Greenwood-based Tilson HR Inc. Chief Executive Officer Brent Tilson says a new federal law will provide certainty for Indiana's professional employer organizations and the small businesses that use them. The Small Business Efficiency Act creates a certification program for PEOs with the IRS. Tilson says the law helps ensure the PEO industry, which enables companies to outsource administrative duties, will “be here today and 200 years from now.”
January 5, 2014
Greenwood, Ind. — Greenwood-based Tilson joins professional employer organizations across the nation in celebrating the Small Business Efficiency Act, which defines PEOs in the federal tax code and creates a voluntary certification program for PEOs within the IRS.
The SBEA, signed by President Obama on Dec. 19, eliminates federal uncertainty for PEOs, which provide comprehensive HR, benefits, tax administration, and compliance services to small and mid-size businesses.
“This is truly a historic time for the PEO industry. The economic data prove that small businesses using PEOs grow faster, have lower employee turnover, and are much less likely to go out of business,” said Brent Tilson, president and CEO of Tilson in Greenwood, Ind., and chairman of the National Association of Professional Employer Organizations (NAPEO). “We are excited about getting the necessary federal framework in place to broaden our reach within the small business community.”
Among other provisions, the SBEA authorizes changes to the Internal Revenue Code to establish “Certified Professional Employer Organizations.” To become IRS-certified, a PEO would have to meet financial standards (including bonding and independent financial audit requirements) and satisfy reporting obligations and other standards set by the IRS. Once certified, a PEO would take on sole liability for the collection and remission of federal employment taxes for worksite employees. Businesses that contract with certified PEOs would be assured that they would not be liable for employment taxes once they remit their employees' tax withholdings to the PEO.
PEOs enable companies to outsource administrative duties so that they can focus on their core competencies. “PEOs play a key role in helping small businesses grow and thrive, and now Congress has recognized and codified a key element of that role so that even more small businesses can benefit from the services and expertise PEOs provide,” said NAPEO President and CEO Pat Cleary.
As a show of support for small businesses across the nation, Reps. Kevin Brady (R-TX) and Mike Thompson (D-CA) and Sens. Chuck Grassley (R-IA) and Bill Nelson (D-FL) were key champions of the bill.
Approximately 250,000 businesses use PEOs, which provide access to health-care coverage for as many as 6 million people in the United States. Through a PEO, employees of small businesses benefit from economies of scale and have access to such benefits as 401(k) plans; health, dental, life and other insurance; dependent care accounts and other resources typically provided by large companies.
According to a recent study by HR analytics expert Laurie Bassi, businesses in a PEO arrangement grow 7 to 9 percent faster, have 23 to 32 percent lower employee turnover, and are 50 percent less likely to go out of business than companies not using a PEO.
Tilson is a leading provider of human resource solutions to small to mid-sized businesses. Services include payroll and benefits administration, medical and workers’ compensation programs, personnel records management, liability management, recruiting and selection, performance management, and training and development services. The company’s core services are complemented by its Web-based platform, which provides clients and employees with HR information and resources. The company currently provides services to companies across the country.
The National Association of Professional Employer Organizations (NAPEO) represents about 85 percent of the industry’s estimated $92 billion in gross revenues. NAPEO has some 300 PEO members, ranging from start-ups to large publicly held companies with years of success in the industry, as well as some 200 service provider members. PEOs provide payroll, benefits, and other HR services to small and mid-sized businesses. Approximately 250,000 businesses and more than 2.5 million people are part of PEO arrangements. For more information about NAPEO, please visit www.napeo.org.
Source: Tilson HR Inc.