1. Understand Your Specific Needs as a Non-Profit

• Budget Constraints: Non-profits often work with tight budgets, so it’s crucial to find a PEO that can provide affordable services without sacrificing quality.
• Mission Alignment: The PEO should understand the unique culture and mission of non-profits and offer HR solutions that support these goals.
• Compliance with Non-Profit Regulations: Non-profits have specific IRS and state tax-exempt status requirements. The PEO should help ensure your organization remains compliant with these rules.
• Fundraising and Grant Management Support: Some non-profits may require assistance with HR-related tasks tied to grant management or specific reporting needs for donors.

2. Look for PEOs with Experience in Non-Profits

Some PEOs specialize in non-profit organizations or have extensive experience serving them. Here’s what to look for:

• Non-Profit Expertise: The PEO should understand the challenges non-profits face, including IRS regulations, employee retention strategies, and specific reporting and compliance requirements.
• Focus on Compliance: Non-profits must maintain specific tax-exempt status and comply with various local, state, and federal labor laws. Ensure the PEO has strong compliance support.
• Affordable Benefits: Non-profit organizations need cost-effective benefits packages that still offer quality coverage to employees. A PEO should provide affordable employee benefits, like healthcare and retirement plans, without burdening your budget.

3. Consider the Services Offered by the PEO

Non-profits often need more customized services from a PEO than for-profit organizations. Look for these key services:

• Payroll & Tax Compliance: Non-profits often have complicated payroll structures, with both full-time employees and volunteers. Make sure the PEO can manage these complexities, handle payroll taxes correctly, and keep you compliant.
• HR Support & Employee Training: Non-profits often need assistance with HR tasks, including employee management, volunteer coordination, and training programs that align with their mission.
• Employee Benefits: PEOs can help provide competitive benefits packages that include healthcare, retirement plans, and insurance options to attract and retain top talent.
• Risk Management & Workers’ Compensation: This is particularly important for non-profits that may have volunteers, contractors, or employees working in high-risk environments (e.g., community outreach programs).
• Grant & Funding Compliance Support: Some PEOs offer specialized services to help manage grants, funding, and compliance with donor requirements, which can be particularly valuable for non-profits.

4. Look for Transparent Pricing and Flexible Contracts

• Affordable Solutions: Make sure the PEO offers services that fit your budget. Many PEOs charge a per-employee-per-month fee, but some offer scalable pricing models that fit the needs of smaller non-profits.
• Value-Added Services: Ensure that the PEO’s services provide tangible value, especially in areas like tax filings, employee benefits, and worker’s compensation. Non-profits don’t want to pay for services that aren’t necessary.
• Flexible Terms: Some PEOs offer contracts with flexible terms, allowing you to scale services up or down depending on your needs. This flexibility is useful if your non-profit fluctuates in size or funding.

5. Ensure the PEO Aligns with Your Mission and Culture

• Mission-Driven HR Practices: A good PEO for a non-profit will understand your organization’s values and culture. They should be able to support employee engagement and retention strategies that are aligned with your mission.
• Employee Engagement and Retention: Non-profits may have limited budgets for salaries, so they need creative employee engagement strategies that go beyond compensation. A PEO can assist with programs like work-life balance, recognition programs, and other retention strategies.

6. Evaluate Technology and Ease of Use

• User-Friendly Platforms: Non-profits often have smaller HR teams or might rely on volunteers for HR tasks. Look for a PEO with an intuitive platform that’s easy to navigate and helps streamline HR processes, like payroll, benefits enrollment, and employee records management.
• Mobile Access: Many non-profits have employees who work remotely or in the field, so mobile access to HR tools can help streamline communication and management.

7. Seek Recommendations and Reviews

• Industry Recommendations: Ask other non-profit organizations or industry associations for recommendations on trusted PEOs. Peer recommendations are invaluable when evaluating PEOs for your non-profit.
• Online Reviews: Look for online reviews from non-profits that have worked with the PEOs you’re considering. Check websites like Trustpilot, Glassdoor, and Google Reviews for feedback.
• References: Request references from the PEO to speak with other non-profits they’ve worked with to get an idea of their experience.

8. Check for Accreditation and Industry Certifications

• NAPEO Membership: Check if the PEO is a member of the National Association of Professional Employer Organizations (NAPEO), which ensures the PEO adheres to ethical standards and best practices.
• IRS Certification: If the PEO is a Certified PEO (CPEO) with the IRS, it’s an indication of strong regulatory compliance and reliability.

9. Ask Specific Questions for Non-Profits

During the selection process, ask the PEO these key questions to assess whether they’re the right fit for a non-profit:

• Do you have experience working with non-profits and understanding their specific challenges?
• How do you support compliance with tax-exempt status and IRS regulations?
• Can you provide affordable benefits for employees while keeping costs low?
• How can you help with volunteer management and payroll for both employees and volunteers?
• What reporting capabilities do you offer to track grant usage, donations, and funding compliance?
• What steps do you take to help with employee engagement and retention, particularly for employees with lower salaries than for-profit organizations?
• Do you offer solutions that help streamline HR processes for small teams or limited HR resources?

10. Review Proposals and Select a PEO

Once you’ve narrowed down your options, request detailed proposals from the PEOs that seem like a good fit. Compare the proposals, considering the services offered, costs, and their understanding of non-profit challenges.

PEOs That Specialize in Non-Profit Support

StaffMarket currently works with 250+ PEOs across the nation that specialize in the non-profit sector. After gaining more information about your company’s unique needs, we then engage top providers in a competitive bidding process to get you the best solution, at the best rate available, the first time.

11. Finalize Your Decision

After evaluating the services, pricing, technology, and overall fit for your non-profit, make your selection and finalize the contract. Be sure to have a clear understanding of the terms, expectations, and ongoing support.

Sound like a lot of work? You are right. The good news our team has built the ultimate tool to save you a vast amount of time and resources on this journey. Our job is to find you the best PEO at the best rate available, the first time. We know how important of a decision this is to get right and we only win once you win through a strategic long-term growth relationship with your PEO. Our service is completely free to use, click here to get started: https://www.staffmarket.com/register

The landscape of HR outsourcing includes different models that businesses can leverage to optimize their workforce management. HCM (Human Capital Management), PEO (Professional Employer Organizations), and ASO (Administrative Services Organizations) are three popular approaches, and they differ in the level of involvement and the services they offer.

1. Identify Your Specific Needs

• Size and Growth Potential: Determine the size of your staffing firm (small, mid-sized, or large). Are you looking to scale? Make sure the PEO can accommodate your growth.
• Type of Workers: Are you hiring full-time employees, contractors, temporary staff, or a mix? Some PEOs specialize in managing temporary and contract workers, while others focus on full-time employee services.
• Compliance Requirements: Staffing companies often deal with complex legal regulations (e.g., labor laws, tax codes, workers’ comp). Ensure the PEO has expertise in these areas, especially across multiple states if you’re operating in different regions.

2. Research PEOs Specializing in Staffing Firms

Some PEOs focus specifically on staffing agencies and have experience dealing with the unique needs of temporary and contract labor. Look for PEOs that offer the following:

• Tailored Solutions: Does the PEO offer custom solutions for staffing agencies? For example, PEOs that offer better management of temporary workers and flexible payroll solutions are ideal.
• Industry Expertise: Choose a PEO with a proven track record in the staffing industry. Some PEOs understand the nuances of employment practices for contract or temporary workers better than others.

3. Consider Service Offerings

Evaluate the range of services offered by the PEO. Key services for staffing companies include:

• Payroll Management: Accurate payroll processing is essential, particularly if you have temporary staff and contractors working on different pay schedules.
• Employee Benefits: Look for PEOs that offer scalable benefits packages for your workers (including health insurance, retirement plans, etc.), which can help with retention and recruitment.
• Compliance and Risk Management: Staffing companies are often exposed to higher levels of employment risk (workers’ comp, unemployment claims, etc.), so choose a PEO that can effectively manage these risks.
• Onboarding and HR Tools: A PEO with an intuitive platform for onboarding temporary staff, managing schedules, and handling performance tracking is valuable.

4. Check for Reputation and Reviews

• Industry Recognition: Check whether the PEO has received positive reviews or certifications from industry bodies like the National Association of Professional Employer Organizations (NAPEO) or similar organizations.
• References: Ask the PEO for client references—specifically staffing companies. This can give you insight into how they work with businesses like yours.
• Customer Support: Ensure the PEO provides reliable customer support and that they are responsive to your needs, especially given the fast-paced nature of staffing.

5. Ask Key Questions During the Evaluation Process

When you contact a PEO, ask detailed questions to understand if they can meet your needs:

• Do you have experience working with staffing agencies, particularly those with temporary/contract workers?
• How do you handle the compliance complexities of multi-state staffing companies?
• What types of employee benefits do you offer, and are they customizable for different worker types?
• Can you provide a scalable solution as my staffing company grows?
• What kind of reporting and analytics do you provide for tracking employee performance, payroll, and benefits?
• What’s your pricing model? Are there any hidden fees?
• How does your platform integrate with our current HR software or job management systems?

6. Request a Proposal and Review Terms

• Cost Transparency: Ensure you get a clear breakdown of the costs involved—PEOs usually charge a per-employee-per-month fee or a percentage of payroll.
• Service Level Agreements (SLAs): Review the PEO’s service level agreements to understand their commitments to you regarding HR, compliance, and employee services.

7. Assess Technology and Ease of Use

Technology is a key consideration when choosing a PEO. Look for:

• User-Friendly HR Platforms: The PEO’s platform should be easy for both your HR team and employees to use. Consider features like online payroll processing, time tracking, and employee self-service portals.
• Mobile Access: Especially if your staffing company’s workers are on the go, a PEO that offers mobile access to HR services could be a significant benefit.

8. Trial Period or Pilot Program

Before committing long-term, see if the PEO offers a trial period or pilot program. This gives you a chance to test the platform, customer service, and overall fit with your business model.

9. Evaluate Long-Term Partnership

A PEO is not just a service provider but a long-term partner. Consider:

• Scalability: Can the PEO continue to support your growth as your staffing business expands?
• Support & Customer Service: Does the PEO offer ongoing support for your HR needs, or are you left to navigate things alone once you sign the contract?
• Flexibility: If your staffing business requires flexibility (e.g., fluctuating workforce sizes or seasonal demands), make sure the PEO can accommodate these needs without unnecessary complexity.

10. Make Your Decision

Sound like a lot of work? You are right. The good news our team has built the ultimate tool to save you a vast amount of time and resources. Our ultimate job is to find you the best PEO at the best rate available, the first time. We know how important of a decision this is to get right and only win once you win in a strategic long-term growth relationship with your PEO. Our service is completely free to use and you can click here to get started: https://www.staffmarket.com/register

So..let’s try putting AI to work and help you find the top PEO solution in your industry. ChatGPT, Perplexity AI, Google Geminini, Microsoft Copilot….while these are all great tools to help you learn about HR outsourcing and Professional Employer Organizations, it’s important to consider that they DO NOT perform complex analysis of your unique needs nor provide you the competitive tailored proposals you need. This is a service that StaffMarket performs on your behalf–completely free to use.

So, before you start calling all the PEOs generated and recommended in these AI search engines — it may be helpful to keep in mind how much time you will be spending on this pursuit, only to be speaking with exclusive representatives of each PEO that are not independent and agnostic experts such as StaffMarket provides. Additionally, our competitive marketplace helps drive down the cost so that you may receive the best solution available at the lowest rate possible.

By taking 5 minutes to “kick-off” your Request-for-Proposal by clicking here, StaffMarket quickly engages hundreds of the top PEOs to begin competitively bidding on your business unique needs. We then narrow it down to the top 3-5 proposals that best fit your needs to effectively get you the best rate available, the FIRST time! Our services are 100% free for all our clients to use.

We are excited to see StaffMarket Professional Employer Organization Services at www.staffmarket.com being suggested at top Artificial Intelligence search engine such as ChatGPT, Google Geminini, Microsoft Copilot and Perplexity AI. For example, the following is a real search query from Perplexity AI when a user searched “How to find the best Professional Employer Organization PEO” and it was a helpful representation of our services.

We serve a wide range of industries from construction, healthcare, finance, manufacturing, retail, aviation, real estate, legal, and hospitality. PEOs are used by a diverse range of companies, especially small and mid-sized businesses and offer strategic long-term growth and risk mitigation strategies that usually far surpass the capabilities of an in-house HR manager.

Image Source: Perplexity AI “How to Find the Best Professional Employer Organization (PEO) with StaffMarket”

Author: Brice Hamilton, Director of Business Development

Contact: brice@staffmarket.com

Many businesses are finding it more challenging to attract workers and the competition for quality employees is increasing. By partnering with a PEO small business can economically offer prospective workers a full suite of employee benefits that make their company a more attractive employment options for the prospective employee. PEOs provide payroll services, employee benefits, workers’ compensation insurance, regulatory compliance assistance, and other HR services to more than 173,000 small and mid-size businesses employing over 4 million people.

For small businesses dealing with the myriad of changing employment laws and rules, companies who have been partnered with a PEO have had expert guidance on every aspect of pandemic related rules and regulations. These advantages have shown the value of a PEO and recent surveys and statistics assembled by the National Association of Professional Employer Organizations has proven this value. NAPEO President & CEO Pat Cleary stated that “PEOs were the unsung heroes of the pandemic as they proved to be lifesavers for so many of their small business clients. Small businesses across the country recognize the true value of partnering with a PEO and more and more are deciding to partner with a PEO.” According to NAPEO, since the pandemic began, compared to other small businesses, PEO clients were 58% less likely to have permanently closed, are 82% more likely to have business operations back to normal or better, and have a rate of employment growth that is 81% higher.

View detailed information about the value of a PEO during the COVID-19 Pandemic.

Belmont (CA)

Berkeley (CA)

Cupertino (CA)

Daly City (CA)

El Cerrito (CA)

Emeryville (CA)

Fremont (CA)

Half Moon Bay (CA)

Hayward (CA)

Long Beach (CA)

Los Altos (CA)

Los Angeles (CA): city and unincorporated cities within Los Angeles County

Malibu (CA)

Milpitas (CA)

Mountain View (CA)

Oakland (CA)

Palo Alto (CA)

Pasadena (CA)

Petaluma (CA)

Redwood City (CA)

Richmond (CA)

Sacramento (CA)

San Carlos (CA)

San Diego (CA)

San Francisco – City and County (CA)

San Jose (CA)

San Leandro (CA)

San Mateo (CA)

Santa Clara (CA)

Santa Monica (CA)

Santa Rosa (CA)

Sonoma (CA)

Sunnyvale (CA)

Why join a Professional Employer Organization (PEO)

Whether you are starting a new company in 2019 or are the owner or manager of an ongoing enterprise, one of the biggest challenges is handling the workforce related obligations that come with being an employer. Regardless of the type of small business you are involved with responsibilities for payroll, insurances, taxes, employee benefits and regulatory compliance can be a big chore and it can create a real mess if you get it wrong.

Stay Focused, Follow the Rules and Be a Great Employer

Companies that join a PEO enjoy the risk shifting aspect that places responsibility for payroll, taxes and workers compensation insurance on the PEO. The PEO becomes the employer of record. In addition, many PEOs offer a suite of optional employee benefits that you can make available to your workforce. These may include group medical coverage, supplemental insurances like short term disability and 401K requirement programs.

Best PEO Services Lists are just click-bait

If you were searching for “Best PEO services” you may have been served a link to a page that was constructed as click bait for a list of companies that paid to be on that list. Companies like TechRadar.com get paid to create clickbait advertising content but provide little insight about the Professional Employer Organization industry. PEOs paying a third party to be on their “Best PEO” list include ADP TotalSource, Paychex PEO, Engage PEO, Trinet and XcelHR PEO. While these are all fine companies the fastest way to make your companies PEO search easy is to use the StaffMarket RFP process. If you are looking for reviews from companies that are actual customers of a particular PEO, check out PEO reviews in our PEOs by state listings. In addition, our experienced staff of PEO experts are versed on all aspects of a PEO arrangement and can advise on any questions or concerns you may have about joining any PEO.

With nearly 1000 PEOs operating in the USA any website that claims to have a list of the “BEST PEOs” is just a running a two-bit marketing ploy. The reality is that finding the “Best PEO” really means finding the PEO that best meets your company’s specific HR needs, is licensed and operates in states where you have workers, provides workers’ compensation coverage for your type of work and does it for a reasonable price. PEOs come in all shapes and sizes and each has narrow boundaries of what they can do and who they can do it for.

How our process identifies your best PEO options

For 20 years StaffMarket has maintained the nation’s largest data repository that tracks all aspects of PEOs operating in the USA. With this data, our system matches your company with the PEOs that are viable for your business. Our on-line matching process sifts hundreds of PEO options down to a viable “short-list” of best PEOs based on your specific needs. That’spart one. Part two is a competitive bidding process that assures your company gets a good price. Register to get PEO quotes to get the ball rolling.

Since 1999 over 25,000 companies have engaged us to make their PEO search easy. Contact StaffMarket and we’ll find YOUR best PEO.

Last week, the Committee met to consider adding similar language to another bill. At that time, Senator Broxson (R – District 1) introduced an amendment to SB 1636 that – for purposes of workers’ compensation – would deem a worksite employee to be an employee of a PEO even if the PEO had no prior knowledge of the hiring of that employee by the client contractor. The Committee added the PEO language to that bill before ultimately voting to temporarily postpone the entire bill.

Proposed Amendment Encourages Workers Compensation Insurance Fraud.

At StaffMarket our opinion is that this proposal interferes with the PEO – client relationship and encourages fraud in workers’ compensation claims.  Let’s say my company is a PEO client and my drunk brother fell of a ladder putting up Christmas lights. He has no health insurance. Here’s an idea, I’ll just claim that I hired him last week (sorry mister PEO I forgot to tell you).  That way we can stick the PEO with the medical bills and a workers’ compensation claim.  Stopping this kind of gaming is the reason why PEOs insist on only employees reported on the client’s payroll (where work comp premium is calculated) are covered under the PEO Workers’ Compensation insurance plan. Since PEOs offer business owners work comp coverage on a pay-as-you-go basis based on client’s payroll, it has been long standing practice in the PEO industry to demand PEO clients have workers on the payroll before the workers comp coverage is in force. This practice has allowed PEOs to keep fraudulent claims in check and thus pass those savings on to their clients. If this amendment were to become law, the increased cost of their fraud exposure must ultimately be passed on to their clients.  It would be interesting to know just who is really pushing this amendment and what their motivations really are.

The National Association of Professional Employer Organizations (NAPEO) is working to stop this financial and politically motivated amendment.

A new study by Bassi and Associates (commissioned by NAPEO members) reveals the following:

PEO Industry Growth

• 907 PEOs are now operating in the USA.
• PEOs managed $176 billion in employment related wages for their 174,545 business clients. Those PEO clients represent 12% of all USA private sector employment for businesses with 10 to 99 workers and 2.4% of all civilian employment.
• The number of worksite employees covered by PEOs grew at a compounded annual rate of 8.3%

Why the Growth in Professional Employer Organizations?

The overall USA economy is on improved growth track and the awareness of the value of joining a PEO is growing among knowledgeable business owners and managers. With over 900 PEOs operating in America, quickly finding the right PEO for the right price can be a challenge. Let StaffMarket help make your company’s search easy.

Fixing an Oversight

The TCJA as originally passed neglected to address the impact for businesses that are using a Professional Employer Organization (PEO) to handle their employment related administrative responsibilities. For businesses using a PEO, W2 wages are reported under the EIN of the PEO and not the PEO’s client company. This situation created questions among PEOs and PEO clients regarding the admissibility of using worker W2 wages for when calculating QBI when the wages are reported to the IRS by the PEO. That question is being resolved via guidance on Section 199A from the Department of the Treasury – IRS. As drafted, PEO clients will be able to use W2 wages paid (via their PEO) for their worksite employees when calculating their QBI and associated tax deduction

The National Association of Professional Employer Organizations (NAPEO) has communicated that the proposed rule clearly states that eligible pass-through entities that are clients of a PEO can take the 20 percent tax deduction created by Section 199A of tax reform. It also affirms that being the client of a PEO does not affect the eligibility of a pass-through entity for the 20 percent tax deduction in Section 199A of the tax code.

The proposed IRS guidance for 199A-2 (page 17) states:

II. Proposed §1.199A-2: Determination of W-2 Wages and the UBIA of Qualified Property

As described in part I.C. of this Explanation of Provisions, if an individual’s taxable income exceeds the threshold amount, section 199A(b)(2)(B) imposes a limit on the section 199A deduction based on the greater of either (i) the W-2 wages paid, or (ii) the W-2 wages paid and UBIA of qualified property attributable to a trade or business. This part of this Explanation of Provisions describes the rules in proposed §1.199A-2 regarding the determination of W-2 wages and UBIA of qualified property

A. W-2 wages attributable to a trade or business

The W-2 wage rules of proposed §1.199A-2 generally follow the rules under former section 199. Section 199, which was repealed by the TCJA, provided for a deduction with respect to certain domestic production activities and contained a W-2 wage limitation similar to the one in section 199A. The legislative text of the W-2 wage limitation in section 199A is modeled on the text of former section 199, and both taxpayers and the IRS have developed experience in applying those W-2 wage rules for over a decade. The regulations under former section 199 provided rules to determine Doc 2018-32521W-2 wages, which provide a useful starting point in developing the W-2 wage rules under section 199A, including rules on the definition of W-2 wages, wages paid by persons other than the common-law employer, and methods for calculating W-2 wages.

The Treasury Department and the IRS have received comments concerning whether amounts paid to workers who receive Forms W-2 from third party payors (such as professional employer organizations, certified professional employer organizations, or agents under section 3504) that pay these wages to workers on behalf of their clients and report wages on Forms W-2, with the third party payor as the employer listed in Box C of the Forms W-2, may be included in the W-2 wages of the clients of third party payors. In order for wages reported on a Form W-2 to be included in the determination of W-2 wages of a taxpayer, the Form W-2 must be for employment by the taxpayer. The regulations under former section 199, specifically §1.199-2(a)(2), addressed this issue, providing that, since employees of the taxpayer are defined in the regulations as including only common law employees of the taxpayer and officers of a corporate taxpayer, taxpayers may take into account wages reported on Forms W-2 issued by other parties provided that the wages reported on the Forms W-2 were paid to employees of the taxpayer for employment by the taxpayer.

Proposed §1.199A-2(b)(2)(ii) provides a rule for wages paid by a person other than the common law employer that is substantially similar to the rule in §1.199-2(a)(2). Specifically, the proposed regulations provide that, in determining W-2 wages, a person may take into account any W-2 wages paid by another person and reported by the other person on Forms W-2 with the other person as the employer listed in Box c of the Forms W-2, provided that the W-2 wages were paid to common law employees or officers of the person for employment by the person. In such cases, the person paying the W-2 wages and reporting the W-2 wages on Forms W-2 is precluded from taking into account such wages for purposes of determining W-2 wages with respect to that person. Persons that pay and report W-2 wages on behalf of or with respect to others can include certified professional employer organizations under section 7705, statutory employers under section 3401(d)(1), and agents under section 3504. Under this rule, persons who otherwise qualify for the deduction under section 199A are not limited in applying the deduction merely because they use a third party payor to pay and report wages to their employees. However, with respect to individuals who taxpayers assert are their common law employees for purposes of section 199A, taxpayers are reminded of their duty to file returns and apply the tax law on a consistent basis.

Unlike former section 199, the W-2 wage limitation in section 199A applies separately for each trade or business. Accordingly, proposed §1.199A-2 provides that, in the case of W-2 wages that are allocable to more than one trade or business, the portion of the W-2 wages allocable to each trade or business is determined to be in the same proportion to total W-2 wages as the deductions associated with those wages are allocated among the particular trades or businesses. Section 199A(b)(4) also requires that to be taken into account, W-2 wages must be properly allocable to QBI. W-2 wages are properly allocable to QBI if the associated wage expense is taken into account in computing QBI.

Additionally, proposed §1.199A-2(b)(4) restates the rule of section 199A(f)(1)(A)(iii), which provides that, in the case of a trade or business conducted by an RPE, a partner’s or shareholder’s allocable share of wages must be determined in the same manner as the partner’s allocable share or a shareholder’s pro rata share of wage expenses.

Consistent with section 199A(b)(5) and the legislative history of the TCJA, which direct the Secretary to provide rules for applying the W-2 wage limitation in cases in which the taxpayer acquires, or disposes of, a trade or business, the major portion of a trade or business, or the major portion of a separate unit of a trade or business during the year, proposed §1.199A-2(b)(2)(iv)(B) provides rules that apply in the case of an acquisition or disposition of a trade or business. See Joint Explanatory Statement of the Committee of Conference, 38. Specifically, proposed §1.199A-2(b)(2)(iv)(B)(1 )provides that, in the case of an acquisition or disposition of a trade or business, the major portion of a trade or business, or the major portion of a separate unit of a trade or business that causes more than one individual or entity to be an employer of the employees of the acquired or disposed of trade or business during the calendar year, the W-2 wages of the individual or entity for the calendar year of the acquisition or disposition are allocated between each individual or entity based on the period during which the employees of the acquired or disposed of trade or business were employed by the individual or entity, regardless of which permissible method is used for reporting predecessor and successor wages on Form W-2. For this purpose, the period of employment is determined consistently with the principles for determining whether an individual is an employee described in proposed §1.199A-2(b).

A notice of proposed revenue procedure, Notice 2018-64, 2018-35 IRB ____, which provides three methods for calculating W-2 wages is being issued concurrently with this notice of proposed rulemaking. The three methods in the notice are substantially similar to the methods provided in Rev. Proc. 2006-47, 2006- 2C.B. 869, for purposes of calculating “paragraph (e)(1) wages” (that is, wages described in §1.199-2(e)(1) issued under former section 199). The first method (the unmodified Box method) allows for a simplified calculation while the second and third methods (the modified Box 1 method and the tracking wages method) provide for greater accuracy.