PEOs are in the business of offering robust human resources services to their customers and off-loading the responsibilities involved to a team of professionals who know how to manage employee information safely. Customers need help to make sure they keep sensitive information safe and secure. To address the legal obligations companies have when handling employee information, PEOs evaluate the information they handle and the legal obligations regarding data security imposed for handling such information, making sure they introduce cybersecurity measures early and reinforce them often.
While there is not an exact definition of cyber hygiene, I summarize it as a set of formal and habitual practices that ensure the safe handling of critical data and securing networks. Cyber hygiene must be institutionalized, as any weak link can cause issues to all on a given network or distribution. It is a communal exposure that needs to be addressed in a communal manner.
This article presents excerpts from NAPEO’s 2019 paper, “Best Practices for Reducing the Risk Associated with PEO Payroll Fraud.”
These days, it’s not unusual to read or hear stories in the news about fraud occurring within businesses. Many times, these businesses are victimized when an individual in a position of financial authority makes unauthorized withdrawals or disbursements from bank accounts or misdirects cash deposits. Generally, the response to these is to put controls in place to prevent and detect fraud relating to cash, but the possibility of payroll fraud is often overlooked. The PEO industry has a high risk for the potential of payroll fraud. We must be ever-vigilant about the various schemes that fraudsters put into play to cheat PEOs out of their hard-earned cash, including through automated clearing house (ACH) fraud, check fraud, and identity theft.
One of the trends over the last 12 to 24 months has been the hardening employment practices liability insurance (EPLI) market. Companies that may be accustomed to focusing on workers’ compensation risks are seeing large EPLI rate increases, rising retentions, or both. The goal of this article is to discuss ways companies can potentially mitigate these rising insurance costs. But first, it is helpful to understand what EPLI is and isn’t, then discuss market trends, and finally cover potential actions to take.
Cyber insurance coverage and underwriting have changed a lot since the first cyber insurance policy was sold in 1997, especially in the last two years. Cyber insurance didn’t really take off with business owners until around 2014, when cyberattacks became more frequent and primarily involved stealing personal and private information of businesses’ employees and customers. When stolen personal information resulted in identity theft, businesses faced financial liability as they found themselves being responsible for the restoration of the identities. Businesses performed restoration either voluntarily or after lawsuits were filed. These businesses also found themselves paying for credit watches for all of the individuals whose information had been stolen.
I mentioned in a previous writing that NAPEO’s Board of Directors adopted the largest budget in terms of legislative affairs and marketing/communications in the history of the organization for 2022. With that budget, the association made clear that establishing effective, influential relationships on Capitol Hill and spreading the news about the value of PEO services are our primary objectives this year.
THE IMPACT OF COVID ON HOURLY WORKERS
The COVID pandemic has had a big impact on hourly wage workers in America. The United Way of the National Capital Area recently surveyed more than 1,000 American workers about how they felt about working during the pandemic and how they feel about their wages. Some companies have increased their wages, but others have struggled to keep staff.
Nearly 200 years ago, a fiercely determined band of Texas soldiers in San Antonio prepared for imminent attack from the Mexican army. As they fortified their defensive positions, urgent calls for reinforcements were dispatched. Unfortunately, their pleas were not heeded in time to stop General Santa Anna’s forces from laying siege to the Alamo and killing all her defenders. The Battle of the Alamo is central to the founding history of Texas, which declared its independence from Mexico on March 2, 1836, a mere four days before Santa Anna’s forces attacked.
Laws and regulations that impact PEOs change every day, and NAPEO’s PEO Capitol Summit is the only event focused specifically and exclusively on compliance and emerging legal issues for PEOs. Attendees will benefit from the opportunity to gather in the nation’s capital with PEO owners, senior managers, legal advisors, and HR professionals for valuable policy discussions, legal analysis, and lobbying opportunities. Highlights of the conference include industry expert discussions of PEO industry hot topics that deliver practical information on applying legal concepts to your management decisions and day-to-day operations, a chance to ask the experts your burning questions, and the opportunity to hear from leading lawmakers and policy gurus.
As hackers continue to target critical infrastructure sectors, attempt to steal personal data, threaten to release such data, and collect ransom, the need for more regulation and corporate diligence could not be more necessary.
As the industry has grown over the years, PEOs have evolved naturally in the direction of multi-state operations. This has always been true, but the pace or scope of this effect accelerated with the rise of remote work during the pandemic.
The PEO client service agreement (CSA) is a challenging document. The complexities and ambiguities of the PEO arrangement require a lengthy contract to reasonably address the risks and to protect the PEO. These challenges are magnified by the need to address state-by-state issues.
The term “carve-out” is commonly used in the industry, but how it works may not be quite as clear. For those who are not familiar with the term, it describes an arrangement in which the onsite client secures its own direct workers’ compensation coverage for its workforce. Because that client has contracted to be in a PEO arrangement, the co-employees performing services for that client are covered under the client’s own workers’ compensation insurance policy, not the PEO’s policy. Typically, that coverage is sufficient and no other problems arise.
The Employee Retention Tax Credit (ERTC) was designed to give relief to employers that retained their employees, whether working or not, by paying them throughout COVID. Initially, employers could get $5,000 total per employee for the whole year of 2020. The parameters changed in 2021, giving employers the opportunity to claim $7,000 per employee, per quarter, for the first three quarters of 2021. While this is a great idea in theory, the mechanics of administering it are very burdensome for PEOs.
The PEO sale is a complex sale. To be successful at selling PEO, salespeople should have a real-world understanding of human resources practices, from hiring to retiring and all the drama in between. They should be knowledgeable about:
• Employment regulations;
• Workers’ compensation and regulations;
• Risk management;
• Employee benefits, administration, and regulations;
• Payroll, payroll forms, payroll taxes, and regulations;
• Time and attendance systems; and
• HR technology.
As I write this, we have just returned from our strategic planning retreat in Point Clear, Alabama. Every three years, we hatch a new strategic plan to guide us. We pull together our board members and Leadership Council chairs and, with the help of a facilitator, plot our course for the next three years.