ALEXANDRIA, VA - Senate Bill 1026 signed by Gov. Linda Lingle this week requires licensing and operation standards for professional employer organizations (PEOs) providing human resource management, employee benefits, payroll and workers' compensation on an outsourcing basis to 1,800 businesses employing more than 20,000 people across Hawaii.
Hawaii now joins 36 other states requiring PEOs to register annually with the state and show compliance with state labor laws, including workers' compensation, temporary disability insurance, prepaid health care and employment security, and post a $250,000 bond.
In an industry worth $68 billion nationwide, more than 30 PEOs have been operating in Hawaii prior to the new regulation. These organizations worked closely with the state departments of labor and insurance complying with all employer-mandated requirements.
"After 30 years, it feels good to have PEOs recognized as employers in the state of Hawaii," said Barron Guss, president and CEO of Hawaii's pioneer PEO, ALTRES. "This legislation now provides NAPEO and its members a foundation for bringing forth even greater recognition and clarity in areas such as employer status, workers' rights and unemployment reporting. Our industry has just entered a new phase of maturity in Hawaii."
"The law adds a new layer of safeguards and oversight to give comfort to small business owners and their workers in a PEO arrangement," Milan P. Yager, president and CEO of NAPEO, the industry's trade association. "Even more importantly, the law clarifies that tax credits and other economic incentives remain with business owners sharing their employment responsibilities with a PEO."
A PEO provides economies scale on costs associated with the responsibilities of employment. PEOs help small- and medium-sized businesses provide retirement benefits, attract and retain employees, relieve the administrative burdens of employment practices, improve worksite compliance with federal and state labor regulations and provide access to technology they would not otherwise have access to. Today, the average member PEO of the National Association of Professional Employer Organizations (NAPEO) serves approximately 200 business clients and 4,000 workers.