Federal 2010 Budget Provisions Affect Employee Leasing and PEO Arrangements.

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.

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The Risk of Using Independent Contractors

The authors highlight some of the recent changes which may effect companies who employ independent contractors. State and federal regulators and legislators have taken steps to address the widely used, (and often abused) practice of misclassifying entire classes of employees as independent contractors. The report reveals why large and small employers alike should take care in assigning independent contractor status to individuals engaged in consulting, delivery and transportation, sales and marketing, management, personal and technical services. Compliance and the fear of litigation is just one of the reasons that so many employers are seeking the services of third party employee management firms. Many service models exist, from payrolling companies - providers who serve contingent workforces, employee leasing companies, and PEO’s - Professional Employer Organizations. Below are excerpts from a recent article in the New York Law Journal. http://www.nylj.com

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Twenty Years Later Professional Employers Organizations More Popular Than Ever

Employee leasing became an industry as a result of TEFRA tax legislation in the 1970’s. The tax-advantage of working with an employee leasing company became even more attractive when businesses realized they can outsource all of their Human Resources functions while offering employees a myriad of benefits previously thought to be too expensive. The industry association, the National Association of Professional Employer Organizations (NAPEO), celebrated the anniversary during their annual conference held September 20-22, 2007. NAPEO encourages members to offer a truly collaborative partnership with clients that goes far beyond simply offering benefits to employees.

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