category of Human Resources. Odesk.com’s Tamara Rice observed “Of course, Employers Rx is not just offering their services, but advice for HRO agents too. Go straight to this HR outsourcing archive and start reading–not all articles are original content, but all are relevant.”. Also honored were blogs from HR Outsourcing, Outsourcing-HR, and industry-leading professional employer organization TriNet HR.

The popular blog, HR Outsourcing Solutions, has been an informative online resource from it’s first entry in July 2007. On an early Sunday morning, company founder Bruce Silver sat down at his computer. “I had just finished reading an article on Bnet.com about Google’s website Blogger. I came up with the crazy idea that I could do that too. The result wasn’t pretty, but it was a start” he said. From that time forward the blog has provided it’s readers with helpful tips for small business owners and entrepreneurs. Topics have included saving on group health insurance, HR compliance, payroll, workers compensation, and how to shop for an employee leasing company or professional employer organization.

HR Outsourcing Solutions will be incorporated into their newly redesigned Employers Rx LLC website, which is scheduled for launch next month. Make sure to visit us by bookmarking our website: http://www.employers-Rx.com.

A Day In The Life Of A HRO PEO Consultant

Bruce Silver
Employers Rx LLC

On any given week, Employers Rx LLC has between five and ten accounts in various stages of our (RFP) request for proposal process. If you have personally shopped for an employee leasing company or professional employer organization, then you know first hand, what a daunting experience it can be. You’re aware of all the questions they ask, the forms you have to complete, the company and employee information they require, the emails, phone calls, reams of paperwork they create, all the time wasted and productivity lost.

Now imagine dealing with six sometimes eight different HR companies, responding to questions from underwriters, risk managers, sales managers, all wanting in depth information about your company, in a certain format, on their forms, and the list goes on. If that is not enough, imagine what it can be like when you are doing this for eight or ten clients a week. Welcome to my world.

Our clients this week include an intimate apparel company with locations in NYC, PA, and Bentonville, AR, a 5 state property management company based in Chicago, a public company who provides medical staffing nationwide, a manufacturer of ATV accessories in IA, a publisher in Stuart, FL, a medical supply company in Rochester, NY, and 2 more. These accounts represent almost 400 full and part time employees with over $25 million in annual payroll. Our first goal is secure the most competitive rates for our clients, bona fide offers the first time,without any conditions, additional fees or hidden costs.

A typical day starts around 5:30am, after walking the dogs, I sit down with my first cup for freshly ground coffee and check the batch of overnight emails. I am greeted by a message from one of the “Big 3” PEO’s complaining that our client’s RFP has their health statement filled out on a competitor’s form, and that his underwriter would not accept it. As with many of our clients, providing affordable health insurance coverage for their employees is a major problem. In this case, the client has been happy with Aetna for years. Usually, we send out our own generic health questionnaire. Since this client’s RFP will only be submitted to PEO’s that have a master plan from Aetna, we opted for an “official” Aetna group health statement. Never again.

Unfortunately, this was only half of the complaint. The “Big 3” PEO also requested the client’s most recent payroll run. Our client has some seasonal employees, and was thorough enough to provide us with a breakdown by state and code of their expected annual payroll. This was in addition to providing the last quarterly report. Because it wasn’t their last weekly payroll run. My rep would have to call his VP for an exception. After a flurry of emails, phone calls, and even a personal visit by their executive VP, I am happy to report that exceptions were made, and our client has finally received a competitive proposal.

My next email was from another professional employer who I call “Big 5”. He too is complaining that our client provided information on a competitors form, but was willing to make an exception. However, he had issues with another client’s RFP. Once again, group health insurance is a primary concern. Our client has 5 former employees covered under COBRA, and the “Big 5” underwriter wants birth dates and termination dates before they can make a firm offer with set rates. It has only taken us six weeks to get to this point, another few days won’t make a difference? NOT.

What frustrates us the most is trying to get all of the required information from our clients. Very often we are working directly with the business owner who is wearing so many hats, they rarely have the time to compile the payroll, workers compensation, and health insurance documentation we need. Even when dealing with a company’s HR Director, comptroller or office manager, getting all the forms completed and returned in a timely manner, despite all the technology, still remains our greatest challenge.

We welcome any and all suggestions, and if you’re a prospective client, we appreciate your cooperation in assisting us to do the very best job we can, for you and for your organization. Thanks again for the opportunity.

Employers cannot prematurely claim COBRA credit

Bruce Silver
Employers Rx LLC

The American Recovery and Reinvestment Act of 2009 has added to the already complex and overwhelming administrative burden that employers are responsible to comply with. COBRA regulations are just another example of the patchwork of regulations designed to plug the holes in our corporate for-profit health insurance system. Notice! I did not say "healthcare" system.

Notice! I did not say "Healthcare" system.

A "Healthcare" system addresses the actual delivery of health care services. Insurance companies have nothing to do with providing services, they are simply put .... a funding mechanism. These companies, indeed institutions, have developed and implemented a convoluted system for transferring payments from "consumers" to service providers while wasting billions of dollars on claims administration, legal, lobbying, marketing, sales and underwriting expenses. This doesn't account for billions more in executive salaries and stock options, and billions more expended by doctors, labs, hospitals, and pharmacies in order to navigate their systems.

We "Can" Do Better!!!

Until then, read the latest from the Department of Labor and the Internal Revenue Service.

Employers cannot claim the new COBRA premium assistance credit until they receive the 35% payment from the former employee, Treasury Department and IRS officials said on April 6. Additionally, being called up to military duty may be an involuntary termination triggering eligibility for the credit, they clarified. The Treasury and IRS officials spoke during a webcast about COBRA premium assistance sponsored by the Department of Labor (DOL).

Premium reduction. Individuals who are involuntarily separated from employment between September 1, 2008, and December 31, 2009, may be eligible for temporary COBRA premium assistance. The American Recovery and Reinvestment Act of 2009 (P.L. 111-5) (2009 Recovery Act) allows dislocated workers to pay 35% of their COBRA continuation premium and be treated as paying the full premium. Employers will pay the remaining 65%.

The 2009 Recovery Act also provides a limited second-chance window to elect COBRA coverage. The subsidy is generally available for nine months.

The IRS and the DOL have posted frequently asked questions (FAQs) and other information about the COBRA subsidy on their websites The IRS issued formal guidance on April 1, 2009. "We focused on issues we could reach quick consensus on," Russell Weinheimer, senior counsel, IRS Office of Chief Counsel, said.

Payroll tax credit. Employers will be reimbursed for their 65% COBRA premium assistance through a payroll tax credit, Patricia McDermott, special counsel, IRS Office of Chief Counsel, explained. However, the credit cannot be claimed until the employer receives the 35% payment from the covered individual, she cautioned.

In some cases, entities other than employers will claim the credit, McDermott explained. If the COBRA coverage is provided by a multiemployer plan, for example, the plan provides the subsidy and is reimbursed by taking a credit on Form 941.

Rather than claiming the credit, an employer may offset payroll tax deposits during the quarter by the amount of the premium, McDermott said. Additionally, the employer can elect to have any excess credit applied to next quarter liabilities, rather than accepting a refund from the IRS.

Military service. In March, Treasury Department and IRS officials indicated that being called to military duty is not an involuntary termination for the COBRA subsidy. Now, the government has revisited that position, Kevin Knopf, attorney-advisor, Treasury Office of Tax Policy, said. "We are going to consider (call up to military service) involuntary termination of employment."

Premiums. Generally, plans can charge 102% of the total cost of coverage. The employee's 35% share is calculated against the 102% amount, Weinheimer explained. "If the employer charges less (for COBRA continuation coverage) than the maximum amount allowed by law, the 35% reduction applies to that lower amount."

Notices. The 2009 Recovery Act requires employers to send a general notice to all qualified beneficiaries, whether they are currently enrolled in COBRA coverage or not, who have a qualifying event between September 1, 2008, and December 31, 2009. The general notice goes to qualified beneficiaries and not just covered employees, Amy Turner, senior advisor, Department of Labor, explained. A qualified beneficiary may be an individual whose qualifying event was divorce or aging out of dependent coverage.

A notice of the special second-chance COBRA election must be provided to any covered employee who did not elect COBRA coverage between September 1, 2008, and February 16, 2009. Individuals who elected but later discontinued COBRA coverage also must receive the second-chance notice. The notice of extended election must be provided by April 18, 2009. The DOL has posted model notices on its website.

Can HR outsourcing help companies endure the recession?

When The Going Gets Tough, The Tough Call For Help

By Livia Gershon
Worcester Business Journal

“I’m so excited about this year. It’s great.”

That’s a sentiment you won’t hear from many company presidents these days. But Ultan Feighery is in an unusual position. He’s the president and founder of The Human Resources Organization in Westborough, a human resources outsourcing company. And he says HRO has seen a 25 percent jump in new business in the first two months of 2009.

To Feighery, it makes sense that companies facing shortfalls would bring HR functions to an outside vendor to save money. But others in the field say it’s far from clear that business leaders want to take the jump into outsourced HR at a time when so much else is uncertain.

Cafeteria Options

The Human Resources Organization, which Feighery founded seven years ago, offers employers a variety of services to choose from. It can manage 401(k) plans, run payroll and offer on-site or on-call support. It also acts as an insurance agent, looking for good deals for clients without being commission-driven like traditional agents. Feighery said the company can help clients not just by replacing permanent HR staff but by figuring out better ways to deliver benefits.

“In 95 percent of cases we can find significant savings,” he said.

Bob Eubank, executive director of the NorthEast Human Resources Association, said there’s no doubt HR outsourcing has established itself as a viable industry over the past decade. But he said it’s not clear whether it’s become more or less prevalent since the economy went into decline. Sometimes the outsourcing possibility costs more initially for longer-term savings, and that may not be an attractive option right now,” he said.

Sandra L. Reynolds, executive vice president of The Employer’s Resource Group at the Associated Industries of Massachusetts, said she’s heard of increases in outsourcing only among businesses that feel they need to reduce their own staff. "We’re just starting to hear about companies that are kind of facing the realities that they either might or will have to do that,” she said.

Next Best Option

Reynolds said her group, which offers its own HR products, has definitely seen an increase in the use of its hotline. “When you have fewer internal resources you use external resources at a higher level,” she said. Mike S. Lanava, business resource manager at the Worcester Regional Chamber of Commerce, said he hasn’t noticed HR staffers being replaced by outsourcing in recent months. “I haven’t been so much aware that there have been layoffs of complete departments,” he said. Still, he said he does think the long-term trend is moving toward greater use of external HR resources.

Largely because government compliance rules are becoming more complicated, Lanava said, many companies are going to HR specialists for particular needs. The companies may help them develop a sexual harassment policy and provide training videos, write up a maternity leave plan or offer customized safety training.

While some law firms and a handful of large, national companies always provided those sorts of services, Lanava said, more small players have been emerging to offer them in recent years. “What I’m seeing is more smaller local things that are tailoring their packages to the local companies,” he said.

Still, there can be a backlash against the outsourcing of HR, especially if it’s not done well. Reynolds said some large companies that once outsourced HR functions are bringing them back in-house these days. “Some of them are finding that it solves some problems but it also creates some problems,” she said. Eubank said one big problem can come if employees don’t have a particular person they can go to with job-related issues. For that reason, he said, many companies use a mix of in-house and outsourced resources.

That’s just fine with Feighery. He said his company makes sure to let potential clients send them as large or as small a chunk of their HR operation as they want. After they try the company out, he said, they often decide they want to add more services.“Last year, 85 percent of our clients added more than 30 percent to the products that they bought,” he said. “You put your toe in the water.”

From the Editor.

The story never changes. When times are good, business owners seem to think that little is broken within their organization or operations. When times become challenging and budgets tighten, many managers and executives look for innovative ways of cutting costs without sacrificing service or quality.

Send us your HR outsourcing success stories to hrsolutions@employers-Rx.com or contact us directly at (877) PEO-CURE or (877) 736-2873.

Survey Finds Nearly 20 Percent of Employers Plan to Drop Health Benefits

Nineteen percent of employers responding to a new Hewitt Associates survey are planning to stop offering health benefits over the next three to five years, nearly five times as many as the 4 percent that said they were planning an exit strategy last year.

For those employers planning to continue to provide health benefits, keeping employees healthy has become the primary workforce issue in 2009, up from the No. 2 position in 2008, according to Lincolnshire, Illinois-based Hewitt’s survey, “The Road Ahead: Emerging Health Trends 2009.”

“Promoting employee accountability” was ranked the chief health and prevention component of employers’ health care strategies in 2009, followed by “offering competitive benefits” and “managing health risk.” In 2008, employers selected “offering competitive benefits” as their chief objective, followed by “promoting accountability” and “tightly managing health care cost trends.”

“In today’s environment, employers are under pressure to cut health care expenses, but they realize that short-term cost-management tactics do not address the underlying drivers of health care cost,” Jim Winkler, head of Hewitt’s North America health management consulting practice, said in a statement. “This leaves them with two options: making a long-term commitment to improving the health of employees and their families, or exiting health care altogether.”

Among other survey findings:

• More employers are targeting specific health conditions within their employee populations than in previous years. Specifically, employers are targeting asthma, cardiovascular disease, depression and diabetes.

• When employers were asked to what extent health care reform proposals outlined by the Barack Obama administration would affect their current health care strategies, 51 percent said they would have some impact, while 44 percent said it would have no impact.

• While one-third of executives think the Obama administration and Congress should address health reform in the president’s first year in office, 63 percent believe it will take place in Obama’s first term.

• Moreover, 60 percent of executive said the federal government should take the lead, while 33 percent said the federal government and the states should share responsibility.

A total of 343 benefits executives from a broad spectrum of industries responded to the survey, which was conducted from December 2008 to January 2009.

For more information about the survey, contact Maureen Mersch at maureen.mersch@hewitt.com or Mary Ann Armatys at maarmatys@hewitt.com.

Staffing - The New Growth Industry?

Bruce Silver
Employers Rx LLC

Employment agencies and staffing companies across the country are announcing a "pick-up" in volume. Of course many are admitting that it is due to the record number of layoffs, as well as an increase in applicants who are willing to accept part-time or temporary positions, while waiting for better times ahead.

Indeed, many industry observers like Jack Rainer, owner of Career Personnel Services in Montgomery, Alabama expect that it can' last. He predicted there would be some hiring rebound before the economy begins to recover. Some firms will find they have cut too deeply in layoffs and will need to replace lost staff, he said. It will take time for people to digest what is going on, but they still have needs".

What I find valuable in this Montgomery Advertiser article written by Cosby Woodruff are the observations of Anna Doeren, a stafffing specialist at Career Personnel. She recognized that job cuts have progressed beyond those in purely clerical jobs to more senior positions. "It is lower-level administration to middle managers, a lot of that has been cut."

"One area where they are seeing more demand from companies is in providing outsourcing of human resources functions. People are contracting us to be the human resources manager. Many of them have cut out their HR departments."

What Anna and Jack may not be aware of, is the increasing trend by many of the most successful and innovative companies in their industry to provide a full range of services for employees from "hire to retire". I am referring to the fastest growing industry in the gamut of HR services commonly referred to as "RPO" or Recruitment Process Outsourcing.

Recruitment Process Outsourcing refers to a business service where an employment or staffing agency not only finds a suitable applicant for a particular position at a client's worksite, it also can include training, payroll, group health benefits and workers compensation coverage. In effect, it is the recruiter who is employing the worker, and is responsible for HR compliance and adhering to Federal, State and local employment regulations.

PEOs - The Outsourcer's Resource

With few exceptions, these functions are being outsourced to companies who actually do this work. Let's face it. Most successful employment agencies and staffing companies are owned and managed by individuals who are very good at finding and placing suitable candidates for their clients. Many are great at developing relationships with employers and HR managers, but lack then administrative and insurance background to tackle all the areas involved. Only the largest firms have the resources to invest in the infrastructure and technology platforms required to efficiently support an full service RPO effort.

While the majority of employee leasing companies and professional employer organizations refuse to accept employment agencies and staffing companies as clients (many have incurred significant workers compensation claims ) there are handful of quality PEOs who have established a working partnership within the staffing and RPO industry. These firms have developed a "niche" by better understanding the unique challenges, products and services that enhance an agency's ability to compete and succeed in these demanding times.

Employers Rx has many staffing clients who have developed successful long term relationships with their PEO partners. If you own or manage an employment agency or staffing company and are considering making the leap into the "RPO" Recruitment Process Outsourcing marketplace, our experienced professionals are available to discuss your options and opportunities.