In some respects, these are the best of times and the worst of times, as the economy transitions from total shutdown to hyperdrive in a matter of months. The dramatic closings from COVID threatened the economy not just here in the U.S., but essentially threw all traditional economic measures to their farthest historical extreme globally. Government, in an unprecedented way, stepped in to bring relief to what it perceived as a shuttered economy by introducing two extreme measures in the form of fiscal stimulus (government spending into the trillions of dollars) and monetary stimulus (0 percent interest rates).
A common inquiry by investors is the impact of cyclicality on the PEO industry. While every industry is impacted by cyclicality, the PEO industry has historically weathered the shifts better than most. This article will cover the impact of cyclicality on the PEO industry and outline some strategic moves PEOs can make to capitalize on opportunities and mitigate risk.
As more of the U.S. opens and vaccinations are widely available, small and mid-size business owners continue to grapple with what their post-pandemic future is going to look like and how to best prepare for it. As valued partners to small businesses, PEOs play an important role in ensuring their client worksites remain resilient and have the resources and support they need to thrive today and in the future.
Minimum wage workers and their advocates have been fighting for a $15 minimum wage increase for several years. They have been relatively successful on the state level and, with the Biden administration in power, they are setting their sights on changing the federal minimum wage. Notably, relatively few workers are paid the minimum wage. The labor market itself determines most wages for workers. In contrast, employment legislation is enacted when society is dissatisfied with wages or a significant unexpected crisis impacts the labor market.
The economic outlook for small businesses continued to brighten in the third quarter of 2021, as reflected in NAPEO’s Q3 Small Business Snapshot. Highlights include:
As restrictions for COVID have eased significantly and we transition to a post-COVID normal, small businesses are seeing a steady recovery. However, issues such as the challenging hiring environment, supply shortages, and regionally specific concerns are certainly slowing them down.
The 1968 hit song “Spinning Wheel” by Blood Sweat and Tears sums up the outlook shared by many small businesses in the Southeast today. Small business owners know all too well the investment of blood, sweat, and tears into their businesses. Lifetime investments that took the form of start-ups, franchises, and acquisitions are teetering on the thin line between survival and sustainability.
The economic outlook for the heartland is optimistic. Unemployment rates have fallen to almost pre-COVID numbers in most of the states in the region. Yet, there are still industries that are behind the hiring curve, mainly in the hospitality sector. Help wanted signs can be seen frequently posted in windows of restaurants and retail shops across the board.
The state of small business in the southwestern United States is, in a word, good. Arizona, New Mexico, Texas, and Oklahoma cover more than a half million square miles and host a combined population of 42 million people, more than half of which reside in Texas. Economies are growing in each state. All four states have also enjoyed increases in population.
“Ok, that’s it, I’ve had enough, let’s shut it down, sell it, I don’t care.” Sitting down with our small business clients, I heard that statement at least a dozen times in 2020 from tired, frustrated, and disgruntled owners. However, as quickly as the pandemic arrived, the economy has, at least here in Utah and the intermountain states, hit the high-octane gas during the past several months as we emerge from the pandemic funk.
One thing is certain: The COVID pandemic and all its accompanying regulations propelled PEOs into the premier role of helping small and mid-size companies navigate through it all. PEOs in our market have really stepped up their marketing as the solution to all of the regulatory requirements, which has definitely been a major contributor to sales year-to-date in 2021.
As I write this, we have just finished our summer board meeting and leadership retreat in my hometown, Greenville, South Carolina. I was so proud to share my fabulous city with my NAPEO friends, and we had the chance to be together in person to discuss NAPEO business. Plus, in true NAPEO style, we worked hard and played hard. We ended the two days together on a high at the BMW Ultimate Driving Experience track! It was a wonderful opportunity to reunite, reconnect, and reflect on our association.
NAPEO Gives Back • Attracting Employees • What are Workers Thinking • Tandem Welcomes New CEO • Connect with NAPEO Peers • Workplace Productivity
Over the last few years, Bill Maness, CEO of Wichita, Kansas-based Syndeo Outsourcing, has made a deliberate effort to involve his leadership team in NAPEO events, working groups, and committees. He sees many benefits of doing so and believes the knowledge and confidence his team gains from participating in industry activities boosts their leadership skills. It also helps cultivate the next generation of industry leadership within NAPEO.
We all made a lot of adjustments throughout this pandemic. Wearing masks, keeping our distance, limiting travel, etc. But something I don’t think a lot of us considered is what our experiences, especially in the hospitality and supply chain industries, would be like now. Dining out has meant longer waits, no walk-ins, limited menus, and poor service. The service part might be a combination of wonderful workers that are just stretched too thin, or, frankly, people who should never have a server job, but they can fog a mirror and owners are desperate. In other areas of life, ordering a new couch or new refrigerator means six to eight months (not weeks) to arrive and staying in a hotel for three days means that your room will not be serviced until you check out.
As PEOs look toward the horizon to forecast the immediate future, a gathering storm in the form of I-9 compliance headaches may be cause for concern. Several critical aspects of the employment eligibility documentation process are coming into focus—not just for the client companies that PEOs serve, but for PEOs’ own workforces as well. There are several steps PEOs can take now to be in the best position to navigate these challenges.
Handling HR for PEO clients can be exhilarating and, at times, intimidating. Each of our clients faces unique challenges, which makes for interesting work. Of course, it’s natural to be anxious about giving clients good guidance. In my prior life as an employment lawyer, one of my firm’s longest-tenured partners was reputed to have said, “If your hands aren’t sweating before a trial, you should probably quit the practice of law.” I think the same holds true for PEO HR teams, where genuine concern is a hallmark of good service.
Before the COVID pandemic, working remotely was a perk that mostly progressive companies offered to their employees. According to Global Workplace Analytics,1 3.6 percent of the U.S. workforce worked remotely half-time or more. When the pandemic struck in early 2020, businesses quickly transitioned to remote work or faced shutting down operations.
I got a call a few weeks ago from a salesperson I first met back in 1999. He’s a really nice guy, a little too salesy for me, and he always pursued higher workers’ compensation risk, low-margin business. But still a nice guy. Our conversation went from the usual “How have you been since we last spoke 15 years ago” to the agenda of how could this salesperson get a PEO to write a prospect with a high workers’ comp modifier and save the prospect money. It was a fairly short conversation about the subject, the details too long for this article. However, when we hung up the phone, I realized that this guy was stuck in 1987.
The PEO space has paved a better way for small and mid-size business (SMB) owners over the last 25-plus years. Personally, from selling payroll alongside PEO at a national provider to being an independent broker, a sales manager at a mid-size provider, and being the president of my own PEO, I’ve spent 17 proud years in the PEO space in one way, shape, or form. Candidly, I will spend the next 17 years pushing PEO forward. With that in mind, there is one question I’ve heard asked and have answered 100 different ways during my years in the PEO space. What is a PEO? In my career in the business, the shocking realization is that the answer changes from year to year, group to group, company to company, and client to client.
Nearly three-quarters of the PEOs participating in NAPEO’s Q2 2021 PEO Pulse Survey reported growth, with 24 percent citing significant growth. Revenue continues to grow and is matching times not seen since 2018.
Since my last column, NAPEO held a Board of Directors meeting and retreat. Years ago, we began a tradition of holding one board meeting a year in our chair’s hometown. Over the years, that has taken us to Indianapolis, West Palm, Detroit, New York, and Honolulu, among other places. This year, Chair Lee Yarborough hosted us in her hometown of beautiful Greenville, South Carolina. It was a great session—I’ll get to that in a minute—and the meeting was held at the BMW Performance Center. That meant we all had an opportunity to drive at breakneck speeds (slower for me) around the track in BMW M2s, M3s, M4s, and 600+ HP M5s. In short, it was a blast. I’d recommend it to anyone who finds themselves in that neck of the woods.