Alexandria, Va. (July 19, 2006) — Ever wonder how someone running a business learns how to comply with the scores of federal and state employment regulations? It's a major challenge for any business person, especially an owner of a small business who is preoccupied with growing the business.

Compliance is also a major expense. The cost of complying with federal regulations falls disproportionately on small businesses (‹20 employees), according to the U.S. Small Business Administration (SBA). Complying with all federal regulations cost them $7,647 per employee in 2004, the SBA reports.*

For those who need assistance with compliance issues, the professional employer organization (PEO) can be a welcome ally. PEO professionals can help the business operator understand the laws, produce an employee handbook that includes policies required by law, and help the business in its compliance efforts.

Here are just three possible federal regulatory issues that can challenge even the most informed business owner. The following examples provide general information and are not intended as legal advice:

Employment verification when hiring immigrants. Given the recent crackdown on employment of illegal aliens and legislators' focus on immigration issues, it's critical for a business owner to know what to do when hiring someone from another country. An employer can face severe penalties for failure to comply with employment eligibility requirements. However, an employer can also face serious enforcement action for improperly discriminating against potential employees on the basis of national origin. Employers must tread a fine line in verification of employment eligibility of all employees according to the IRS's "I-9" process. Later, if notified that a Social Security number given by the employee does not match federal records, the business needs to take corrective action but cannot be discriminatory or preemptively terminate the employee. The business will also need to ensure that its I-9 forms can be produced if requested. "Business owners concerned about illegal workers want to work with PEOs to help ensure their records are clear, accurate and well maintained," said Milan P. Yager, executive vice president of the National Association of Professional Employer Organizations (NAPEO). "They cannot afford an enforcement raid finding violations that could shut them down."

Employee complaints about harassment. What happens when the employee reports a serious harassment situation, but insists the complaint should only be heard and not acted upon? Most HR experts agree that there is a duty for the employer to at least investigate — even when the employee details inappropriate behavior but says, "It's no big deal; I don't want to make waves." It's obviously important enough to this employee that he or she brought it up with a manager. It is not enough to thank the employee for raising the issue, stress the company's harassment policy, and then take no action. Compliance experts agree the employer must look into the situation further. At the same time the employer should be careful to protect the reporting employee from retaliation and assure that all parties are fairly treated during the process. "The PEO can advise and help train managers for such situations, which can be volatile when not handled well," Yager said.

Obligations to employees in the Armed Services. It is not uncommon these days for an employer to have an employee called up for military duty. Upon return home, suppose an employee wants her job back and the seniority that would have occurred during the time in the service. Or an employee on duty wants an opportunity to continue his health insurance while on leave. Military personnel have special rights under the law that apply to all employers, regardless of size. If your company hired a new employee to fill the position of an employee on active duty, that employee is probably still entitled to the job upon return. In fact, because of the law's "escalator principle" the veteran must be placed in the position he or she would have occupied if active duty had not intervened — and thus they may be entitled to a promotion, even if that requires the employer to train or retrain the returning employee.

A business owner confronted with these types of problems can breathe more easily when the PEO is helping with compliance. A PEO can provide the professional advice and proactive practices that improve a business's compliance and create a better workplace. While this support will not provide ironclad guarantees against errors and lawsuits, it will help to minimize the potential. PEOs also enable their business clients to cost-effectively outsource the management of employee benefits, payroll and workers' compensation.

PEOs work with business owners to formulate and follow HR practices that comply with current laws on hiring, firing and disciplining employees. For example, a PEO can provide guidance with respect to structuring compensation so that it adheres to the state and federal wage and hour laws. The PEO can also provide guidance on the rules and practices surrounding criminal and credit background checks, the Americans with Disabilities Act (ADA), the Age Discrimination in Employment Act, COBRA, ERISA, and the complex rules for 401(k) plans, such as the safe-harbor and nondiscrimination-testing provisions.

For more information on PEOs and the PEO industry, visit NAPEO's Web site: http://www.napeo.org/.

*Footnote: "The Impact of Regulatory Costs on Small Firms," W. Mark Cane, September 2005, for the SBA office of Advocacy. Link to study: http://www.sba.gov/advo/research/rs264tot.pdf

NAPEO, the National Association of Professional Employer Organizations, is the recognized "Voice of the PEO Industry.^®" NAPEO has 350 PEO members found in all 50 states, representing more than 70 percent of the revenues of the $51 billion PEO industry. PEOs enable clients to cost-effectively outsource the management of human resources, employee benefits, payroll and workers' compensation. PEO clients focus on their core competencies to maintain and grow their bottom line. To learn more about the PEO industry and how PEOs contribute to small businesses' success, visit the NAPEO Web site: http://www.napeo.org/. NAPEO is located at 901 N. Pitt St., Suite 150, Alexandria, VA 22314; phone, (703) 836-0466.