Hey now, welcome to another edition of the inside BS show. My name is Dave Lorenzo, and today we're taking you inside the world of PEOs. Now, if you don't know what I'm talking about, or if you're curious about PEOs, or if you think you can't handle all the HR aspects of your business, whether you're a small business, a medium-sized business, or a business that's growing like crazy, this is the show for you.

We've got the exact guy to take us inside of this stuff. Please join me in welcoming Matt Wallace to the inside BS show. Matt, thanks for joining us today.

It's great to have you here. Thank you, Dave. It's a pleasure to be here.

I appreciate your time. Sure. So you're the guy to talk about when it comes to PEOs, you got a lot of experience with them.

Explain first to everybody who's listening and watching, what exactly is a PEO? So a PEO stands for professional employer organization. Effectively, what a PEO does for small and medium-sized companies is we provide a human resources infrastructure that allows them to focus more on what they do as a business, and less on the business of employment type matters that can often bog you down. So things like payroll administration, benefits administration, HR, compliance, workers' comp, and risk management, just keeping small companies compliant with the ever-changing landscape of laws and allowing them more resources in that element of their business so they can focus more on what they do and how they make money.

Yeah, it is a fantastic service. If you're listening, you're watching the show, and you have a professional firm, think about it this way. You spend probably 15 to 20% of your time at any given time struggling to pick the right benefits plan, figuring out how you screwed up the payroll, trying to decide if disability is right for you, trying to help your employees decide what the disability selection should be for the company.

All of this could be taken off your plate because that's exactly what PEOs do. And I'm not just describing it. I actually used a PEO when I started my business because I just couldn't get appropriate benefits plans.

I didn't want to handle the payroll. It was a set it and forget it thing. It was so great to not have to worry about it.

So, Matt, tell us, I was probably not your target audience for this. I only had like four employees at the time. Who is the ideal professional firm or company to engage a PEO for help? You know, there's no one answer to that question.

A lot of it depends on the particular customer that you're talking to. But I would say, in general, my ideal client would be a client probably in the 20 to 200 employees space. We work with all kinds of different businesses from manufacturing to, you know, professional services firms, multi-state companies, you know, companies that have maybe limited internal HR resources, but fairly decent risk, you know, and a fairly decent footprint of employees that they want to take care of.

So, you know, we've worked with companies as small as four, and we've worked with companies as big as several thousand employees. But mostly, PEOs are geared for small, medium-sized businesses as a rule, and everyone's doing it for, you know, sometimes a little bit different reason. Benefits access is a key thing.

HR compliance right now with recruiting, like attracting and retaining employees is a very important element that's driving a lot of people to look at PEOs. So there's a lot of different answers to that, but, you know, we're fairly flexible and fairly nimble, so we work with a pretty wide variety of types of customers. So explain to people why you guys are a better option when it comes to the benefit offerings, and explain the... Actually, let's start here.

Go through kind of the breadth of service, right, that you provide. Because when I got involved in my personal experience, I was amazed at all the opportunities that I had. It was like, you know, I was back in the corporate world, and I could now offer the same types of benefits, the same opportunities that big companies could offer.

Tell people about the breadth of services and explain why you can offer those. And it's time once again for another Sandrowski Business Minute. Today we have Jodi Mersinger with us, and she's going to answer this important question.

Jodi, what is capital gains tax? Well, Dave, first of all, taxable income is put into different buckets depending on the type of income or the source of the income. For instance, your wages and interest and dividends and business income. Are considered ordinary income.

If you have a gain from the sale of an asset, say securities or certain types of real estate as investment, that's considered a capital gain. And capital gains are then further put into buckets based on the term that you have held the asset. So if you've held the asset for one year or less, it's considered short term.

If it's held over a year, it's considered long term. And that's important because long term held assets have reduced tax rates. The long term capital tax rates depend on what your taxable income level is.

The max capital gain rate on long term holdings is 20%, but it can go down to 0% if your income is at a really low level. So it is important because of that to make sure you're cognizant of the holding periods of your assets. And when you're selling your assets to try to match your capital gains and losses for one thing, because you can have a loss if your basis exceeds your selling price, but they do offset gains.

Losses, however, are only deductible in a given year to the extent of $3,000 and the rest is carried over indefinitely. So what you don't want to be in a position of is having a significant capital gain in year one and then a significant capital loss in year two because you can't carry that capital loss back to shelter that capital gain. But if you time it so it's in the same year, then it will shelter that capital gain.

Or if you have a loss in year one and the gain in year two, the loss can be carried forward to offset that gain. All right, so if you have a question about capital gains or any other type of taxes, you need to reach out to Jody at Sandrowski Corporate Advisors, and you can do that by calling 866-717-1607, 866-717-1607. Sandrowski Corporate Advisors, they're a CPA firm with a different perspective.

Yeah, PEOs really came out of the ether with trying to level the playing field between larger companies and smaller companies, right? Economies of scale, when you have a lot of employees, changes the game for the types of resources that you have access to, the benefit offerings you can afford internally with the number of people that you have administering these things, whereas small companies are at a disadvantage because they're often running very lean. They don't have resources like that, yet they're still trying to attract good people. They're trying to really provide an incredible environment for their employees to work in.

The concept of PEOs came about because we're able to utilize economies of scale to help small companies level the playing field against their bigger competitors. And what I mean by that is the PEO concept utilizes a structure called a co-employer relationship. The co-employer relationship effectively is the PEO assumes a little bit of employer risk in paying payroll, providing benefit services, helping with compliance situations, things like that.

And what it allows us to do is we're able to pool thousands of small companies together and create larger buying pools for things like benefits and workers' compensation, things like that. So it effectively allows us to harness the power of many to deliver better services to few and stabilizes costs over the course of time. We employ a lot of those experts in HR and risk management, payroll, et cetera, on our team so that a small company doesn't have to have all of those resources.

And so it allows us to really enhance and and really become part of a company's HR team or HR initiatives without adding a lot of headcount, without, you know, with being a lot more cost effective in doing it as well. So, Matt, when you hear people say, but will these still be my employees? My accountant said something about like a co-employment relationship. What is the answer to that when somebody is confused about that? Yeah, it's a great question because we get that sometimes when people hear the term co-employment.

What does that actually mean? Effectively, what it means is your PEO is assuming some of the basic administrative employer of record duties. OK, we are not taking over control of a company. We are not making and hiring and firing decisions.

We are not, you know, creating a situation where the employees work. We are simply providing best practices guidance on HR, ultimately letting the client make final decisions for their company. The company ultimately determines who they're going to hire and who they're going to fire.

We simply provide them with the right guidance to do it correctly. So the administrative employer of record duties are things like paying employment taxes, being responsible for HR advice that we provide. We have to report to the states when a new employee comes on and doesn't.

So there's some really minimum things that we do as an employer, but do not assume any control or strip a client of any control of their business whatsoever. So it's a nice, beautiful kind of best of both worlds situation where they can harness economies of scale. They can harness the resources of the PEO and not lose an ounce of control over what they're doing on a day to day basis running their company.

Yeah, it's a it's it's the kind of thing where in my business I'm thinking to myself, I don't want to do any of this stuff anyway. So I'm happy to have you do it. It's you know, basically you fill out a couple of online forms and you're done.

Now, let's let's talk a little bit about that's on the administrative side. But let's talk about some of the HR value added consulting type services that that you guys offer. Like one of the things that I like the best is performance management tracking, because I find that if I ask a CEO, even of a company that has one hundred and fifty employees, hey, listen, do you do performance reviews? A lot of times I'll get a big they take a deep breath, like a big sigh.

Well, yeah, you know. And how do you how do you keep track of that? Well, we just sit down and have a conversation and we give them three percent every year or whatever. And that's you know, that's a difficult way to use the performance management process to create a create an environment of continuous improvement.

So if you let's say you had a sales team and you wanted to make sure they were continuing to grow, you would sit down with them, hopefully like, you know, once a week, once a month and evaluate their performance. And then you would do a formal evaluation maybe at the six month mark. And then every year after you want to keep a record of this so that you can track their progress over time.

Explain how GNA partners in your systems can help people do that. Yeah, I think it's about, first of all, providing what's the right thing to do. Right.

Number one, what's the right thing to do, A, for your business? And then B, what's the right thing to do from a compliance perspective? You know, when you want to do things this way, oftentimes companies don't know the right questions to ask or they don't know where to go for a solution like that. In a PEO environment, you have all that sort of in one place. And in many PEOs can roll out particular types of services like that as needed.

So like for us at GNA partners, for example, when a client has a performance management need, we have the tools and the software and the know-how behind it to engage that part of the service if and when the client is ready to invest in that and to roll it out. But then also guiding them on how to use the tool, customizing it to their needs, walking them through best practices on how to do it correctly. You know, at GNA, for example, you mentioned the sales team.

We went from six month reviews to 12 month reviews. And simply to allow things to, you know, kind of work themselves out oftentimes, especially in a sales role where you've got people that ramp up slower sometimes. And, you know, we've used our tools internally to, you know, do that now on an annual basis compared to a semi-annual basis.

So it's just that's what's best for us. Not all clients do it that way. But being able to guide them and have those resources at the ready that can be integrated with everything else you're doing is it's a wonderful thing and allows them to be more efficient.

Now, you guys also offer some training options. And I think that's kind of unique in the PEO space. Talk about some of the stuff that you do from a training perspective.

Is it safety training or what types of training options do you offer and how does it work? Yeah, it's kind of all of the above, right? Depending on the kind of customer that you're working with, if we're working with a manufacturer that has a lot of OSHA requirements, the safety training, the integration with their safety initiatives might be a lot heavier than a law firm, right? That's not necessarily dealing with the same elements that way. But you have a lot of clients that especially right now with the great resignation, with trying to retain people, we have a lot of customers that are trying to invest in training and development of their people. So learning management systems are becoming asked about a lot more, developing curriculums just within the ongoing development of people.

But then you also have trainings like HR trainings. I'm here in Chicago, in Illinois every year. It's now mandatory that companies provide a sexual harassment training from one employee and above.

So we do things like that as part of our service to make that an easy thing for our customers. So there's a lot of different types of training available. It just depends on what the customer wants or the type of business that they are.

And now, how does GNA deliver these solutions to clients? Is there a base of services that you invest in? And then some of these services that we're talking about are additional. How does it work? Yeah, particularly for us, we do a lot of things on a very nimble basis. So we'll typically look at a PEO service, like a core offering.

Our core offering is typically inclusive of payroll administration, of benefits administration, workers' compensation and safety administration. Of course, the HR components that we're talking about. And that's really a pretty robust but sort of baseline core group of services.

We have the flexibility sometimes to take some elements of that out. So we have some clients that want to maintain their own benefits, for example. We can carve out the benefits, even help them administer those carved out benefits, but we can take that out of our solution.

Or some clients want to keep their own workers' compensation plan. We can take that out in most cases. So we have a lot of nimbleness in that base core service.

But then we have a lot of clients that want to do a performance management system, or want to do a time and attendance system, or a learning management module, or expense management. We even go beyond that. We can actually do full-on recruiting services.

We have outsourced accounting services that we can provide on more of an a la carte basis as well. So a lot of those optional services, we can sit down with a customer and really understand what their needs are, and then select the boxes that make the most sense for them, and integrate that into the service like a light switch array. And then consequently down the road, if something changes, or if they have a need that maybe needs to come online at a later time, or come off at a later time, we have the ability to turn those things on and off pretty much at whim without it being an act of Congress to do so.

So it just allows us to be more specific and intentional to the different needs of different customers, and really hone in, and control our pricing, and be mindful of the budget of our customers as well. All right. So let's take a step back.

And I want you to tell us, because you've had a very nice career working in this space, how has this particular space changed over the last 25 years? What have you seen that has improved, say, in the last decade? Well, I tell you what, there's been a lot more recognition of the model, both on the governmental side and just in the end user side. I think people have realized that PEOs are not a bad thing. They're not a fit for everybody, but they're here and they're here to stay.

And they make a lot of sense for a lot of different kinds of businesses. The government has wrapped its arms around it. There's now a lot more regulation involved in operating a PEO.

There's a lot more ability for PEOs to demonstrate stability. The IRS, for example, has created a certified PEO designation now where we have to demonstrate fiscal responsibility, things like that, that people were concerned about with some of the bad apples that had been in the industry before where companies had gone out of business and companies had gotten hurt. So you're seeing more of a regulation now.

You're seeing more stability. And ultimately now with the environment that we're in, we're seeing a lot more companies looking for HR outsourcing type solutions of which PEO is one of those options. So a lot has changed and we're growing at an incredible pace right now and companies are seeing the value of the right PEO partner.

And so I'm very encouraged by where we're going and what has transpired over the last, especially 25 years. We're speaking with Matt Wallace. He's the vice president of sales for the Midwest at GNA Partners.

If you want to reach out to him, you can call him at 630-481-8101. So Matt, who is this not a fit for? Who would this just be a, you know, just a bad decision for? Who would you say, listen, this is not for you. You need to go the traditional route.

Well, there's a number of situations that don't fit. You know, number one, if, if, uh, if a company doesn't really think about or value HR in their business, if they're just sort of getting by and that's working and you know, the consideration of HR isn't really on their, on their screen, then a PEO, you know, you're not going to need a PEO. Companies that are just looking to artificially reduce particular costs.

Let's say you have a company that, um, has really blown up their workers' compensation program and is looking for an alternative to the assigned risk pool market. Um, just, just for that reason, HR, none of that really makes any sense. Just looking to fix this, this workers' comp problem.

Those are often tough situations for us because we're pretty selective on who we bring into our workers' comp program. And we're, you know, we're going to be mindful of that. Um, really large companies tend not to be great fits for PEO because they've already invested in a lot of their HR infrastructure.

What I mean by that is probably companies that are 500 employees and above. Um, you start to reach a point of diminishing returns where it might make sense to still have an HR outsourcing model, but maybe not the co-employer model of PEO, in which case we can pivot to other kinds of solutions. But, um, so you, you, there's a number of reasons why a company might not be a great fit.

Companies that are really struggling financially that are having trouble paying payroll, not going to be a great fit for a PEO, you know? So you kind of got to do a regular payroll in order to make it work as a PEO. Yeah. Funny how that works.

But, uh, yeah, I mean, so there's, there's a number of types of examples. All right. So let's, let's talk about now who your ideal client is.

Who, who do you, if I said to you, Matt, pick one group of people that I, and I can put them in front of you all day long, doesn't have to be one specific industry. Describe for us who that person or that company or that group of people would be. Yeah.

I mean at the risk of alienating others because, um, we're, we're not just a one trick pony. We do have a lot of flexibility in who we work with. But if I was going to give you just my ideal customer that more often than not, this works wonderfully for a 75 person professional services company that has employees all over the country that has a minimal HR footprint inside the company, but a lot of complexity out there with multi-state regulations, multi-state benefit concerns, onboarding infrastructure for new employees or a lack thereof in their case.

A company like that is most likely an ideal type of fit. Um, you know, but, but you can bring it back home into a, a 50 person manufacturing shop that is struggling with recruiting the next generation of employees coming into the situation, um, needs good benefits for the ones that they have. Um, maybe has limited HR resources inside the company, maybe an office manager that's wearing 13 hats trying to get it done.

Right. Um, so there's a number of different kinds of companies that can be really good fits, but I would say those are two good examples. All right.

And when people refer business to you, who are, who is the, who is the ideal group or industry that, that will, that will direct people to you? Is it, is it specifically like CPAs and outsourced HR professionals who are like, look, this is a mess. You need to get, you need to call G and A partners and get those guys in here to straighten you up. Like who, who's the ideal referral source for you? Yeah.

I mean the CPAs and entrusted advisors like that are wonderful, uh, resources. We actually do quite a bit of business with insurance brokers and PEO brokers specifically. So we have aligned ourselves with, um, you know, life and health and property and casualty type brokers, especially nationwide.

Uh, because we, we feel that we're all servicing the same kinds of customers. We do things a little bit differently from them. So we've designed, uh, programs that are very cohesive with folks in the insurance industry that if you take a step back and think about might think there are competitors of ours, right? Um, we want to play in the same sandbox.

So we've developed compensation programs and, and just kept those folks close when they bring a client to G and a, we want them to be involved. We want them to be present throughout the relationship and really be, you know, actively involved in how we service those customers by virtue of the relationship that brought them. So that's mainly, I would say 50 or 60% of our book of business and we have like 3000 customers nationwide has come from brokers.

So that's our biggest source of partnership. Yeah, that's great. Now describe for us cause there's a lot of people who are listening, who are watching, who are looking for, looking for business development tips, looking for a new strategy and some new tactics to help them get clients themselves.

So as a, uh, as a sales leader, describe your process for the, for the folks who are with us today. What is, what is your sales process like? Yeah, for us it's like diversification is number one. Talk to everybody.

I mean talk to everybody. Um, you know, we, we not only have, you know, strategic partnerships in the form of brokers and whatnot. So we encourage our team to, to get around the people that are our players in the industry, whether they're, you know, strategic partners, whether they're, you know, CPAs or lawyers.

I mean, talk to everybody and just just be in that same room with all those folks and be known. Right. So get your name out there.

Don't be afraid to network. Don't be afraid to ask questions. We diversify.

You know our team is making cold calls, you know, we're sending email campaigns, multi-touch campaigns, dropping information off at the office back when that was a thing. Right. Um, and just trying to diversify lead generation as much as possible so that, you know, your, your name is out there.

You become a trusted, you know, person in the industry. People know and, and, you know, and then join, join provisors because provisors is a wonderful, you know, type of, of company, you know, group that, that you can be part of where your name can get out there with a lot of higher level people. So let's talk to everybody.

Just, just be present. And when you're, when you're thinking about the future of the PEO industry, the future of GNA, what do you see on the horizon? What do you see on the horizon for you? What do you see on the horizon for the industry? Yeah, I think it's, we're, we're positioned very well right now. What the pandemic taught us is that not everyone's HR services or HR infrastructure was as dialed in as they thought it was.

Right. And now with the great resignation and the great retention efforts going on out there, especially, you know, companies that can simplify, reduce risk and provide resources in, in the, you know, the business of employment areas of a business are now elevating. You're seeing a lot of different kinds of companies come to the surface, whether they be PEOs or administrative services, outsourcing ASO type companies, or even just, you know, basic, you know, basic HR, you know, for a fee type companies as well.

You're just seeing more companies being engaged or thoughtful about what are my options out there in this kind of, you know, arena. And so I'm very encouraged by where we're going. We're growing at a tremendous clip.

GNA is particularly through not only acquisition, but through organic growth. So very healthy, very stable and and we're really excited at what's coming. I think we're in a good spot.

All right. So Matt, let's, let's talk to folks now about the best way to start a conversation with you and the best time of year to start a conversation with you. Is there any particular time that makes it more advantageous to, to onboard with GNA or with a PEO? Is it the beginning of the year because of payroll paperwork or what time of year makes the most sense? There's really not one answer to that.

A lot of times companies are thinking about January 1st as a logical, the most logical time is January 1st, mainly because you've got, you know, deductible startovers typically with, with a benefits. You've got a tax startovers with state unemployment, federal unemployment, social security. That's a very often a very, that's the, that's a biggest month for pretty much any PEO out there is going to be January.

However, things have really changed over the course of time. So there, there isn't a particular month that's worse than others. A lot of it depends on the client.

So if they have a benefits renewal in the middle of the year, oftentimes they're driven by the benefits renewal as a time to engage a different PEO or a PEO. You know, somebody leaves the company and they have an HR vacuum and they need help, you know, time be darned. It doesn't matter what month of the year it is.

So, and then now also with like the certificate certification of PEOs, a lot of like the taxes. So what was happening with PEOs in the past was if a client came on board in the middle of the year, they would experience a tax start over. Basically because they're paying their employees under a new FEIN, the PEOs, they would often experience a social security, a federal and state unemployment start over event.

And that was not a, you know, a financial advantageous thing. So what has happened over the course of time though, is now with the certified PEOs and other legislation, we are able to work with a client that comes over mid-year and on our year to dates, you know, experience with the federal taxes, especially deductible carryovers between carriers are very common. So in other words, if you come into our, you know, here in Illinois, for example, we have a Blue Cross Blue Shield medical option, and they're coming from let's say Aetna or UnitedHealthcare, you know, our carrier will acknowledge and load in the deductibles that have been satisfied year to date so that they're not experiencing a start over there.

So there's a lot of things that are done now that really take down some of the financial, you know, problems that we, you know, that were experienced in the past. Okay. So Matt, I want you to take a minute now and think about three things we want folks to take away from our conversation today.

Give yourself a minute, take a, take a, take a second and think about three things folks should remember from our time together. While you're doing that, I'm going to remind folks that we're brought to you by my revenue roadmap guide. If you're a professional service provider and you're looking to grow your revenue, there's no better way to do that than to set a plan in motion to create a plan and have it in place so that you know what you're going to do and when you're going to do it.

And I've got something really cool for you. You don't have to reinvent the wheel. I'm going to give you my plan, my business development plan for professional service providers.

Here's what you need to do. Go to revenueroadmapguide.com. That's a website revenueroadmapguide.com. Enter your contact info there. You can immediately download the business development plan that I use with my clients, CPAs, law firms, consultants, other coaches, people who are in the business of providing services in exchange for financial compensation.

You can use this plan. You can customize it for your professional service firm, just like I customize it for my clients. It's my gift to you for watching and listening to the show.

Go to revenueroadmapguide.com. Enter your contact info there. Get that plan today. My guest today is Matt Wallace.

He's the vice president of sales for the Midwest for GNA Partners. You can reach out to him at 630-481-8101. 630-481-8101.

Okay, Matt, what are the three things we should take away from our conversation today? Well, I think one of the biggest takeaways is that most companies can use a little bit of help in HR. That can be a, you know, a variety of different solutions, but don't be afraid to look at options for outsourcing components of your HR service. PEOs are never going to be a complete just take over an HR department type solution, but we can definitely enhance and provide infrastructure that's often missing in small companies.

So I would say number one is that. Number two, really focus on being intentional about retaining good employees. You know, whether that is through benefit programs, company culture, you know, just advancing talent.

When you, when you recognize somebody has that grit and that, that ability to grow, invest in that, keep them loyal by accelerating their, you know, their time with you and really giving them the opportunity to grow as an employee. You know, stay engaged, you know, with your team members as much as possible. So for me, it's, it's really about in a remote environment, especially trying to keep people engaged in that company culture in that camaraderie is really a hard thing.

So really focus and listen to what's going on with your employees. Be very mindful of where their, their head is, right? So if they're, if they're feeling disengaged or you're sensing that they're disengaged, really work to bring that back and find creative ways to keep your employees, you know, really at home. Because it doesn't take a lot right now for people to get distracted, to get demotivated and to go after the shiny object out there.

And there are a lot of shiny objects out there right now. People are calling your people. Recruiters are all over the workforce.

So really work to keep your people front and center and really listen to what they're thinking about. Alrighty. Great tips.

Great advice. Thank you, Matt. So folks, if you want to reach out to Matt Wallace at GNA partners, you can call him 630-481-8101 630-481-8101.

We're going to put his contact info and the company website down in the show notes. Matt, thank you so much for joining us today. It was a pleasure having you.

Thanks, Dave. This is a wonderful experience and thank everybody for listening. Alrighty folks, that'll do it for another episode of the inside BS show.

My name is Dave Lorenzo. We'll be back here again tomorrow with another edition of our show until then here's hoping you make a great living and live a great life. Thank you.