SVB EOR impact, Thoughtful EOR partnerships, and NAPEO campaigns

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EOR PEO latest Mar 12 2023 week

In times of a downturn, it is incredible how the sentiment in the EOR PEO market continues to be strong.

Silicon Valley Bank SVB unnerves the EOR PEO industry

The weekend of 11th and 12th March 2023 was tenuous for the EOR PEO industry. The impending payroll obligations later in the week were in jeopardy because of the modern-day bank run on SVB.

SVB is the go-to bank for startups and technology companies in California’s silicon valley. The pandemic generated enough liquidity thanks to the Fed keeping interest rates low and Fed’s quantitative easing policies. Some of the cash found it’s way to startups as equity. SVB played along getting generous deposits from these companies. But, when the interest rate cycle turned up sharply, SVB was staring at a classic asset-liability mismatch (ALM). It is rumored that Peter Thiel’s Founders Fund triggered the modern-day bank run on SVB. Eventually, FDIC had to take over. Hectic activity by the FDIC, Fed, and the Treasury over that weekend ensured that the US Banking system was able to honor the deposits held at SVB by many companies and individuals.

A number of EORs and PEOs found themselves impacted to varying degrees. Rippling raised a Series E round almost overnight to prepare for the contingency. TriNet’s release said it had minimal exposure. TriNet PEO mentioned that it was assisting some customers who had funds with SVB. Others like Oyster, Papaya Global, Deel, Paychex, and Insperity; all came out and gave confidence to their customers that things were in control.

Here is the news we picked up.

In addition to all the above, here is what the regulators had to say,

In the latest development in SVB, after two weeks since the crisis began, Regional Bank First Citizens will be acquiring SVB.  US regulators will be backstopping all SVB deposits.

Finally, some relief.

Thoughtful partnerships continued in the EOR PEO market

A few weeks ago this column wrote about “Everyone is becoming an EOR” where companies in allied businesses were making inroads into EOR and PEO. All with an attempt to capture EOR’s rising trend. Along similar lines, EOR and PEO companies are doing active collaborations to expand their value proposition to their customers. We recently read about G-P collaborating with Wise for cross-border payments.

This week we had the following partnerships taking shape.

Fintech acquires PEO

Xalles, a fintech holding company is acquiring a Texas-based PEO InnovationsHR, Inc (IHR). IHR will become a wholly owned subsidiary under Xalles Financial Services Inc. The acquisition has many parts to it, as is highlighted in the press release.

PEO partners with digital concierge health platform

Would it not be a nice value add if as a PEO you can support your customers in helping them take care of their aging employees? True Compare PEO which helps in conducting the PEO search process has done just that with its collaboration with CoverRight. CoverRight is to help you get health support right at your doorstep.

We think these are thoughtful innovative partnerships and we expect to see more such collaborations in the marketplace.

NAPEO’s campaign to unclog IRS tax credit backlog

An Utah-based SMB energy company says that it might have to shut its doors because it has run out of liquidity. Ironically, it has tax credit backlogs from the IRS.

NAPEO – the foremost association for PEOs in the USA – has been campaigning on this matter with the IRS. According to NAPEO, it has already sent more than 700 letters in this matter.

750,000 is the total number of outstanding claims. The total amount in dollars could not be ascertained.

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