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

Earlier this year, the Federal Trade Commission (“FTC”) issued a rule that largely prohibited employers from requiring employees to sign non-compete agreements (the “Non-Compete Rule”). The rule was set to take effect on September 4, 2024. However, on August 20, 2024, the United States District Court for the Northern District of Texas issued its final ruling in Ryan, LLC v. FTC, a case that challenged the FTC’s Non-Compete Rule. In its ruling, the court invalidated the Rule, meaning that non-compete agreements will continue to be valid and enforceable.

Background

The FTC is a federal agency charged with regulating commerce. The FTC was created by Congress and is granted certain statutory authority to regulate business in the United States. One of the areas that falls under the FTC’s purview is unfair trade practices.

In recent years, the FTC began looking at non-compete agreements. Eventually, the agency determined that the creation and enforcement of non-compete agreements was an unfair trade practice. The FTC used this determination as its basis for issuing the Non-Compete Rule.

Ryan LLC v. FTC

The plaintiff in Ryan challenged the Non-compete rule and argued that it had two basic flaws. First, it was arbitrary and capricious, based on the fact the FTC’s studies it relied on to reach its determination were inadequate. Second, the plaintiff argued that the FTC lacked the statutory authority to regulate non-compete agreements in general.

The Court agreed with the plaintiff in Ryan and held that the Non-Compete Rule was arbitrary and capricious as well as outside the authority granted by the FTC’s statutory mandate. Therefore, the court set aside the Non-Compete Rule in its entirety ensuring that it will not go into effect on September 4.

Takeaways

The court’s ruling is a final order in the case. The FTC may choose to appeal the ruling to the Fifth Circuit Court of Appeals. However, such an appeal would take months if not years, and the Non-compete Rule will not be enforced in the interim. If there is no appeal, the Non-Compete Rule is effectively dead.

However, given that non-compete clauses are in the FTC’s crosshairs, it is certainly possible that the agency will try to issue a new rule that would be able to pass judicial review. It is also possible that Congress could pass a law either banning non-competes or expressly giving the FTC authority to regulate them. That possibility is less likely in the near-term, given upcoming elections and the current partisan makeup of Congress.

But for the present, employers can continue their usual practices concerning non-compete clauses in employment contracts. While such clauses are not prohibited by the FTC Non-Compete Rule, there are a multitude of state laws and judicial decisions that constrain and delineate whether such clauses are valid and enforceable. In broad terms, non-compete clauses must be reasonably drafted to protect the legitimate interests of employers without being overly restrictive on an employee’s ability to work. Non-compete clauses need to be reasonable as to the length of time they are in effect, the geographic area they cover, and the scope of the prohibited competitive behavior.

If your company is currently using a PEO then you should contact them about this topic.

The most common classifications are exempt and nonexempt. Exempt employees are typically salaried workers who (a) are paid the same amount each week regardless of hours worked, (b) are paid at least $844 each week and (c) hold administrative, professional or executive positions. Nonexempt employees are often hourly workers who perform more manual or technical duties. Nonexempt employees are entitled to overtime pay for any hours worked beyond 40 in a workweek, which is defined as seven consecutive 24-hour periods.

Classifying employees as exempt or nonexempt under the Fair Labor Standards Act determines their eligibility for overtime pay as well as meal and rest breaks. Most employers have both exempt and nonexempt workers.

Other employment types come with their own sets of laws and considerations:
Full time describes someone who works a specified number of hours a week and gets access to company benefits. The specific terms are set by the employer and may be subject to state-specific labor laws. The category is subject to FLSA.

Part time describes someone who works fewer hours than full time, though the exact number of hours that constitutes part time is left to the employer to define. Part-time workers are covered by FLSA.

Contract employees are hired for a defined period, often for their specialized knowledge or skills. They work varying hours according to the contract and are eligible for FLSA benefits.
Independent contractors are like contract employees but aren’t on the company’s payroll. Their work hours and exemptions are determined by the organization they work for. Independent contractors are not covered by FLSA.

Temporary employees are hired on a short-term basis and are eligible for FLSA benefits.
On-call employees are expected to be able to work during specific hours, are paid hourly and may be covered by certain provisions of FLSA.

Seasonal workers or employees are hired for a specific period — typically of six months or less. Seasonal workers tend to be hired for the same six months from year to year (for example, summers), while seasonal employees tend to work as help during peak times (for example, winter holiday workers). FLSA does not specifically cover these categories, but certain provisions of the act may apply. Volunteers are not employees, so they are neither exempt nor nonexempt.

Because employee classifications impact companies’ budgets, some employers may seek to treat workers as independent contractors to avoid compliance with unemployment insurance, workers’ compensation, Social Security, tax withholding, temporary disability, and minimum wage and overtime laws. However, if you instead establish an employee classification policy and apply it consistently, your company will be less likely to face costly fines for misclassification. Payroll software, which offers such extras as analytics to aid in decision making, can help with compliance while fostering business growth.

Employee classification is essential for workforce planning, recruitment and retention strategies, and compliance. One of the business advantages of joining a Professional Employer Organization (PEO) is that they will assist in ensuring that your company has made the employee classifications accurate.

How to Find the Best PEO for Managing Employee Payroll

Payroll management doesn’t need to be stressful, For any enterprise, particularly small and medium-sized businesses, learning how to evaluate a PEO’s payroll management service can lead to streamlined, efficient, and personalized employee payroll solutions – giving you the strategic upper-hand.

So, what’s the true value of a PEO for payroll management, and how can you start the process of evaluating your options? Contact StaffMarket and we will help you navigate to the best solutions.

A PEO Does More than Just Process Paychecks

A PEO can offer a comprehensive suite of services designed to simplify payroll management. saving you time and resources that would otherwise be spent on the critical, and repetitive, task of employee payroll.

The benefits of partnering with a PEO extend beyond just handling the numbers. A PEO provides strategic support, leveraging its expertise to protect your bottom line and streamline your operations.

Partnering with a PEO Means Seasoned Expertise When You Need It

One of the most significant advantages of a PEO partnership is having a dedicated payroll specialist to offer support and guidance when you need it most.

Streamline Payroll Processes: By integrating advanced payroll software and processes, a PEO saves valuable administrative time and energy.

Greater Payroll Compliance: PEOs stay ahead of the constantly evolving web of wage laws, labor regulations, and tax regulations, even across different jurisdictions, which can help you avoid costly financial penalties.

Scale At Your Pace: As your business evolves, so do your employee payroll needs. A PEO provides scalable solutions that grow with your business, ensuring you have the support you need at every stage of your journey.

This level of personalized service simplifies your payroll operations, ensures compliance, and allows you to maximize productivity in other areas of your company.

How to Evaluate PEO Companies for Your Employee Payroll Needs

The ideal PEO should streamline your employee payroll processes and align with your business’s broader HR and growth strategies..Here’s how to ensure you choose the right PEO for your business: StaffMarket will match your needs with our database repository of PEO services.

Industry Experience

Every sector and business has unique challenges. You’ll want a PEO that is attuned to the specific nuances, regulations, and payroll intricacies you encounter regularly, such as employees who work in multiple states.

Many PEOs have experience with a wide range of industries. This gives them a wealth of knowledge to accurately answer your questions and predict future hurdles that you’ll need to clear on your path to growth, even as the regulatory landscape evolves.

Comprehensive Services

A PEO that offers a broad spectrum of services can provide more value than one focused solely on payroll. StaffMarket helps your company find the best fit PEOs that integrate payroll processing with HR management, benefits administration, workers’ compensation insurance, and risk management services. This approach simplifies administrative tasks and ensures a seamless integration of payroll with other critical business functions.

Forward-Thinking Technological Solutions

In today’s tech-driven economy, having access to user-friendly payroll software is important. A PEO will offer robust payroll software that streamlines end-to-end payroll processing, from employee administration to reporting.

Mobile access is another must-have for round-the-clock payroll management and processing. Access to software from your phone, tablet, or desktop means having the flexibility to manage payroll operations — and put out fires — anytime, anywhere.

Personalized Consulting with Responsive Customer Service

A one-size-fits-all approach rarely covers all bases, especially for small businesses with complex or unique requirements. We will help evaluate PEOs that work with you to understand your business and offers customized solutions tailored to your business needs. StaffMarket will facilitate that dynamic. The availability of personalized consultants, including payroll specialists and a responsive customer service team, will significantly enhance your experience.

A Track Record of Success

We will help you find a PEO that has been around for a significant amount of time with a proven history of success with businesses in a variety of industries, and provide client testimonials and case studies that back it up. A stellar track record of success will give you the confidence and peace of mind that comes with knowing your HR and payroll services are always in good hands.

Flexibility and Scalability

Your payroll needs today won’t be the same payroll needs you have a year, or even five years, from now. Choosing a PEO that can scale its services to match your growth trajectory means not having to re-evaluate your payroll management strategy every 6 months.

Whether you’re expanding your workforce or entering new markets, flexible and scalable payroll solutions can adapt to your changing requirements, ensuring uninterrupted service and support.

A PEO Can Be Your Employee Payroll Partner in Growth

The perfect PEO partner should understand your business’s unique requirements. Evaluate potential partners against your needs, and select a PEO that is a testament to excellence and personalized service.

A PEO will understand the unique challenges small and medium-sized businesses face in managing employee payroll and HR across a wide variety of industries. PEOs have provided comprehensive, tailored solutions for businesses across the country for decades.

A PEO will provide consultative services for your specific business challenges, and will ensure that your employee payroll management processes are accurate and complete.

New Overtime Regulations

On April 23, 2024, the U.S. Department of Labor announced a final rule to raise the salary threshold for certain overtime exemptions.

The final rule raises the minimum salary thresholds in two steps.

July 1, 2024:

• The salary threshold will increase to $844 per week or $43,888 per year (a 23% increase over current levels).
• The salary threshold for highly compensated employees will increase from $107,432 to $132,964 per year (a 23% increase over current levels).

January 1, 2025:

• The salary threshold will increase to $1,128 per week or $58,656 per year (a 64.9% increase over current levels).
• The salary threshold for highly compensated employees will increase to $151,164 per year (a 41% increase over current levels).

The rule is considered a “major rule” and cannot take effect for 60 days. During this time, the ruling could be challenged in court.

We recommend that you review your salaries and classification policies to determine what approach you would use to comply with the rule, if and when it becomes effective. Because the rule could be struck down, you may wish to plan for implementation but hold off on taking action for as long as possible.

Options to consider if someone’s salary is under the new thresholds:

• Increase their salary to the new minimum; or
• Change their status to hourly, non-exempt and pay overtime.

• Businesses that use PEOs grow 7 to 9 percent faster, have employee turnover that is 10 to 14 percent lower, and are 50 percent less likely to go out of business than companies that do not use PEOs.

• PEOs enable small businesses to offer their employees access to Fortune 500-level benefits such as: 401(k) plans; health, dental, life, and other insurance; dependent care; and other benefits they might not typically receive as employees of a small company.

• Most small companies cannot afford to hire a human resources professional. In contrast, almost all PEOs provide access to human resource professionals as a part of their services to small businesses and their employees. Through this service, PEOs help small businesses comply with myriad federal, state, and local employment laws, and they provide access to HR expertise to small business employees.

• Among businesses with fewer than 10 employees, those using a PEO have more than 3 times greater participation in a retirement plan than employees of businesses that do not use a PEO. For businesses with 10 to 49 employees, 52 percent of PEO client employees have a retirement plan, versus 23 percent in those companies that do not use a PEO.

About the PEO Industry

• There are more than 500 PEOs in the U.S. that provide human resource services to small and mid-size businesses—issuing wages and remitting taxes, offering workers’ comp and risk consulting services, and providing compliance assistance with employment-related rules and regulations. In addition, many PEOs offer HR technology systems and access to 401(k) plans, health, dental, and life insurance, dependent care, and other benefits.

• PEOs help businesses take care of employees by enabling them to offer Fortune 500-level benefits at an affordable cost and providing access to experienced HR professionals. And they help business owners and executives save time by taking administrative and HR-related tasks off their plates, allowing them to focus on the success of their businesses.

• More than 200,000 small and mid-size businesses employing 4.5 million people partner with a PEO.

• About 17 percent of all employers with 10 to 100 employees are PEO clients.

• Over the last 12 years, the PEO industry has quadrupled in size as the regulatory landscape gets increasingly complicated and more and more businesses turn to PEOs for back-office assistance.

January 2024,
The Biden administration issued a new rule Tuesday intended to put more contractors on company payrolls, a change that could reverberate across a range of industries, including healthcare, restaurants, construction and transportation. The rule, which will go into effect in March 2024, would impose a stricter test to determine whether companies can classify their workers as independent contractors. It would replace a 2021 rule implemented by the Trump administration. The new regulation could affect millions of workers, though affected businesses could consider taking legal action to block the rule.

Independent contractors don’t receive federal labor protections such as minimum wage, workers’ compensation or unemployment benefits. Some companies improperly count their employees as contractors to avoid paying for those protections, Labor Department officials said. Under the new rule, if a worker can be counted as a contractor would depend on factors such as whether the job is primarily permanent or temporary, how much control an employer has over work performance or how integral a worker’s job is to the overall business.
This new rule will likely raise operating costs for small businesses due to the requirement that these workers will now be classified as employees so the employer must pay for abide by Wage and Hour regulations including minimum wage rules, unemployment taxes, payroll and tax withholding and provide workers’ compensation insurance coverage.

Joining a Professional Employer Organization (PEO) will help ensure a business will be in compliance with these new DOL rules. PEOs act as the employer of record and provide HR guidance that ensures their client businesses will navigate the regulatory landscape successfully.