Outsourcing Opportunities Abound in Today’s Economy

Posted April 1, 2015 at 12:12 pm

With more regulations in place and an increasingly competitive global economy, America’s outsourcing business has ample opportunity to continue the steady growth it’s seen since the ‘80s, according to a recent article in Investor’s Business Daily. With up to 3 million employees, Professional Employer Organizations (PEOs) take care of ancillary operations for roughly 250,000 businesses. Since 2009, the average PEO has grown more than 20% per year, according to a trade group called the National Association of Professional Employer Organizations.

As companies respond to market regulations by reducing payroll and operations, enterprising PEOs are picking up services ranging from supplying uniforms used in high-demand healthcare settings to managing employee benefits and payroll. TRSA member Cintas Corp., Mason, OH, is an example of a business that has capitalized on additional services, according to the article. “The Cincinnati-based company has expanded from its bread-and-butter uniform supply operations to providing fire extinguishers and protection, and first-aid products such as external defibrillator programs.”

The Affordable Care Act, which added a myriad of laws and new regulations, and the expansion of cloud-based technology also has increased the opportunities for many new “outsourcers.” Payroll and health insurance services, like TriNet, San Leandro, CA, for example, has doubled its shares since its March ’14 IPO, and expanded into expense reporting, time-tracking and travel policy management. WageWorks, San Mateo, CA, is another example of an outsourcer diversifying its services. It provides a variety of health savings accounts, but helped the San Francisco Bay area target air pollution and reduce local commuter costs by 25-40% last year.

The growth of PEOs has not gone unnoticed by Congress. In 2014, it changed U.S. tax law by passing the Small Business Efficiency Act. Effective Jan. 1, 2016, the IRS will allow PEOs to collect and remit federal employment taxes, and their customers will not be held liable for those taxes. The new tax law, plus the shift from defined to consumer-directed healthcare plans will put continued pressure on company costs. Add to the mix user-friendly technology platforms and companies will look to offload the administration of employee benefits, especially if they are trying to grow. All that means more work for the PEOs.

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