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PEO Profitability-A-Poppin’

The beautiful thing about popcorn is that you start with small kernels and, handled properly, they become big fluffy, yummy pieces of puff, which are about 20 to 50 times the size of the original kernels.

PEO profitability is much the same way. This month’s feature provides insight into this.

First, you must evaluate into your PEO’s performance. Define what you will measure to determine your profitability, examine the drivers behind your business, and interpret the results.

Avoiding margin erosion is key. Some of these eroding forces are commoditization, selling a product over a service, failing to recognize costs, and rising compliance costs. It’s important to address these before they become threats.

Because your PEO is like no other, metrics and key performance indicators give you specific knowledge about maximizing your profitability. Industry benchmarks provide the baseline; customizing them with your numbers provides a drill down for additional insights.

There has been a surge in acquisition activity among PEOs recently, and many companies are incorporating it as a strategy to reach profitable growth goals. Acquiring PEOs can achieve synergies and diversified product offerings. PEOs looking to be acquired can increase shareholder value and access technology. The key is a sound financial process and a strong integration strategy.

Many PEOs diversify their offerings, service lines, or products to enhance profitability. One PEO, however, has diversified in an innovative way: It accessed technology resources by being purchased by a large IT and connectivity company that wanted to partner with companies serving the small and mid-size business market. The PEO’s profit margins have increased by integrating these technologies for its clients, receiving more warm leads from other business units, and raising the bar on its insurance programs.

We hope this feature will help you get your PEO’s profitability-a-poppin’!

Know More



PEO Insurance Markets Update

2017 has been a year of significant disruption in the insurance markets. It can be daunting to try to predict what awaits health insurance markets serving small businesses. Just weeks before the beginning of the open enrollment period for the Affordable Care Act (ACA) healthcare exchanges President Trump signed Executive Order (EO) 13813, the Executive Order Promoting Healthcare Choice and Competition. In doing so, he dropped another pebble in the insurance pond and sent ripples to all shores. However, if we isolate some of the variables that impact what products are available to PEOs and their clients, we can sort through some of the confusion.

Legal Currents

Worksite Enforcement: Immigration

Increased immigration enforcement action and a reduction in illegal entry into the United States remain among the Trump administration’s highest priorities. Notably, Acting Immigration and Customs Enforcement (ICE) Director Thomas Homan (recently nominated to serve as director of ICE) recently confirmed in a speech to the Heritage Foundation in Washington, D.C. that he has ordered Homeland Security Investigations (ICE’s investigative arm) to increase its worksite enforcement actions by “four or five times” in the new fiscal year.

Risk Management

Workers’ Compensation Retaliation

Workers’ compensation retaliation is a quirky cause of action that frequently pops up in the PEO space. It sounds like a discrimination claim, but, as a creature of state law, there are literally 50 standards, each with its own twists and nuances. It says “workers’ compensation” in the title but oftentimes has little to do with the underlying workplace injury. Sometimes, an attorney may use it to complicate a workers’ compensation matter; other times, it will ride on the coattails of a Fair Labor Standards Act (FLSA) claim. Regardless, it is a frequent addition to kitchen-sink demand letters and so deserves some scrutiny.


The Inside Word

Shop Local, Shop Often

About 20 years ago, my wife Kathy and I and another family purchased several local sporting goods stores—Vivroux Sports. If you think running a PEO is difficult, try owning a small retail store in the Amazon online economy! So, how do we stay open? Luckily, because there are still those who actually derive a sense of satisfaction from supporting their local economies.

NAPEO Notebook

Renewal Season, New Regs, Member News, and Association History Patrick J. Cleary

As I write this, a new year has dawned, with all the promise and activity that a new year always brings. This is renewal season for us. So far (knock on wood), renewals are coming in ahead of last year’s pace and it looks like our members are experiencing some growth—all good. We’ll need all of you on board if we’re to be as effective in 2018 as we were in 2017.

Special Report

Tax Cuts and Jobs Act Brings Extensive Tax Changes Courtney A. Zinter, Esq.

H.R. 1 delivers opportunities and obstacles—as well as some familiar uncertainties—for PEOs and their clients. On December 22, 2017, President Trump signed H.R. 1 (also known as the Tax Cuts and Jobs Act) into law with relatively muted fanfare following the whirlwind eight-week period in which Republicans ushered the massive tax bill through Congress without Democratic support. The flurry of activity and frequent changes that characterized H.R. 1’s legislative progress meant that many employers and employees left work for the holidays before knowing which provisions would ultimately make it into the new law. Because most of the changes made by H.R. 1 were effective almost immediately on January 1, 2018, affected taxpayers began scrambling in the New Year to understand the law’s provisions and determine what actions—if any—they should take in response.

Capitol Comment

2017: The Year in Review Thom Stohler

In January 2017, no one knew quite what to expect from a Trump administration. Then President-Elect Trump had promised to repeal the Affordable Care Act (ACA), roll back Obama administration regulations and executive orders, strictly enforce immigration laws, and pass tax reform. However, there were no detailed plans on how he would accomplish those goals. Other than his announced cabinet appointees, we did not know who he would appoint to fill the thousands of subcabinet positions within the administration.

Legal Q&A

Browning-Ferris, Ban the Box, New DOL Opinion Letters Farrah L. Fielder, Esq.

Q. Does the Browning-Ferris decision, which said that even a reserved right to exercise control over an employee’s employment constitutes joint employer liability, still stand? A. No, thanks to a December 14, 2017, decision of the National Labor Relations Board (NLRB). In Hy-Brand Industrial Contractors, the NLRB expressly overturned the 2015 Browning-Ferris decision, which created a new joint employer liability standard for entities under the jurisdiction of the NLRB. Browning-Ferris ushered in the idea that...

PEO Spotlight

Partners Human Resources Co.: John Pinard Chris Chaney

For the past 18 years, John Pinard and Roger Rock have owned and operated Oklahoma City-based Partners Human Resources Co. The name of their PEO symbolizes their business relationship and the role they seek to play for their clients. A small PEO primarily serving Oklahoma and Texas, Partners seeks to serve businesses that are truly looking for a business partner, not just a cost-savings venture. In fact, the commitment to specialized, high-touch service is what attracted Partners’ first clients.

The Big Picture

New Year, New Tax Reality Thomas J. Donohue

On New Year’s Day, the American people awoke to a new tax code and a brighter economic future. Increased business optimism, higher wages, and holiday bonuses were among the immediate effects of the tax reform legislation signed into law on December 22. But the greatest impact will become clear over the long term: a stronger, more innovative, and faster growing American economy.


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