MISC MUSES

It’s old news that the Obama administration increased funding to the Department of Homeland Security’s ICE division (Immigration and Customs Enforcement).  It’s also been widely reported how this increased funding is being spent.  Like the Employer Compliance Inspection Center which houses a team that expressly targets I-9 audits of large businesses.  With all the press, it’s hard for me to understand why ICE is saying it believes that 99% of all employers have erroneous I-9’s in their files; that it finds an average of five errors per audited I-9.  Actually, it’s not that hard to understand.  The federal Form I-9 is a one-page document that comes with 68 pages of instructions.

Complexity aside, ICE is on a mission.  In 2010, they doubled their number of audits conducted.  Compared with 2008, fines levied have increased 10-fold.  Just ask the folks over at Abercrombie and Fitch.  They just paid a $1M fine for a third-party’s improper electronic storage of their I-9’s.   Bold as ICE.

Ever heard of E-Verify?  If not, you will, soon.  This ICE program initially gave employers voluntary access to an internet database to verify a worker’s employment status in the U.S.  As of today, E-Verify is now mandatory for some or all businesses in the following states:  AL, AZ, CA, CO, GA, ID, IL, IN, LA, MI, MN, MO, MS, NE, NC, OK, PA, RI, SC, TN, UT, and VA.

There may have been a time when the risk of non-compliance was, shall we say, manageable.  I think those days are over.

Within the IRS and Department of Labor, red flags start flying from any number of triggers.

Consider the example of a legal secretary who presented herself as an independent contractor to a prominent Colorado law firm. After her project with the firm ended, she filed for unemployment benefits. An investigation into her claim revealed she had no clients other than the law firm, worked hours as dictated by the firm, performed all her work on the firm’s premises using the firm’s equipment, and was under the direction and control of the firm’s attorneys. The Colorado Department of Labor and Employment, therefore, considered her to be an employee – not an independent contractor – and deemed her eligible for unemployment benefits. Additionally, the law firm was held liable for back payroll taxes and penalties.

Well-intentioned employers can quickly end up on IRS and DOL radar screens when a contract worker files a Worker’s Comp claim. This happens with surprising frequency despite the logical assumption that an independent contractor should understand the implications of a business-to-business relationship.  One key aspect of a genuine B2B relationship is that a worker’s business activity exists independent of the employer.

As an employer, if you’re an IC’s only client, an “audience of one” so to speak, you should start thinking red flag.  Admittedly, compliance issues are complicated stuff.  There is no predetermined formula that yields a definitive answer to the employee versus contractor question.

But red flags are that color for a reason.  If you spot one while dealing with your IC’s, seek help.  The IRS and DOL have taken off the gloves.

PayReel’s clients, who are some of the biggest companies in the world, are always immersed in the chaos of producing multimedia content or executing live events. PayReel makes sure they have the right contractors at the right time in the right place, and that everyone gets paid properly. And, most importantly, they handle every last detail correctly while making sure their clients think nothing of it. Relax. We got it.

Sometimes it’s a good idea to get away from the office to recharge your batteries, to sharpen the axe, to network with colleagues, and to lose a few bucks in a casino. PayReel’s CEO and I managed to do just that last month in Las Vegas while attending an Executive Forum sponsored by Staffing Industry Analysts.  SIA has become an invaluable source of information and insights on the global contingent workforce marketplace.

The conference, held at the Red Rock Resort, was extremely well-attended by hundreds of staffing professionals from all four corners of the globe.  The SIA team flawlessly executed their 4-day agenda by providing a well-rounded mix of industry, strategic, and tactical topics.  I could have also used a primer on Blackjack betting strategy.  Alas, the best lessons in life are often expensive.

Here’s a brief recap of our top three takeaways from the conference:

1.       Things Really Are Looking Up!

Our economy’s jobless recovery has finally begun to create jobs.  That’s good news.  The other news is that job creation following “the great recession” is occurring at the slowest rate since the 1974/75 downturn.  Industries showing the best job growth are health care and manufacturing.  Construction jobs remain hard to come by.

2.       The World of Work is Changing

Technology is reinventing work.  It is changing where work happens, worker employment models, and the structure and dynamics of teams.

Moreover, since older workers are delaying retirement and fewer young workers are entering the labor force, companies now face the challenge of managing and motivating multi-generational workforces.  Most have found that HR policies aimed at baby boomers don’t necessarily translate to Gen X and Gen Y employees.

3.       Social Media Marketing is No Longer an Option

YouTube is now the world’s second most popular search engine.  If you didn’t know YouTube was even considered a search engine, you’re in good company … but don’t stay there.

Business to Consumer marketing is no stranger to social media.  But now B2B marketers are increasingly leveraging the power of social media.  If your business is absent from LinkedIn, Facebook, or Twitter you’ve put yourself at a disadvantage relative to your competition.

I’m really looking forward to the 2013 SIA Executive Forum.  I made several new friends during this year’s event.  And I promise to send you all the money I owe asap.  The threatening emails really aren’t necessary.

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Once you get past all the legal jargon, it’s a really simple question:  Does the Constitution of the United States give Congress the power to compel every citizen to either purchase health insurance or pay a penalty?

Our Supreme Court justices listened to arguments for three days in late March and are expected to hand down a decision in June.  The smart money is on a 5 to 4 decision … either way.  If the Affordable Care Act is struck down, the federalists will shout “Freedom!” in their best Mel Gibson/William Wallace accents.  If “ObamaCare” survives intact, the liberals will proclaim “Four More Years!” in their best Ted Kennedy.

At this point in the proceedings, it looks as if Justice Anthony Kennedy will be the swing vote.  His comments and questions during the three days of hearings have supporters of the law on an emotional roller coaster.  And just in case he begins to lean too far in opposition, the Obama administration has already fired a shot across his bow.  Last week, the President (a constitutional law scholar in case you’ve forgotten) raised another simple question for us simple-minded citizens to ponder … Does the Supreme Court even have the authority to overturn legislation passed by Congress?

Are you even remotely interested in how our republic functions (or dysfunctions)? If so, the drama doesn’t get any better than this.  Imagine the fallout if the Supreme Court declares the law unconstitutional.  Our healthcare system will still be in need of reform.  It’ll still be an election year.  And the voting public will quickly begin asking “So now what?”

Let the finger-pointing begin!

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If you’ve come anywhere near an HR newsletter in the last six months, you know there’s a big crackdown in progress targeting misclassification of employees as independent contractors.  The heat has risen to the point where one piece of pending legislation would make misclassification a federal offense regardless of whether the infraction was intentional or not.

Why do the IRS and DOL have their collective knickers in a bunch over misclassification?

It all comes down to simple economics.  Federal and state tax revenues are down.  Not a good thing if you’re in charge of balancing budgets.  Meanwhile, non-compliance with IRS and DOL regulations governing which workers are classified as W-2 employees versus 1099 contractors are going up.  This equates to fewer tax dollars coming from employers without a corresponding increase in tax revenues from independent contractors.

Combine this with historic federal and state budget deficits, and you’ve got a recipe for stepped-up surveillance and enforcement.  Witness two recently introduced bills: The Payroll Fraud Prevention Act, and The Employee Misclassification Prevention Act.  Both bills are still in committee, but they underscore how much attention this issue is getting in Congress.

Still not convinced this iron is hot? Allow me to remind you about the widely announced partnerships between the IRS, DOL, and several state agencies who are now sharing employer information with the goal of tracking down practitioners of worker misclassification.

The U.S. economy’s jobless recovery has improved over the past few months to a mostly jobless recovery.  While most pundits are cautiously optimistic about the employment outlook, employers in many states are still facing increases in unemployment insurance taxes.  Yes, you read that right.  Unemployment is down and unemployment insurance taxes are going up.

Like you, I have a pretty good idea of how the unemployment insurance system is funded … via taxes that employers pay into a dedicated state account.  But what happens when those accounts run dry?  Because of our economy’s tepid recovery, ongoing claims for unemployment insurance remain high.  In some states, the cash reserves to pay these claims have long since been depleted.

Yet people in these states continue to receive unemployment checks.  Where’s the money coming from?

Title XII of the Social Security Act allows states to borrow money from the U.S. Treasury to cover the cost of these claims.  Now, however, Uncle Sam wants his money back.  If it takes your state longer than two years to make good on its Title XII loan, you can expect an increase in the federal portion of your unemployment insurance tax (FUTA).  If your company is located in Indiana, Michigan, or South Carolina you already know what I’m talking about.  Plus, some state constitutions require an increase in their SUTA (and other) rates to accelerate repayment of Title XII loan balances.

By my count, 22 states have outstanding balances more than two years old and are facing increased FUTA rates. So, forewarned is forearmed.  Keep an eye on your state’s Title XII balance.  You can find it at the following DOT website:

http://www.treasurydirect.gov/govt/reports/tfmp/tfmp_advactivitiessched.htm

Payroll Services

PayReel, a payroll service for independent contractors, builds your digital independent contractor community, instantly connecting vendors, contractors, and internal resources to boost productivity and drive operational agility.

Now that most of us are well onto our new year’s diets and beginning to rationalize away the more strenuous of our resolutions, let’s take a look at some topics that promise to be interesting reading in 2012 …

• Unemployment is down, but state and federal unemployment insurance tax rates are still heading up.  What’s up with that?
• Fed and states continue to step up enforcement of employee misclassification penalties.  A hot topic gets even hotter.
• The “YouTube Effect” – That shaky cell phone video has already redefined how information is consumed.  Now it’s evolving and finding its way into the corporate boardroom.  What does that mean for the future of corporate communications?
• An Audience of One? – Don’t be your “independent” contractor’s only client.  If you’re alone, the IRS may take a seat right behind you.
• SCOTUS is on the case.  The Supreme Court hears arguments on the constitutionality of the Affordable Health Care Act (aka “ObamaCare”).  With all due respect to Messrs. Ali and Frazier, this is shaping up to be “The Thrilla On the Hilla.”
• Bold as ICE – Immigration and Customs Enforcement is serious about properly documenting workers.  Is an audit or (shudder) a site visit in your future?
• Managing independent contractors and corporate red tape can be a neat trick.  What are some best practices from people who lived through it?

And like last year, from time to time I’ll hand over my keyboard to some guest bloggers.  So buckle up, stay tuned, and Happy New Year!

PayReel’s clients, who are some of the biggest companies in the world, are constantly immersed in the chaos of producing multimedia content or executing live events. PayReel makes sure they have the right contractors at the right time in the right place, and that everyone gets paid properly. And, most importantly, they handle every last detail perfectly while making sure their clients think nothing of it. Relax. We got it. Contact the freelancer payroll solutions company today!

At the risk of understatement, The Federal Affordable Care Act of 2010 (or, depending on your politics, ObamaCare) has become a sort of a lightning rod issue.

One of the more controversial elements of the act is the assessment of taxes on businesses that choose not to offer their employees health insurance coverage.  If your company employs more than 50 people on a full-time basis (at least 30 hours/week), you, dear reader, have a decision to make.  You’ll need to do the math and then choose either:

1. Begin (or continue) offering “comprehensive” health insurance coverage to each of your employees, or
2. Don’t offer your employees insurance coverage and pay a $2,000 per employee penalty (after your first 30 employees).

Not to say your decision will be driven solely by arithmetic.  There’s the competitiveness of your employee compensation package to consider.  Will you be able to attract and retain top talent if you don’t offer a health plan?  What about the composition of your workforce?  Lots of temporary workers on your roster mean this may be a non-issue for you.

But most of us will be crunching numbers to determine how the cost of offering health coverage compares to the tax bill we’ll get if we don’t offer it.

But wait!  The debate in Washington rages on about how much (if any) of the Affordable Care Act of 2010 will actually see the light of day.  Hence, the head fake.  Our federal government fakes left then moves right (pun intended), leaving us standing here with our, uh, business plan in our hands.

To be sure, there’ll be more head fakes, end-around, and flea-flickers before this all gets settled.  But I, for one, am ready to see Congress take this political football right up the middle and score one for all the sick people who can’t find any humor in this issue.

Payreel – Top Customer Service

PayReel integrates cutting-edge technology with top-notch customer service for the ultimate contingent workforce solution. Our proactive approach to payroll services for independent contractors creates lasting client relationships by merging technological innovation and client services. Contact us today!

(I’m turning over this week’s post to Lisa Cobb, Payroll Supervisor at PayReel.  See you next time!  AB)

Last week I attended a Leadership Certificate Program in Washington D.C.  What I took away from the three days is how true leadership differs from good old-fashioned management.

Our instructor, Martin Armstrong, is retired military and served time in Afghanistan.  He is currently a Senior Director at Time Warner Cable in North Carolina.  He was full of stories … which reminded me of someone back at the office, but I won’t mention any names (Alva Brown).  Martin shared stories about great leaders that have impacted his life both in and out of the military.

Day one, we learned about the different leadership styles and discovered where we fit in.  We discussed the weaknesses that each style can exhibit and were given tools to help build on our personal weaknesses.  It was great to learn that I actually have a leadership style!

Day two, we split into groups and built the old index card, paperclip, and tape tower.  My group won … of course!   Unfortunately, the prize was more index cards, paperclips, and tape.  It was really interesting to see how different groups of people go about accomplishing (or not accomplishing) the same task. And it was fascinating to see how leaders emerge.  It made an otherwise goofy exercise somewhat poignant.

The final day was full of topics.  Evidently, I felt like I hadn’t received enough attention that day, so I volunteered for a role play exercise.  Turns out, I was the lucky individual who had to call an employee in to discuss a very awkward issue …  body odor.  This exercise reminded me how much “fun” being a leader can be.  Even so, I couldn’t wait to get back and practice some of my newly acquired skills … not that body odor is a burning issue at PayReel.

So, what is the difference between being a leader and being a manager?  I guess the moral of Martin’s stories was that to manage is simply to enforce policy.  To lead is to take a stand for the success of your employees and teammates.  Sometimes that involves following the rules … sometimes that may involve changing them.

Anyhow, before heading back to Denver, I was able to spend the weekend with one of my daughters who lives in D.C.  We hit the National Zoo, shopped, and ate too much.  It was perfect!

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