Employee Leasing for Franchise Business Owners

PEOs Offer Employee Management Solutions for Franchise Owners

While attending the 2012 Franchise Expo South at the Miami Convention Center, I was amazed to see all the new and exciting franchise opportunities that were present this year. Every aisle featured a wide array of franchise enterprises offering almost every category of business and consumer products and services. The Expo represented a who’s who of the franchise industry.

Exhibitors included well known veteran operators like Baskin-Robbins Ice Cream and Sign-A-Rama, as well as two new entrants from Palm Beach County, FL. The Original Brooklyn Water Bagel Company and Hurricane Grill and Wings, were rolling out fresh new restaurant concepts with delicious and original menu items that are sure to please the entire family.

A variety of personal service concepts were on hand, from accounting and financial services to health care, home care, and personal security, to beauty services and spas. There was one common theme throughout—the franchise industry was alive and well despite a weak economy and tight credit environment.

The Advantages to Owning a Franchise

The advantages that successful franchise systems offer are numerous. First time business owners acquire a franchise system’s time-tested formula. Individuals willing to invest their time and money can purchase a recognized brand within a protected territory from an organization that provides training, marketing support, and a proven business model.

There is no shortage of potential franchise business owners either. The economic downturn and high unemployment has created a large pool of potential entrepreneurs yearning to operate their own business. Thousands of returning American Veterans can take advantage of special financing and training programs from over 400 franchise systems who participate in the International Franchise Association’s VetFran (www.vetfran.org) program.

Leading franchisors help entrepreneurial servicemen and women, and inexperienced business owners to hit the ground running by offering a “turn-key” operation. The franchise team supplies all the required expertise, guidance and support, beginning with site selection through vendor relations, making certain that every new franchisee is generating revenue from day one.

Congratulations Franchise Owner - Now What?

Most franchise systems help franchise owners get up and running. They provide the model and the franchisee operates the business. However, many franchised business models can’t operate without employees, and many owners have never recruited, trained or managed a workforce before. Fortunately, small business owners can turn to HR outsourcing companies, called professional employer organizations, which can pick-up where the franchise system leaves off. PEOs or staff-leasing firms assume many of the employment responsibilities that franchise owners must contend with.

The majority of new franchise operators are unaware of the myriad of Federal and State laws imposed on small businesses today. Failure to comply with labor and wage and hour rules, submitting timely payroll reports and tax payments can result in severe penalties and fines. Defending your firm against a wrongful termination, independent contractor dispute, or sexual harassment can lead to expensive litigation, and have a catastrophic effect on your bottom line. All too often, a business owner hires a ‘bad apple’ whose behavior causes accidents, costly claims, and disrupts your ability to maintain an engaged and productive workforce.

PEO - Not Just a Payroll Company

Just as a successful franchise system provides a “One Stop” solution for operating a business, employee leasing and PEO companies are the answer to managing franchise employees. They are true HR companies providing comprehensive human resource services to employers under a co-employment agreement. Franchise owners operate the business, while the HRO or PEO acts as the administrative employer of record.  Employment-related reporting, HR compliance, payroll administration, workers compensation and workplace safety are handled by an experienced staff of HR and payroll professionals. Highly trained safety engineers and risk managers are assigned to examine and evaluate any worksite for potential hazards.

Another advantage employee leasing and professional employer organizations share with the franchise industry is that they both achieve economic efficiencies by bringing together large numbers of subscribers. By serving thousands of small business owners, many PEOs offer franchise operators a wide range of discounted insurance programs, employee benefit plans, and workers’ compensation coverage at significant savings to small business group rates. Franchisees gain a high level of HR and safety expertise, valuable employee benefit and incentive programs, and the latest HRIS technology at one low cost. Outsourcing your tedious and non-productive employee administration responsibilities to a comprehensive HR company is a win-win for the franchise owner and franchise employee alike.

For additional information click here.

Independent Contractors and Co-Employer Agreements

 Can PEOs Protect Against Misclassified Independent Contractors?

There are many questions surrounding Independent Contractors these days. Do services rendered by an individual for your company constitute an act of employment, or are they truly services being provided by an independent party? What types of occupations are clearly recognized as independent contractors in the eyes of the Internal Revenue Service? How can I protect my business when paying independent contractors? What are my risks for misclassification?

IRS enforcement actions against small and midsize corporations for misclassifying employees are on the rise, and the penalty for non-compliance can be substantial. Employers who have misclassified workers are responsible for the payment of all back taxes. This includes not only the employers 7.65% share of federal taxes for Medicare and Social Security, but a portion of the employee’s share of FICA as well. Now add state and local unemployment taxes then compound for 3 or 4 years. When your finished, multiply this figure by 5 or 10 employees and it’s easy to see why so many business executives are concerned when confronting this issue. With the stakes so high, many companies are seeking ways to eliminate this exposure.

Professional Employer Organizations and Independent Contactors

There are several strategies that employers are using to insulate themselves from exposure to the IRS. Some business owners and HR executives have turned to outsourcing the payroll and administration of their independent contractors to administrative employers, employee leasing companies, professional employer organizations, and staffing companies.

The mere fact that a third party handles a company’s payroll administration does not absolve them from their obligation for collecting and paying employment taxes. The decision whether an individual performing a service on behalf of your company is an employee usually comes down to control. Who controls whom, how, where, when and what work is performed. While it is only one of several factors considered by the Internal Revenue, in most cases it is the determining factor.

Engaging the services of a professional employer organization is a matter of contract law. Most of the contracts from the country’s leading PEOs have language in their co-employer agreements which specifically exclude independent contractors. Some PEO’s and many employee leasing companies will provide payroll and administrative services for companies who employ independent contractors, however they are not the employer.

Most co-employment agreements spell out the terms of shared responsibility for employment related functions between the PEO and client company, and assigns responsibilities for each party to the contract. The PEO acts the administrative employer of record. The client or co-employer is the work site employer who assigns where each employee reports, hours they work, and job function. Payroll, employee leasing companies, or professional employers cannot protect employers if audited by the IRS for misclassified employees, the burden of proof and liability is with the business and the employer.

IRS Guidelines for Hiring Independent Contractors

Facts that provide evidence of the degree of control and independence fall into three categories:

1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another. The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.

 Don’t Guess - Ask the IRS

If an employer or employee is unsure, either party can submit Form SS-8 to the IRS. They will make a final determination and notify you of the worker’s status.

Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding

Be aware that it can take at least six months to get a determination, but a business that continually hires the same types of workers to perform particular services may want to consider filing the form.  

Contact us for additional information on independent contractors and HR outsourcing.

Find a Professional Employer Organization at PEO.com

Leading Website to Locate PEOs and Employee Leasing Companies

Are you a small business owner or busy executive searching for assistance with managing your employee administration, benefits, and HR compliance responsibilities? Discovering the right solution has never been easier. Today, help finding an employee leasing or professional employer company is just a click away. Just type PEO on Google, Bing, Yahoo or your favorite search engine. Usually PEO.com appears first or second in the natural search, testimony to the site’s authority, content, and duration.

Click on the logo above to go the the PEO.com website  

The website is the brainchild of industry veteran and visionary Rod Diekema, who developed and launched PEO.com in 1997. The interface has changed over the years, with each new version contributing to an easy and safe user experience for the busy HR manager or business owner. Vistors to the site are treated to a soft and welcoming home page which offers the choice of searching for an HR outsourcing company by location or keyword. Trying to find local employee leasing companies in your state? Simply scroll down and pick the city nearest you.

Does your company require the services of a large national professional employer?  A search of PEO.com’s extensive database reveals Accord HR headquarted in Oklahoma City, OK has offices in Littleton, CO, New York and Syracuse, NY, Tampa, FL, and Tulsa OK. Boise, ID based Employers Resource serves clients with offices located from Anaheim CA, Atlanta, GA, to Dallas, Houston and San Antonio, Tx.

Maybe your the owner of a  small family business who is looking for a local “hands-on” HR company to relieve you of your payroll, HR administration, and employee benefit problems? High touch, high service professional employers like St. Louis, MO based Simploy HR or Employee Capital Management serving Michican and Illinois can be found with the click of a mouse.

Don’t take my word for it. Find an employee leasing firm or professional employer company that is right for you at PEO.com today. Not sure which types of PEO or HR organization is right for you? No problem. Knowledgeable PEO consultants and industry veterans are available to advise you of all your HR outsourcing options, and will help you find the best personnel management company for your company.

Small Business Payroll Grows in July - Intuit Small Biz Index

Intuit’s Small Business Index Shows Increase in Hours and Compensation

Intuit, developers of the popular accounting software program QuickBooks®, is also the nation’s leading provider of online payroll administration and processing for small business owners. Intuit has a wealth of information about small business employment serving more than 1 million small business payroll customers.

Intuit launched their Small Business Employment Index to provide a unique view into small business employment trends. Their index is one of the few to compile employment statistics for companies with fewer than 20 employees, which represent 87 percent of all U.S. employer firms and employ nearly 20 million people.

Small business employers added 50,000 people to their payroll and significantly increased both hours worked and compensation. Small business hourly employees worked an average of 110.2 hours in July, making for a 25.4-hour workweek. This is a 0.7 percent increase from the revised June figure of 109.5 hours.

Click on this link http://www.intuitinc.com/payrollindex to read the entire report.

Is this report a clear indicator of things to come? Small business owners and entrepreneurs across America struggle to grow their business, and contribute to revitalizing our economy. Like the red locomotive in the children’s story “The Little Engine That Could”, small business remains this nation’s only hope for a recovery. Small businesses are truly the builders of our economic wealth.

Unfortunately, our government and multinational corporations are selling us short. In the last month large corporations like Boeing, Cisco, Merck, RIM, as well as state and local governments reported layoffs in June of more than 140,000 employees. The news reports of the last week have never been grimmer. Growth in the last two quarters averaged less than 1 percent. Credit rating agency Standard and Poor’s downgraded the AAA rating on America’s debt, flaming the fears of a global “double dip” recession.

Politicians continue to fiddle while Rome burns. History has shown that when true adversity strikes, America rises to the challenge. One of this country’s most loved and respected leaders said in an address “When written in Chinese the word crisis is composed of two characters - one represents danger and the other represents opportunity”. That was in 1959 by soon to be President John Fitzgerald Kennedy to voters in Indianapolis.

In his 1961 inaugural address, President Kennedy gave his famous speech challenging Americans to “Ask not what your country can do for you — Ask what you can do for your country”. He continued “My fellow citizens of the world: ask not what America will do for you, but what together we can do for the feedom of man. Finally, whether you are citizens of America or citizens of the world, ask of us the same high standards of strength and sacrifice which we ask of you. With a good conscience our only sure reward, with history the final judge of our deed, let us go forth to lead the land we love, asking His blessing and His help, but knowing here God’s work must truly be our own”.

Pray for our leaders to come together …. history is watching.

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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