Co-employment and the Business Register: Impact and Solutions Brandy L. Yarbrough U.S. Census Bureau

Overview  Co-employment-- what and why  BR Operational Framework– a brief primer  Impact on the BR– effect of co-employment  Solutions– leveraging data-sharing  Future Direction– toward operational use

What is Co-employment? “Business of Employment” “Business of Business”

Why Co-employment? Revenue Better Benefits Core Competencies

Co-employment Facts & Figures 1 ~$80 billion in revenue Average of 19 employees > 2 million workers co-employed 1 Data obtained from NAPEO website

Co-employment: Key to the BR Impact “Employer of record”

BR Operational Framework Employers ~7.5 million units MU ~25% SU ~75% Non-Employers ~22.5 million units BR Statistical Unit Universes

BR Statistical Unit Maintenance Employers MUSU Non-Employers Survey DataTax Data

BR Tax Data Tax Data Business Income Tax Files Payroll Tax Files EIN SSN OR

Payroll Tax Data: SU “Births” The initial presence of payroll attached to an EIN entity results in the creation of a new SU employer unit

Payroll Tax Data: SU “Deaths” SU employer units that do not have IRS payroll tax data under their corresponding EIN for a given reference year are effectively removed from the active employer universe. However, if these SU “deaths” have net receipts for the reference year they are eligible for inclusion in the non-employer universe.

Identifying Non-Employers Selected business income tax entities are the basis of the non-employer universe. Business income tax paying entities (EINs and SSNs) that: 1.Are not affiliated with an MU company and… 2.Do not match an active payroll tax entity and… 3.Are below the net receipts cutoff for their assigned industrial classification (NAICS)… …are included in the non-employer universe.

Non-employer processing flow

Co-employment Impact on the BR: Key Elements As “employer of record”, PEOs may handle payroll tax reporting for their clients under their own EIN. As a result, client businesses may drop out of the employer universe… …or they may get improperly counted as non-employers as the clients still file their own business income tax returns All of the employees of the client businesses are attached to the PEO. Direct impact on the quality of :... BR statistical unit coverage & accuracy …employment and payroll aggregates at industrial and geographic levels

Objectives Add PEO clients to the employer universe. Remove them from the non-employer universe. Distribute employment to client industries and locations.

Solutions Survey? Cost Burden Low relative impact Legal uncertainties Tax data? Inconclusive Incomplete BLS data? Inter-agency data exchange program Decentralized U.S. statistical agencies/programs Memorandum-of-understanding (MOU) needed Implemented in November 2012

The Data Exchange Unemployment Insurance (UI) programs: o Administered at the state level o Each state has its own laws and regulations o Some states require PEOs to list their clients BLS obtains these data as part of their Quarterly Census of Employment and Wages (QCEW) program. The PEO client data were included in the interagency agreement The data provide: o ~ 100,000 PEO clients covering > 1 million employees o The linkage between PEOs and their clients o Name, address, and industrial classification of the client businesses o The EIN of the client businesses o Employment and payroll data for the client businesses

Using the BLS Data: Short-Term 2011 reference year data provided in November of 2012 Timing: Good and Bad Bad: o Resource commitments to the 2012 Economic Census (EC) o No time to develop full-scale operational use Good: o EC infrastructure for collecting/validating the data o Improve EC data products Experimental approach: o Top ~1000 clients by payroll size were manually added to the BR o Key identifiers and industrial classification, were derived from the BLS-provided data o Cases were mailed EC questionnaires

Results & Observations ~33% response from PEO clients as of July 2013 No follow-up or reminder notices Nearly half reported payroll/employment The remainder had these values imputed using the 2011 data as the basis The aggregated EC data are provided below: Payroll and receipts data are in thousands of $ Adjustments to the payroll/employment data for PEO businesses will be done manually once EC collection and processing have concluded Data Element2012 EC2011 BLS2012 IRS March 12th Employment19,70417,107n/a Annual Payroll1,387,7601,243,806 n/a Total Receipts7,148,520n/a7,033,494

Conclusions & Future Direction Small-scale exercise but useful starting point The BLS PEO client data appears to be of sound quality Useful for improving statistical unit and program coverage Limitations: o The Census Bureau does not have access to BLS data from all states. o Not all states require PEOs to list their client businesses. EC and survey instructions for payroll/employment data should be modified if PEO client businesses are to be canvassed. Full-scale operational system for integration with the BR Leveraging other opportunities made possible through the data exchange