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Wednesday, May 16, 2012
SB2424: Veto the PEO Bill
By Sen. Sam Slom @ 5:54 PM :: 5068 Views :: Energy, Environment

Governor: Veto the PEO Bill

by Senator Sam Slom, Smart Business Hawaii
The Employee Leasing Industry was born in Hawaii in 1982. The two companies that started the Industry in Hawaii were JS Services & Altres. At that time in history, there were approximately 40 companies throughout the United States providing this service. The Employee Leasing Industry, now called PEO's, provides an important avenue for small companies to remain in compliance with the numerous mandated benefits and policies that an employer faces. The PEO takes care of the HR functions, pays and files the Payroll Taxes, pays and does the audits for work comp and TDI Insurance. The PEO provides Medical Insurance, pays Child Support, provides retirement accounts, and does much more. The PEO allows the small business to concentrate on the reason that he went into business.
PEO's not only benefit the small employer, they also benefit the State of Hawaii in numerous ways.
The Tax Department and the Department of Labor presently receive one accurate and timely Tax Filing from each PEO.
Without PEO's they would receive hundreds of Tax filings. This aggregation of timely and accurate filings results in an increase of efficiency, and therefore saves the State of Hawaii time and money. Over the last thirty years numerous PEOs were formed throughout the State.
During the last year of the Lingle Administration, the two largest PEO's lobbied successfully for the passage of a PEO bill.
Governor Lingle signed it into law as Act 139. This Act provided for regulating the PEO Industry in Hawaii. The Act called for numerous fees, expensive audits and a $250,000 performance bond. At the present time there is no bonding agency in Hawaii that will provide a $250,000 bond. The only option available is to place the amount in a bank, with the account controlled by the state.
This Act, was blatantly anti-competitive, and was designed to eliminate the smaller PEOs while allowing the larger two or three PEO's to control the Industry. During the legislative session that just ended, SB 2424 was passed out of both Legislative bodies, and has gone to the governor for his signature. This bill raises the Performance Bond amount up to between $500,000, and $1,000,000. This will guaranty the demise of numerous small or boutique PEO's.
Please join with me to urge the Governor to veto this blatantly anti-competitive bill.
Espero Bill aimed to protect small businesses may do the opposite
KHON: "We need to look at the industry as a whole and see where it needs to be regulated and see what's the fairest that all companies can compete equally," said Sen. Will Espero.
Those concerns led to the passage of a bill that will give the state Labor Department more control over PEOs. Under the measure, company's with more than 100 employees will be required to secure a surety bond of at least $500,000.
"All the other states have a surety bond of about $100,000 and this state of Hawaii is asking us to do $500,000 at minimum," said Aguinaldo. She said when she adds in fees it will cost additional $50,000 a year. "This really says it's not a great state to do business in Hawaii. It's just another blow to a small business."
Some lawmakers agree.
"This bill is like putting an atomic bomb on a problem that probably doesn't even exist," said Rep. Mark Takai. "Requiring companies to have a $500,000 bond basically ensures the success of the larger PEO's and I don't think that's what we want. This bill is going to probably put some of them out of business."

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