The CARES Act: What Enterprises and Small Businesses Need to Know
April 6, 2020 | 2:00 PM - 3:00 PM EST
Bryan Peña, Chief of Market Strategy, MBO Partners
Miles Everson, Chief Executive Officer, MBO Partners
Gene Zaino, Founder, MBO Partners
00:07 Introduction and welcoming of guests
01:35 Introduction of MBO Partners and CaresForIndependents.com
03:21 MBO’s purpose by Miles Everson
07:30 Setting the stage for COVID-19 relief via the CARES act and MBO Partners
13:24 Introduction of the Coronavirus Aid, Relief, and Economic Security (CARES) Act
13:50 Key CARES Act benefits: Small businesses and independent contractors
15:00 Self-employment taxes or employer-side Social Security payment deferred
17:05 Net operating Loss (carrybacks) for income tax refunds and tax reductions
18:25 Low interest loans and immediate grant
20:20 Low interest payroll and overhead loan potentially forgiven
23:22 Key CARES Act benefits: Individuals
29:35 Why a modern business model is needed to respond to events like COVID-19
37:08 What enterprises can be doing right now
56:21 Closing remarks
It is challenging to grasp and incorporate the benefits of the Coronavirus Aid, Relief, and Economic Security (CARES) Act into a business. As a result, many people are still uncertain about the specific details of this law.
Listen to our key speakers explain and provide recommendations for employers to effectively take advantage of this law and receive extended help and retirement benefits for their independent talent.
In this exclusive webinar, Miles Everson, Chief Executive Officer of MBO Partners and Gene Zaino, Founder of MBO Partners, discussed the CARES Act. They also discussed how the USD 2 trillion economic stimulus package can provide liquidity to Americans and aid businesses by increasing benefits, loans, grants, and tax deductions during the COVID-19 pandemic.
This Q&A-style discussion talked about:
- The four factors or rates of change that accelerate business systems
- The eligibility for low interest loans and immediate grants from the CARES Act’s economic industry disaster loan program
- How the CARES Act can aid reduced self-employment taxes or aid the employer side of FICA
- How the CARES Act affects the new business models of multiple companies
Are you interested in attending the next webinar? View our upcoming events.
Bryan Peña: Hello, everybody, welcome to today's webinar, we're going to give a couple of minutes while people log in and the system catches up. Okay, I can see the numbers swelling, so we'll go ahead and get started.
Bryan Peña: Thanks, everybody, for joining us today on today's webinar, What the CARES Act Means for Enterprises and Independents. My name is Bryan Peña. I am the Chief of Market Strategy here at MBO Partners. And I'll be acting as your master of ceremonies as we're. Using the webinar features, all attendees will be muted and their videos should be turned off. But we are very, very interested in your questions so please use the Q&A function needed within the bar there to post your questions and we will do our best to answer them in real time. This we want to recommend that you visit the Cares Act for Independents after this webinar. There's a lot of great resources that we're referencing here, as well as just a lot of stuff on the MBO site itself. So I please encourage you to do so. The information provided here does not constitute legal advice, tax or financial advice. It does not take into account your particular circumstances, objectives, legal and financial situations or needs. Before acting on any information, you should consider the appropriateness of the information for your situation in consultation with the professional advisor of your choosing. This is a rapidly changing area of law and will be subject to change and interpretation. And now that have gotten out of the way, I am pleased to kind of introduce MBO Partners. Our mission is to make it easier for enterprises and top independents to work together, and we've been doing so for the last 20 years. I think that we always like to say that we are in the good economy, before the economy was a good economy, and that commitment to independent professionals has been something that I personally have been really, really proud of. And so I want to make sure I reference our website CARESforIndependents.com. That website went live on Monday after the law was passed on Friday. That rapid of a development of such an incredible resource for independents a true testament to the commitment that this organization has. And so I certainly hope you'll take the time to visit that great insight. Not in this-- for those of you who are participating in an enterprise program, but also for individuals and how you can help your friends take advantage and protect their situation in this challenging time.
Bryan Peña: Speaking of which, I am incredibly pleased to introduce Miles Everson. Miles Everson is the CEO of MBO Partners and is the former Global Advisory and US Vice Chairman of PriceWaterhouseCoopers. Previously led the US financial services business for PriceWaterHouse during the 2008 financial crisis. During this crisis, Miles was instrumental in the U.S. being given the mandate for the US Department of the Treasury to support them with risk management for the Troubled Asset Relief Program. I personally think this experience in advising governments and institutions on how to deal with that crisis makes his perspective especially valuable. I know I certainly have benefited from his leadership and I'm sure you will feel the same after today. So without further ado, Miles, take it away. Miles, are you muted?
Miles Everson: I was, sorry about that. But it's very much appreciated and importantly a good day to to all of you that have joined today. And first and foremost, on behalf of everybody at MBO, we certainly hope that you and your family are handling this as best as possible. Everyone has their unique circumstances and so certainly wish all the best to each of you. And so as we think about MBO and independents, the best place to start, in my opinion, is really what happens in this face of uncertainty. And in the face of uncertainty, it's very common for a fear to set in. And so it's setting in with certainly with individuals on this webinar as well as sets in with our employees. It sets in with the independents. And, you know, MBO really believes in the enterprise and the independents and being able to work together. And our objective here is to help everyone in the face of fear, really to face everything and to rise up. The alternative is to kind of fear everything and turn away to run. And that's not what we're about. We've been active, very active in trying to push along some of the stimulus relief out to the independent contractors, understanding the implications because we're in unchartered waters here, so to speak, in terms of the way stimulus could impact the independents. And so we will spend some time on that today. And maybe just as a reminder of MBO's purpose, which is our purpose, is to give people the control to do the work they love, the way they want. It's no surprise to people on this call that the independent workforce is a fast growing. By our measure, it's about 41 million people. It'll double over the next seven or so years. It's a fast growing segment of the population and you ask any CEO what his or her most important asset is. It's the people we believe that includes the independent professionals that are contributing to the success of your companies and companies like yours. And so we do everything we can to make a better world for the independents, which then makes it easier for you to work with them as well. If we take a minute and just pause on a couple of the key implications that the Covid-19 has on both independents and employees, it's you know, if you step back and issued some guidance recently, which says 1 in 5 American workers say they'll be unable to meet basic financial needs in a week or less. I think we're starting to see that push through the system right now, based not only on what I read, but when I see some of the family members that I know and friends that's happening. Likewise, 38% of knowledge workers will be unable to meet basic needs after 1 month or less. The good news for us in this is that the knowledge workers tend to have more runway, at least based on this survey, than the non knowledge worker in the world that we work with, with you. And our independence is in the knowledge work area. And then important for I think all of you is that 60%, 64% percent I should say, of consumers have stopped purchasing a brand after hearing news of that company's poor employee treatment. While we don't know exactly what will happen as a result of this, but I do believe that coming out of the backside of this crisis, there will be a lot of hindsight applied to how companies treated their people. Their people being both their employees and their independent workforce. And so thinking through what the implications on the brand are right now is certainly very important. We're going to give you some ideas later in this webinar as to how we might help you think through what you might be able to do in that regard to protect your brand while also doing the best you can for your people in your company.
Miles Everson: So let's set the stage for the Covid-19 Relief via the CARES Act and MBO Partners. What we're going to do today is we're going to get into some specific relief that's available under the CARES Act for Independents, and then we're going to spend a few minutes talking about the larger content macro environment around us and how we think the Covid can impact companies today and maybe give you things that we think you should be considering for some actions to specifically take within your companies right now. And so with that, I would like to introduce Gene Zaino. I can't think of anybody better, frankly, to speak and represent the independent contractors who's been doing it for over 25 years. He's got a tremendous heart for trying to help the independents and make them available for you. And so, Gene, with that, I'll turn it over to you and let you set the stage here.
Gene Zaino: Thank you, Miles and thank you all for joining us this morning or this afternoon, depending on where you are, and sharing Miles comments and that I hope you're staying safe doing your social distancing and everybody as well. We certainly are experiencing an unprecedented kind of environment and way of working. So we want to share with you what we have done in the last I guess now it's the last eight days or so since the CARES Act has been signed by our president and put into law. We kind of spent quite a bit of time going through the 888-page document to tease out what it is that the independent workers really need to know. We held 2 webinars last week that covered just over about 23 hundred people. We continue to monitor and as these laws are evolving and also as the intention of these stimulus and aid packages come out, there are certainly bumps and twists and turns. So we're trying to keep everybody updated. So if you could get to the next slide.
Gene Zaino: The first thing here is let's talk about who it is that we're addressing in these next few minutes that I will go through. Specifically what is useful to the independent worker and we're talking about people that are significant element of our workforce in our economy. And just in last year, we're talking about an economic impact to our GDP of over just about 1.3 trillion dollars with a T, right. So that's about 6 or 7% of our workforce and and just to put it in perspective, it's about the size of the entire economy of Spain. Obviously, in the last few weeks or months, this has changed. But what I'm really very pleased about is for the first time, this CARES Act has actually acknowledged this segment of the workforce, and you're going to see in a few minutes areas of the CARES Act that have been designed specifically to support the independent contractors, independent workers, gig workers that all of you and and many in our economy rely on to execute our business. So get to the next slide.
Gene Zaino: So we're talking about about 41 million people in the United States. This is according to 9 years of research that we've been doing since 2011 under a document that is prepared by an independent research firm called the State of Independence in America. It's the longest running study with the most data and talks about or provides information about the size of the workforce and also their behaviors. So we totally understand the growth of this workforce and its importance, and that was the purpose of this study. And personally, to me, I'm pretty happy that it has been acknowledged now that this is a real significant part and our government is actually taking care in the CARES Act to take to address it. It's pretty much across the age group, and these people actually earn more than their counterparts full-time, about 15% more. Yeah Miles, you're saying something.
Miles Everson: Well, I was just going to add that of those 41 million, there's over 15 million that identify as being an independent as a full-time, limit or a major breadwinner in households. And so, again, we take a very heartfelt approach to making sure we're doing all we can to help those 15 million people.
Gene Zaino: So now that we know who we're talking about, let's get through to the actual act, and again, anyone that you want to learn more about this, we pretty much have a treasure trove of information on our site. And we also have a site specifically for this called CaresforIndependents.com. So the CARES Act, which is this 880 something page bill is about 2.-- it's you know, there's different numbers. I believe it's close to 3 trillion dollars and I believe it's growing because there's actually more funding that's needed to support the high demand for many of these programs. So let's get to the next section. Next slide.
Gene Zaino: So the CARES Act what I'm going to talk about is 8 different features of this CARES Act, 4 of them that we're going to talk about that are specifically for the small business or the independent contractor and small businesses defined as any companies in general that has under 500 employees, but also expanded the definition to include the independent contractor, sole proprietor. And then I'm going to talk about four other features of the CARES Act that is available to anyone that's on this call or general Americans in general of how they could also take advantage of aid packages that have been made available with this multitrillion dollar aid package. So for the small business, as you see on the screen, I'm going to talk about deferring employer side tax for their self employment tax or some net operating losses that they could carry back to get tax refunds is actually a cash grant available and also loans for keeping their independent business operating. So we'll take the first one in the next slide.
Gene Zaino: So the CARES Act has provided for self employment tax or the employer side of FICA, and for you know, as a W-2 employee, you know that you have Social Security Tax taken out of your pay. Also, the employer pays an equal amount. It is about 6.2% of your wage gets paid by the employer and 6.2 gets paid by the employee. When you're self-employed like an independent contractor, you have to pay both sides of that. And what this bill, this act has done is enabled the deferral. It's not a loan. I mean, it's not a grant or it's not forgiven, but it's a deferral of paying those self employment taxes through the end of this year, 2020, and you'll have to pay half of it by the end of 2021 and the other half by the end of 2022. So that's a cash flow, liquidity assistance for independent contractors, whether they're 1099, whether they're a little S-Corporation, whether they're a C-Corporation. So I would encourage you to make sure all of your sole proprietor, independent contractors are aware of this because it is a great way for them to at least have reduced their quarterly tax payments or at the end of year, their entire tax bill, at least to defer it for half of it, for through 2021 and the other half through 2022.
Miles Everson: If I can chime in again, I believe this would also be applicable to nonprofits with fewer than 500 employees. Just anyone that's paying the payroll tax is eligible...
Gene Zaino: Correct.
Miles Everson: because I...
Gene Zaino: Yes. No, it is available to nonprofits. Yes. Yes, thank you. So that's one to go to the next one.
Gene Zaino: And it's the net operating loss (carrybacks) and in the tax law that was changed at the end of 2017, they removed this from the traditional tax benefits for companies and businesses and individuals that have businesses that are passed through to their personal return. And what this now has been reintroduced is if you have a loss in 2020, a loss in your business from more expenses than you have income, or in 2019 or in 2018, you could carry those back 5 years. And when you paid tax 5 years ago, you could get that back. So this is another huge benefit to get a big cash refund or removal of tax payments that you have to pay as a small business or as an independent contractor, which is really valuable. And again, this is another good feature for us to make sure that these independent contractors that we rely on doing business for us and executing our own mission is pretty important for them to be aware of this. So that's the second item.
Gene Zaino: The third is I actually have low interest loans and immediate grants available to them. The CARES Act has expanded its economic industry disaster loan program, which has really been around for quite a while, and it was designed for economic injuries resulting from disasters like hurricanes, floods, earthquakes. And since the coronavirus is now a national disaster, it is applicable to all parts of the United States. And the Small Business Administration has created a site which is I would encourage people to go to if they feel they have the ability to just buy any kind of economic injury, could be lost to inventories, that could be lost income, and it will allow someone on the SBA site to put through an answer to some questions. It takes about 10 minutes and apply for a loan, and the loan is available based on their credit score. So it's a really easy process. And even if you're eligible to get the loan you applied for, they will give you up to a 10,000 dollar grant, that they will give to you 3 days after you apply for that loan. And that is a very big benefit that a lot of people have already, I know have already went to the SBA site and applied for that. So this is up to 10,000 dollars you can get for free if you have losses and--.
Gene Zaino: The next one is also alone on the next slide, which is you might have heard some of the people on the news talk about this, which is the paycheck protection program. And this is a little bit different. This is brand new. It has to be issued by the bank. So even though it's SBA guaranteed and it's an SBA program, you do not apply for this on this Small Business site, you actually have to go to your bank and an independent contractor or self-employed or small business goes to their bank and they basically want you to keep your employees paid for the next 8 weeks after you receive this loan. And it's to prevent people from going on unemployment. And what how it works is you look at what your monthly payroll was last year, what your average was, and the loan could be 2 and a half times that amount, as long as you use those funds for paying workers that are in your business for the following 8 weeks after you received the loan, you will have that loan forgiven. And if you have a reduced payroll, the amount forgiven will be slightly reduced proportionately. But it's another way for businesses and independent contractors for their own income can do this so whatever they were earning last year, they can get two and a half times that now as a supplement, as long as they can keep themselves in the same payment of paying themselves for that amount of money. So it's actually a really good way for 1099s, self-employed independent contractors to get themselves this type of funding. Now you can't double dip. So if you went and got that 10,000 dollar grant I just talked about in the previous, you can't use that again for the same amount unless you can stack them, though. So if your losses are so large where it's more than 2 and a half times your last year's payroll, that you have is a loss, you can get both. So the both of these programs are really valuable. And I think there's also some issues right now trying to get money out as quickly as our government wants to get them out. And a lot of the banks are having a little bit of a surge problem, but my understanding is this coming week, we should start seeing these checks being released and these funds being released to the people that need them. So that's the 4 for the business. It's the two loans and the carryback of losses to get a refund, and the deferral of their self employment tax. So those are 4 items that I would encourage everybody making sure their independent contractors know.
Gene Zaino: The next 4 are for individuals, any American, all of us on the phone can be eligible for these. So it's unemployment benefits, direct cash right to your bank account, which we'll talk about the ability to get cash out of your retirement accounts and also the extension of our filing of taxes. So you go to the next slide.
Gene Zaino: So unemployment has been significantly enhanced for those that are unfortunate, that have lost their jobs and are needing to go on the unemployment roles, you have to go to your state. It's not a federal program. It's administered by the state. Each state has their own kind of rules on how they will issue unemployment. But in general, it's about 400 dollars a week or at a cap or 50% of your wage, whichever is lower. And then on top of that, the CARES Act act has added 600 dollars per week to that amount. So if you take the 400 dollar example and you add the 600 dollars to it, that's about a 1,000 dollars a week for unemployment. Now, the 600 dollars is only available for 4 months, paid on top of the state amount that you would get. But the rest of the unemployment will go through at the end of the year and there's no waiting period. So it's really good way for people that have been put out of work to get a significant amount of cash to keep them going, and this has been a very popular program. I know it's working well in some states and in some states they again, because of the surge, it's difficult. They also have added for the first time the ability to have self-employed and gig workers to apply for unemployment, which is brand new. I believe this is only going to be available during this period, but it is a recognition that they want to keep the self-employed and independent contractor workers to be protected. And this is yet another way to do that. The next one is on the next slide.
Gene Zaino: It's the ability to get direct cash directly to your bank account, and this is available for all Americans. This is getting wired directly to your bank based on your tax return of last year. If you qualify. And to qualify, you have to make under 99,000 dollars a year, or if you're married, household, you double that, or that's 198,000 dollars. Underneath that, if you are under 75,000 or for joint filers, 150, you actually would get 12 hundred dollars each and 500 dollars per child. So an individual that is earning under 75,000 dollars will get 20, will get 24 hours. If they have a child they'll get 17 hundred dollars. If they're married and both together or under 150,000 they get 24 hundred plus they have two children, another thousand dollars. It does phase out once you achieve exceed those limits of 190,000 if you're married or 199,000 if you're single. And those are based on your tax return, your adjusted gross income. So if even if you're doing half of independent contractor work and half W-2, it combines together on your adjusted gross income, so it works for both individuals that are W-2 as well as independent contractors. So 12 hundred dollars per individual. 500 dollars per child is is yet another source of aid.
Gene Zaino: The next is interesting. It's a way to get income from your retirement plan. And if we go to the next slide. They've relaxed the rules for getting cash into the retirement plans, you could actually borrow a 100,000 dollars from your retirement plan. They relax those rules that used to be for 50,000 dollars and you could have up to 6 years to pay that back. If you are in a situation, unfortunately, where you either have been diagnosed with the coronavirus or you're caring for someone that has, you could take that 100,000 dollars out and you don't have to pay it back, but you would have to pay tax on it over the following 3 years. So those are 2 new rules that are available to everybody who has retirement accounts and wants to get early access to those funds.
Gene Zaino: And then the last item is, I think what everybody knows is that tax day is now July 15th. So you don't have to pay your tax or filing tax form until July 15th, from April 15th. You still-- if you're an independent contractor, though, you still have to file your quarterly taxes on time. So those are the 4 things for the individuals, right. So here your extension of the taxes, your ability and retirement to take money out of your retirement plan, the ability to get the rebates directly from the Treasury Department into your bank account for the 12 hundred dollars or 500 dollars per child, and then also the unemployment benefits. So those are kind of a high level summary of the CARES Act. Hopefully you found that to be somewhat informative and I'm going to give it back to Miles, who now will talk about what enterprises would need to do.
Miles Everson: Great. Hey, thanks, Gene. And we know that we have a few questions that have come in, we're going to cover those questions when we get to the end. I got just a few minutes here to share some thinking about modern business models and why events like Covid-19 remind us why it's so important to have a modern business model as opposed to an antiquated one. And since I came to MBO about 9 months ago, I was leveraging my experience of having advised many of the world's largest companies not only on strategy, but on risk mitigation and how you respond to an increasingly volatile environment around us. If we could go to the next slide, please, Bryan.
Miles Everson: And so we've identified this in 4 forces that are changing our world. And the first is the rate of change is accelerating. And I think most people would say, "Gee, thanks, we know that, Miles." But the significance of the rate of change accelerating for businesses is that there's innovations. The rate of new innovations is also accelerating, and it's when there are innovations that converge and have a societal impact that this really matters. So to give you an example, when AI was first invented and announced in 1959, it was effectively a nonevent until the mid 90s when some data handling and technology made it possible to use the data. It really didn't hit any mass scale until the last 15 or so years when you had the ability to have networks that could handle big data. You had the ability that systems that handle big data and you have the AI to apply to the data sets and scanning technologies to collect data. And so it's the convergence of, excuse me, the convergence of innovations. And when you have the innovations that converge and have societal impact, that progress is actually deflationary. And so I'll give you an example here, which is most of us have a smartphone today, and if you go back to just, you know, we didn't have smartphones even 25 years ago. And today the computing power of that smartphone for a thousand dollars cost dramatically less than what it cost to have a supercomputer in the 1970s. Likewise, when you look at the decoding of the genome, it was a hundred million dollars, decode it in 2000 and today you can get your genome decoded for less than a thousand dollars. And that's because it has massive societal impact. The next one on horizon, which I think we're going to see, hit us at a faster rate now that we're experiencing this need for remote work and social distancing is 5G. 5G will enable a tremendous amount of work to be done remotely that was not possible or is not possible without a reliable 5G communications network today. And then the third one is the power of knowledge flows, and the power of knowledge flows is really to contrast it to a philosophy of knowledge stocks. So knowledge stocks is where you have knowledge or intellectual property that you trade in one on one binary transactions and that's the way the world operated for many, many years. But as we've seen, the power of knowledge flows certainly with open source technologies. Many of the most innovative technology and breakthroughs that are coming today is because of knowledge flows, not because of knowledge stocks. We see this in the realm of people and human capital management as well, that you really want access to all of the best talent on the planet, not just the 100% captive employee work base. You want to have access to independent professionals as well. And that's part of what's driving the fact that these 41 million Americans is going to double over the next several years to be a much more significant and pronounced impact on the US workforce in the U.S. economy. And this leads us to the fourth item, which, frankly, has been around for hundreds of years, which is the fractionalization of everything. In fractionalizations, some examples, what I mean by that is, in 1602, the Dutch East India company had issues around the risk associated with shipping product across the world and if they had, frankly, disease on the ship and were ran into a storm, they wouldn't be able to make the delivery of the goods, and so the investors decided to diversify their risk by creating a publicly traded company. So the first publicly traded company was created in 1602 to diversify risk. And now today, you can think of the fractionalization of things like in the 80s, late 80s, when mortgage backed securities came into being. Know we talk about home ownership in the United States. The reality is only 25% of Americans will ever hold the deed or title to their home. Otherwise, the bank will have it, no own mortgage. However, anybody that has a balanced fund investment in their 401(k) or any other investment strategy, they own part of somebody else's house in what's called a mortgage backed security. It's the fractionalization of home ownership in the United States. And then you can think of the fractionalization of all kinds of assets, including our homes. People now fractionalized their homes because you can with a modern business model. And so we believe that what's happening and what MBO is helping folks like you and people that want to have a different career is we're fractionalizing the human career in the human workday. We're doing that by making it possible for people to work remotely. To work the way they want to do, you know, and do the work that they love. And this is a trend that is bigger than any company or any individual country that it doesn't show any signs of stopping any time soon, and so one way that you can think about the fractionalization of your workforce is through talent pooling and what we mean by talent pooling is-- can you please advance that slide... Is creating a talent pool of people that are known to you and that you can access directly to no one talent pool and you get direct access to that talent pool. And so where does this talent pool come from is what some people obviously often ask us and trusted talent, when you talk to most people in companies, they would say that the best talent is trusted or referred talent. And so we know that there are many, many millions, frankly, of Americans that will be in transition right now in terms of their work status. So you can get them from current independence. You can get alumni, independents, you can get people in transition. You can get retired employees. We have companies that have come to us because they're bringing a retired workforce back to work right now because they're in high demand areas. And so what you can see is that there's certainly a possibility and logic behind doing talent pooling and getting direct access to no one talent. And so when we think about what all this means to an individual enterprise, we've come down to some things that enterprises can be doing right now. And there's really four items that an enterprise can be doing right now. And so actions that you should think about taking: 1. We do believe that helping independence financially is important and you can do that one way by directing them to the CARESforindependence.com website that we had referred to earlier. There's lots of good information there for them. And, you know, the second is to help independents find work. And whether that's work in your own enterprise or if you have people in transition, direct workers to the MBO transitions where we're helping them figure out how do they become a member of the MBA platform or they could become a member of your own community, which is the third item, which is build your own pool of known talent. One thing we know is that it's a lot easier to stop work than it is to start work. And the easiest way to test that is look at how quickly layoffs occurred and furloughs occurred and then compare that to how long it takes to bring people to work and hire them onto your company. And we will get through this as a country. And so having a talent pool of people that's known to you that you can ramp up quickly makes you a much more resilient business model. But you should start that now, not after the recovery starts, because you'll be behind the eight ball at that point. And then finally, if you really want to get aggressive and look at how you think about having a modern and resilient workforce is we have a very specific approach and views on how you would do a workforce optimization strategy that allows you to build a deeper bench, have more access to talent, and at the same time be able to scale your cost structure with the volatility of your demand side of your business. So these are all things that we think are important to any company that's saying, well, where do we go from here on the backside of this crisis. So what we're hopeful of here is more opening it up for some questions will go through. Now, is that what you've gotten out of today's discussion between Brian Jean and I is we're very zeroed in on how we help talent through this tough time and make sure that they have line of sight to financial support, frankly, that they can get. But I think certainly we had MBO believe we have an obligation. And we certainly would think that it's an opportunity for you to enhance your brand with a broad base of talent by taking some of the actions that I set out here on this page. So with that, Brian, I'll turn it back to you and let's get after some of the questions.
Bryan Peña: And thank you to those of you who have submitted questions. And just while we go and address those questions, I'm going to take the time to put a quick poll up so we can see how you guys are responding to this crisis as a whole. But let's go ahead. What we're waiting for the polls to be answered. I guess Gene, this is a submitted question for you, Gene, can you explain any more about this six point two percent payroll tax deferral? Is that for specific employees that are impacted by covid-19 or for all employees on payroll?
Gene Zaino: Sure. So it's specifically for employers and self-employed. So the six point two percent, if you're self-employed, is half of what's called self employment tax. And it's for anyone that wants to do it. Again, it's not a freebie. It's a deferral of the tax. So everybody that's paying self employment tax or their employer share of tax can push that out till the end of 2021 and the end of 2022 for the balance of this year. So it's basically giving you some more cash to operate this year while removing a payment from you. It's still a loan. You still have to pay it back. And you could and you don't have to do it. But I would think every self-employed and small business that's really looking to preserve as much cash as possible during this time of declining economic activity, is a benefit to remove some payments and some obligations. But it's not just for people that are sick or have. It's for any active, established independent contractor or small business.
Bryan Peña: And I think it's an important thing to reinforce, Gene, that this deferral is just that it's a deferral, that it's not a get out of jail free card like this, a free discount. This is money that has to eventually be paid back. But you need to make sure that your partners are planning accordingly if they do choose to take that reduction. That's right. Yeah. Actually, here's another question. This is for Miles. Miles, how are companies dealing with getting background checks? It seems like they're getting challenges with background checks being done in a timely manner. How a company is dealing with that.
Miles Everson: Well, first of all, getting background checks in a timely manner right now is difficult in most situations and it tends to be facts and circumstances because much of the source of the background checks tends to be local governmental agencies that provide that background check. And many of those are not open for service right now. So that's difficult. We do have people that companies that have looked at what I'll call a lighter touch on the background check to try to get the velocity of people going through. And then the third thing I would add is, you know, we've done a fair bit of looking at what are the benefits of background checks and what do you use them for when you get the background check done. And I know it's a debatable topic, but candidly, in this time, we have some people that have really relaxed the rules on background checks because when they reflect on what they typically do, it's more of a safety net than it is an informative Decision-Making tool.
Bryan Peña: Thank you. Gene, this question for you. What can we do for our independent contractors and extended workforce? We're having challenges getting through to overloaded state unemployment departments. I know a lot of people are complaining of websites crashing and the hole and stuff like that.
Gene Zaino: Yeah, that's a huge problem. And it really depends on the state. You know, I know New York actually is doing quite well. I believe that even though they've got these other problems, they're getting their payments out right away. There are some states that are really overburdened. And, you know, a lot of states have systems that are 30 or 40 years old, that they've got issues of unprecedented amount of volume hitting that, hitting their system, both in terms of workers. They're also having to do it while workers are remote. These are the state workers. And then they got to figure out how do I deal with, you know, how do I pay an independent contractor to prove out that they got laid off? So it's a series of issues. I would say what you tell people is keep being persistent and follow it up. It will get through. You know, Miles has this analogy of is the snake eating a pig or rat body? And right now it's just as the head. So you've got to give it a little time. Everything is over overloaded right now. And that's really it. There's really no other answer. It will. It's the law. It will they will get paid and they will get the benefits of unemployment from the date they filed it. But they'll probably have a retroactive payment.
Bryan Peña: Fantastic. I'm going to go ahead and share the survey results. I don't know if you can see the results on the screen, gentlemen, but across the options, the number one change that people have been making is driving towards remote work, second only to happily no changes, resources are still working. I haven't seen the change in those usage. Can you speak to any challenges, either of you that feel companies need to address as they start to look at more remote work situations?
Miles Everson: Yeah, look, I'll go first. I think this is a positive as it relates to a couple of things. Number one is I think what this pandemic has highlighted is that companies need a deeper bench of remote capability than what they thought they needed. And that's, I would argue, is both the depth of the resource, the human resource pool they have available to them. But equally important, I think companies are learning that perhaps the way that they've thought about the security of their assets, which is largely done through. Being in the business of administering hardware to independent contractors, that they may not have to do that because they've now activated and have fully functioning virtual security desktops that will utilize native devices. I've talked to numerous companies in the last week that have said that they've been able to activate that and the security protocols allow them to control and secure the environment. So as it relates to independents and being able to use independents on the back side of this crisis, I think we're going to see that companies are more equipped to deal with that from a technological perspective, which will increase the velocity of being able to deploy independents because oftentimes the hardware distribution becomes a bottleneck in getting people deployed quickly.
Gene Zaino: Yeah, I mean, I think, you know, one of the biggest impediments to change, whether it's personal, whether it's your art, whether it's your company or whether it's government or society, the biggest impediment to change is always the status quo and the inertia of that. And this pandemic and the forcing of people to work remote and to work differently has pretty much destroyed status quo in many ways and certainly has loosened it up to enable change to happen at a more rapid pace, which is one of Miles four trends. I think you're going to see the acceleration of change and even things we're not even thinking about right now that are going to happen as a result of this. It will definitely change things. And I think one of them is going to be the ability for people to realize, hey, I could work remote and I could work for several different clients at the same time, several different companies. I feel safer working at home. I actually have more time. I think we're going to see more people being independent. I think we're going to see more companies having access to a wider group of people that are rationalizing their day, but getting more work done and more agile and more access to more capability because you've got more connections to more people. So it'll be interesting to see where this goes. And it certainly will be different.
Bryan Peña: Thank you, Gene. And this is also, Gene, this is another question for you. One of the questions or concerns that a lot of people have had over the last couple of weeks is they continue to pay their independent workforce, even though they're not working, just to keep them kind of engaged and keep them, you know, keep them in their ecosphere. Obviously, doing so is unique, but it is certainly a common theme. Do you see any additional employment risks by paying these fees, even though they may not be doing work under NSW?
Gene Zaino: So if I understand your question, Bryan, you're asking me if a company decides to pay its independent contractors even though they cannot work...
Bryan Peña: Yes.
Gene Zaino: Does that then trigger more favorable towards employee versus independent contractor from a risk point of view?
Bryan Peña: Yes, that's the question.
Gene Zaino: This has never been tested before. I'll just give my thoughts on that. First of all, I think it's very noble and I think it's a great thing to do. I think we need to be careful how we do it, because three years from now, when people look back, you know, who knows? There could be, you know, class action lawsuits and other things. So we still need to be smart about worker classification. My suggestion would be that, number one, you try to augment to work so they could do the work remotely, even if it's different work. So keep them working, but keep them doing something that's a value to the company so that it is still a business to business relationship. You really wouldn't be giving work out to another vendor of yours or a competitor or not even a competitor, but someone else. And that's delivering your product if you didn't get the product. But being a good partner and having a good service supply chain is important to protect. So, yes, if you can keep them busy, even if it's different types of work, pay them for doing that. The other thing you could do is obviously give just like we're doing now. But doing it actually even more specifically for your independent contractor workforce is counsel them on what they could be doing to keep themselves active and billable and get access to a lot of these, you know, benefits that's out in this CARES Act. I mean, the CARES Act, by the way, is the third phase and there's a fourth phase that's coming soon. I mean, we're talking about trillions and trillions of dollars that our government is putting into the economy. Make sure these people that maybe don't have the lawyers and resources to figure out how to go get it, help them go out there and get it. And that would be another way to help them stay active and viable and keep them as loyal. And you become a client of choice, which is really what you want to be to build those communities that Miles just talked about in terms of these talent pools.
Bryan Peña: Thank you and we have another question, do you foresee any changes to IRS regulations pertaining to Isis coming out of this crisis? That's for both of you.
Gene Zaino: I mean, I do. I think you're going to see something that we've been talking about for years, that there needs to be either harmony, harmonization of the rules in terms of what is an independent contractor versus an employee. And as you know, Brian, all these different states, everybody's got different rules. And it's kind of very confusing for a company that needs to use these people to execute work. So, one, I think harmonization of these rules will be something that could come out of this. And I also think that there's going to be a safe harbor, something that we've been talking about for years, of having some level of accreditation that if someone really wants to be an independent contractor, an independent worker, self-employed, they're able to support themselves, are able to make a certain dollar amount that they could cover their own benefits. And they don't need to rely on their client, if you will, for entitlements. They should have a to give their client a safe harbor pass that they're not going to their clients are going to have to be worried about reclassification or worker classification risk. On the other hand, there's people that will probably be forced into independent contracting work and they should clearly be employees. So, you know, I think they'll be clearer, brighter line as to what is an independent contractor versus an employee. And I hope that's the case anyway.
Bryan Peña: Thank you. Miles, based on your experience, what are the things that we need to look for when anticipating the eventual turnaround? What are some of the things that you feel will be harbingers of a turnaround?
Miles Everson: So I'll start with the. The idea, I guess, or the thought process that. Looking beyond the current crisis is really important because on the backside of any big crisis, what you'll see is you'll see some companies that really emerge much, much stronger and take advantage, if you will, of capitalizing on the change that Jeanne referred to earlier, which is the status quo is the enemy of change and the status quo is getting disrupted. And so taking that and turning it into, you know, not just tactical but strategic decisions will be really critical for companies. And I think that this one in particular is hitting right at the heart of what their workforce needs to look like and should look like. And so we will see companies emerge much stronger that really leverage the remote work. They figure out how to use technology to work. They use the a deeper bench of independence. And, you know, I'm not just saying this, Brian, because of the pandemic. I mean, I'm at MBO because I saw this trend some years ago in terms of what I thought, where I think the world is going, and I think that the pandemic is just merely an impetus to drive this change and accelerate it. There's lots of things in the past hundreds of years that should have been done but didn't get done until there was a crisis to force the change. And I think that's where we're at. So what I'm saying is you can either be a protectionist and try to hold on to the past. You can be complacent and decide that what you're going to do is just watch or you can decide that you're going to be the shaper of the future. And if you decide you're going to be the shape or the future of your country and your industry and your company, then you'll be more proactive in dealing with these situations. So deliberate choices. And clear execution on where you need to be, not where you are today. I mean, I've seen this I've been through now three different major epidemics, not epidemics, but crisis's and every one of them, you can see a pattern of who emerges stronger.
Bryan Peña: Thank you. Gene, any thoughts on the same topic, what's next?
Gene Zaino: No, I think we covered it.
Bryan Peña: Okay, fantastic. Well, thank you both. Thank you, Gene. Thank you, Miles. Thank you, everyone, for attending today's call. We certainly hope you got a lot out of it. The webinar will be available for replay. We'll be sending the link, as well as the downloads for the slides themselves. Thanks, everybody. Stay safe. And we look forward to seeing you at our next event.
Gene Zaino: Thank you so much.