NewtekOne, Inc. (NEWT) Earnings Call Transcript & Summary

Good afternoon, everyone. My name is Barry Sloane, Founder, President and Chief Executive Officer of Newtek Business Service Corp., stock symbol NEWT on the NASDAQ. And I wanted to thank everyone for joining our webinar today to focus on payroll health and benefits issues. We've titled the thrust of today's seminar, A Human Capital Management System in a Post-Pandemic Environment. Before we go into this webinar today, I wanted to introduce some of the talented people that will be presenting with me. I have Senior Vice President of Payroll Operations, Samantha Razon. I also have Executive Vice President of Newtek Payroll Solutions, Shannon Vestal. And from the Newtek Insurance Agency, I have the President, Kyle Sloane, who will be helping me present today. I also wanted to give a quick shout out to some of our payroll health and benefits partners, organizations like Franklin Mint Federal Credit Union, Tulsa Federal Credit Union, Bright Star Federal Credit Union, Belco Federal Credit Union, CALCOE's Federal Credit Union, Christian Community Federal Credit Union, ENT Federal Credit Union, Erie Federal Credit Union, Jersey Shore, Federal Credit Union, Union Bank of Switzerland, Morgan Stanley Bank, Stifel Bank, Raymond James, Member One Federal Credit Union, Sterling National Bank, Transworld Business brokers and Webster Bank, and that should do it. So we have quite a healthy list of partners that have helped us put this webinar on for several hundred clients. And let's move into it. I think that the one thing we know that we've all experienced in the calendar year 2020 is a wish that it would end soon and that it's been extremely volatile. And because of this volatility, we felt it would be very beneficial for us to present to our partners, end customers and new potential friends of Newtek all the different things that are currently going on in the environment with respect to payroll solutions, health solutions, benefit solutions and insurance solutions. Moving to the next slide and focusing on today's agenda. Next slide, please. Not rotating. Let's see if I could get it. I got it. Primary effects the pandemic has had on business. Obviously, the biggest effect has been really work from home. And that's done several things. Number one, many of your staff, depending upon the business type, has been forced to work from their home or home office. That makes it more difficult, particularly when employees are worried about seeing paychecks, payroll stubs, questions on benefits. So having a software that's transparent to the employees is helpful. In addition to that, costs are a concern. Utilizing a system that's kind of all-encompassing and integrated that has a cost-reduction feature, extremely important. The pandemic has obviously had effects on health insurance premiums. We'll talk about the effects for 2020 claims as well as costs in 2021. A lot of different changes, a lot of different needs, both of staff as well as human resource personnel. And we're here to chat about a lot of those issues today. I brought the experts on the call with me. Clearly, there are valuable payroll lists to consider yourself in the current environment. Some of those are security based. Is your payroll system secure enough? Who has access to this important valuable data? You also want to take a look at an inventory, all the tools that you have in your current HR management toolbox. What are the types of tools that you need to bring your business forward in the most useful, beneficial way. Look, as a company like ours, we've got 425 employees in the organization, managing 5 -- I used to say 5 different offices, it's now 425 because of all the home offices. But the rules and the regulations are different in every state. They're constantly changing, particularly with how to deal with COVID, whether it's taking temperature, whether it's having PPE equipment, whether it's how to deal with someone that, unfortunately, comes up with an infection or thinks they have an infection. All these different things are really, really vital. And frankly, many small- and medium-sized or independent business owners tend to use payroll solution providers that's just software. And today, particularly given the rules, the changes, the regulatory environment, it's really kind of important to have the total package. And we'll talk about those kinds of things today. What is that total package? What does it entail? And look, I think that we're looking at -- obviously, we had a situation where the IRS pushed tax filing dates back. That created an unusual issue. We've had payroll tax issues in this calendar year. We've had PPP issues. The amount of questions that HR people had, the amount of questions that your workforce has relating to where we are today as well as looking into the future in 2021, the list is just -- it's ongoing. And we want to chat about today are some of these various hot topics. Obviously, moving to the next slide, we talked about remote work changes. People working remotely in the importance of, a, having software where people can access their information real quickly, the employees and the staff that are working remotely as well as making it easier for HR people and accounting people to be able to also go on to a centralized software system. Looking at expense reduction and employment efficiency, extremely important. Those are all things we realize that the pandemic has affected the top line of many businesses. Whether those are 3 employees, 13 employees, 33 or 300, expense reduction really, really important. Also, staffing, very valuable resource today, particularly -- it's extremely costly to lose somebody that's in your system and well-trained that you don't want to lose. We know that training due to the pandemic and people working remotely, much more difficult. So you want to take care of your staff. You want them to feel that they are being considered, and is an extremely -- it's an important thing for us to make sure that they're doing okay. Hang on for one second. I just want to check. Great. Okay, good. Just wanted to check to make sure I'm being heard, I got a text. Lastly, I talked about changes in the tax code, the PPP. And I think that, once again, having real good software that is communicative, very, very valuable. And I've got all the experts here with me today. I first want to bring on Samantha Razon, Director of Payroll Operations. She has a few important issues. And we're going to chat for about 40 minutes and then open it up to Q&A. So Samantha, jump right in.

Thank you, Barry, and thank you all for joining us today. My name is Samantha Razon, and I'm the Director of Payroll Operations here at Newtek. The first portion of the webinar will focus on the valuable payroll issues in the current environment. As many of you know, the impact of COVID-19 has been significant on many businesses and industries. We hope that today's webinar is educational and provides some insight into the changing payroll and benefit environment. To start off, I'd like to focus on the tax credits that have been made available by the CARES Act and Families First Coronavirus Response Act, better known and referenced here as FFCRA. Expanded sick leaves were created under the FFCRA for employees who are unable to work due to quarantine and/or illness. This allows employers to give employees up to 80 extra hours of sick leave at 2/3 of their pay. It also expanded family and medical leave for up to 10 additional weeks at 2/3 pay for any employees that are again under quarantine, have illness or have small children in which they need to care for at home. These 2 credits alone are very important and valuable to employers in this current environment as they are expanded sick leaves that can be offered to employees outside of the regular PTO, sick or vacation plans that are currently in place. These sick leaves are currently in place until 12/31/2020. So if not already taken advantage of, they can still continue to be used by employers and their employees until the end of this calendar year. Employers can also choose to defer employer portion of social security taxes through 12/31/2020. These become payable at the end of 2021. So anyone can defer their employer portion currently at Social Security and make that table with no interest by 12/31/2021. This is very valuable for some small businesses who are struggling still. They need to free up some more cash. They have the ability to defer some of these payments, basically interest and penalty-free and basically hold on to that money for the time being. More recently, a similar deferral has been put in place to allow the employee portion of the Social Security tax to also be deferred. This opens up the conversation for employers with their employees, making that decision together to decide to utilize the deferral on their employee's portion as well. Again, this puts more cash back into the pocket of not only the employer, but the employee during these hard times. There's also an additional credit offered known as the employee retention credit, which will allow for credit of 50% qualified wages against employment taxes for the period between March 12 and December 31, 2020. It is important that all employers understand and utilize these credits prior to year-end. We are hoping that the IRS and federal government may extend some of these leave credits for businesses that are still struggling. We hope to find out some of that information soon. As of now, most of these credits end with the calendar year and the deferral period ends with the end of next calendar year. So that's something to pay attention to and to look for updates frequently from the IRS and the federal government. The next topic that we want to discuss as quickly, as this year has gone, we are approaching 2021. A topic for discussion at the beginning of next year is the potential effect of the significant increase of unemployment claims on unemployment tax rates. Most fee rates are mailed out between November and December of the year prior. So currently, we are entering the time where employers will receive their new fee unemployment rates. There is generally no way to contest or rate assess, but you can often make a contribution to the state to have your rate reduced slightly. It is very valuable for employers to be on the lookout for these notices. They need to ensure that their records are updated to reflect the proper rate. They may see a large increase in rates due to the large increase of unemployment claims made due to COVID. We are hopeful that states will be fair to those employers in their states. But again, they have paid out substantial amount of unemployment claims throughout this year, so it is possible those rates are going to see a large increase. Again, the employer can, in most states, make a contribution payment to try to decrease that rate and that's something that they should think about as a business decision if that payment is more beneficial than the increased rate. The next topic, election impact on tax rates. Not to get into the weeds on this, but it is an important topic because it would be foolish to not consider the potential rates that can change due to the candidate who wins the election. It's important for employers to be utilizing a system or a service that allows them to properly track their tax rate changes for their employees and as an employer. The ability to be informed and stay up to date on tax legislation and changes is very beneficial for 2021 tax changes. So that's just something that all employers and those of you who have joined from our credit union, that's very beneficial research and information to be able to provide back to employers in the new year. As Barry discussed, a lot of employees are currently working remotely more than you've ever seen before. You may have already had employees question if they no longer commute to an office, so their tax rate change to the state in which they live. As we continue to work from home, the questions will continue to arise on where is the real work location of those employees. For example, if you previously lived in -- worked, sorry, in New York City, but lived in Connecticut, you would have paid taxes to New York City because that was your place of work as well as Connecticut. At this point, people have been working from home for more than half of the year in some cases, should they really still be paying those taxes to New York City just because that's their technical work location. As we continue to move through this and we continue to evolve and decide if work-from-home situations are more permanent, we should consider where people's true work location is to ensure that the potential tax effect is taken care of and that you don't run into any issues of taxability. Shannon will touch upon the HR portion of this type of change, but you can also consider creating new contracts for remote employees to just determine some of those nitty-gritty details that really go with changing an employee from a physical workstation to a remote workstation. Another important thing to consider is having the proper tools to track deductions such as 401(k), medical, dental, vision. Kyle is on the line who will be going more into detail about our benefits and how that's been changing through the climate. It's great to be able to track these deductions through your payroll to have a clearer picture of what's coming in and out of your paycheck and making sure that your employees have that clear information as well. Again, just turning back quickly to employees and their remote working. We know that most employees are at home working, but how accountable are they for the time that they're putting in. You can no longer walk over to someone's desk and make sure they're doing what they're supposed to be doing. So having the ability to maybe implement a time tracking system where an employee clocks in or out, not necessarily for their pay, but just for their accountability is something that employers should consider during this time as the benefit of remote work continues. Again, as Barry mentioned, the employee hiring, retention and layoffs due to COVID, a lot of employers, unfortunately, did have to lay off their employees and are hopefully in the process of rehiring at this point or in the near future. The ability to electronically onboard these rehires or have an onboarding process in place that completely allows the employer to have them register, do any safety requirements, make any acknowledgments, agree to any COVID-related documents or important handbooks that the employer has is very beneficial during this time. Having electronic performance reviews, we're not going to be able to do many reviews in person as the year is winding down. So having the ability to conduct these over Zoom or Teams or in a meeting as well as process all of your performance reviews and provide feedback electronically is very beneficial to employers at this time. And again, having the proper HR tools, being able to create employee handbooks, create new employee contracts, provide COVID-19 regulation and rules, things of that nature is very important in this environment and is something that all employers should really be honing in on. At this point for the HR portion of our webinar, I will turn it over to Shannon Vestal. Thank you.

Sorry, one other thing. Shannon, before you jump in, [Operator Instructions] Shannon, take it away.

Thank you. Okay. Thanks, everyone. Hopefully, everybody can hear me. As Samantha has been saying as well as Barry, the impacts of COVID-19 has changed the playing field for employers and HR professionals. Employers require new and enhanced skills and managing from a distance, motivating employees toward a vision in the midst of ambiguity, of course, providing calm and clarity at the same time as aligning work among the team members and building a community. Doesn't sound like much, right? It's a lot. Human resources are stewards, of course, of the organization's talent. It has the responsibility to make sure that they're creating practices to maintain focus, creating connectivity between the staff and ensure that all the most critical data is going back and forth between business leadership, management and team members. As you heard, Samantha was talking, there were a lot of information that Samantha went through and making sure that we, as business owners, are making sure that we are aware of knowing what those credits are, making sure that we're connecting. With that, of course, we also have all of the other information such as making sure that we have the tools that are vital to include in our toolbox, making sure that all of the things that we need bring efficiency. So what I'd like to speak about, as one of my talking points today is administration of an HR system. All the employment, compensation and benefits, having that information HR is responsible for administering and one single solution, a Human Capital Management system, could answer all of the solutions, bringing all of the data together. HR is the keeper of employment, of course, like I said, in the pay and the benefits information. And many times, the information is not in a single database, which adds to inefficient processes. It also creates additional hours of labor spent on tasks and accuracies of information and risks of not meeting compliance deadlines. Just to give you a for instance. For a business that operates with 25 employees within their organization, if they don't have a full Human Capital Management system or solution, they spend on average about 232 hours per year entering the same data in multiple systems, maintaining employment-related records, updating benefits, tracking time worked and so on. So it's very important that HR departments can ensure empathy of equitable processes when they're doing layoffs, for instance, or any type of situation that they would need to make sure that they have documentation to back up the organization. The best HR departments have implemented plans to offer increased flexibility, giving employees the change -- or a chance to change elections of work statuses from part-time to full-time, as an example, maybe shift retirement plans to make sure that it's meeting the needs of the employee. They're addressing compensation needs for all employees, including unemployment, workshare programs, commission-based plans and much more. The seamless administration of all these processes with a perfect quality is critical to employee financial health and employee trust. So by bringing all those tools together in one Human Capital Management system, you're able to utilize tools such as employee self-service with electronic signature and systematic workflows, being able to have life event changes being handled electronically for your employees that impact benefit plans; making sure that they are able to receive electronic delivery of year-end forms, such as their W2, their 1099s if they're contractors or ACA forms if the business needs to comply with ACA requirements. So having a single solution to house all of that information, along with having the employer policies, benefit plans, workers' compensation, handbooks and other important documents that would be easily accessible, for instance, is very key. Getting that information not only to be able to have it yourself as an administrator, but also being able to give that information to your employees. So it's very key to make sure that you have the proper systems in place to be able to track applicant management, benefit services, learning tools, compliance, along with performance management, giving you the dashboard and analytics that you need as well as going into people analytics such as being able to collaborate and engage your employees. It's very important in this time that we encourage engagement, by giving our employees an outlet. We need to be able to have continuous conversations, idea sharing, seek help from each other. Rather than -- before COVID, of course, mainly the people analytics and working through this was more for annual review processes. But it's much, much more these days. We need to make sure that we are able to communicate with our employees, set goals as well as survey our employees. Employees like being rewarded. They like to be able to communicate with each other. And as well as having a consistent technology to keep track of all of those awards for their efforts, making sure that when it does come time for performance reviews, all of that information is already there at your fingertips or using one single platform. It's all within. So you don't want to let your company culture be a casualty. Definitely do not. No matter if your company is on-site, if you're doing virtual or a little of both, your company culture is changing. It is. With the disruption of COVID, the relationship for employees, managers and the organizations are definitely changing. So it's very vital to make sure that you have a way to create a virtual environment that is healthy for you, your organization to be able to -- and your employees to be able to make it productive and enjoyable. Tools to survey your employees by keeping them engaged on a day-to-day basis is very critical. With having data at your fingertips, it's helpful to your organization not only in making sense of the employee experience, but it also gives the opportunity to recommend responses, changes, understanding how people are working together. It also helps you keep track of the demographics of your organization. Maybe you do need to enroll -- or roll out more engagement plans within the organization. We found that engagement increases when you have the technology and solutions in place. Just by having that engagement tool, you will see that the wellness of your employees will increase by 49%. Rewards and recognition of employees, it increases the employee experience by 51%. It also allows you to be able to coach and mentor, which keeps your employees engaged. So it's a really valuable tool to make sure that you have in your HR toolbox. One of the other things as far as the HR, people analytics, bringing everybody together, also with COVID and the unknown changes that we incur on a day-to-day basis is making sure that you're keeping up with your policies, your company policies and policy development and making sure that your employees have access to those changes and that you can make sure that you're relaying the information to them timely and effectively. Typically, in HR department, you may write a couple of policies a year. But with the pandemic, it has necessitated, of course, a new approach to the rules and practices that guide the organization. And many organizations had established changes to their policies based on federal and state mandates. You've had to change and formalize your approach on how you handle operations within the business and making sure that you're updating your policies. When do we update them? When do we not? Whether it's a new policy or written FAQ to be able to provide consistency and clarity, it's very important that HR responds quickly and to be able to develop the input that they need to be able to get out to make sure that they're in compliance, making sure that they're keeping their employees engaged. And with that, of course, there's so much going on. And of course, we all have the Internet. We can go out there, we can do research. But we're finding that by doing that, we're getting multiple -- we're getting information that's confusing. We don't understand it. It's so -- every time we turn around, the information is changing. We need assistance. We are certified. We have -- we are HR professionals, but even us as certified professionals need guidance. With that, it's important to make sure that you have in your toolbox a way to be able to have access to certified HR representatives that are dedicated to dealing with what is going on in today's culture and environment with the policies and the laws and the changes. It's not saying that you, as an HR professional, that there's anything wrong with you being able to do that. Having those tools and making sure that you're keeping your business in compliance and making sure that you're not having to second-guess the policy that you're writing or whether or not you're handling a situation properly with an employee that may have been around someone that has been diagnosed with COVID. It's a difficult time. So making sure that you have the tools to be able to access that type of resource is very, very key and important to your business. It would also allow you to be able to go in and help you be able to navigate the health and safety of your operations for your employees if they were diagnosed with COVID, hiring and recruiting and being able to retain employees, making sure that you have a safe environment. They will give you tools, and they'll be able to allow you to be able to access that information to keep you and your organization safe. With that, Barry, I think I am going to go ahead, unless you have anything that you need to say, I will pass it over to Kyle Sloane, who will give us some information on benefits.

Shannon, thank you so much for that wealth of information from both you and Sam. [Operator Instructions] And now Kyle Sloane, President of the Newtek Insurance Agency.

Wonderful. Thank you. And good afternoon, everybody. So as we're looking at key changes as we're in the current health care environment, as we're ending 2020 going into 2021, we want to share some things to keep in mind as we're approaching many medical renewal plans going into the new year. So one of the first things that we wanted to touch base on and share with you with some good information about telemedicine and how that's really changed access to care as well as costs for many employees. Telemedicine or telehealth is something that many carriers have started to offer at no cost in order to encourage members to still see quality health care during some of these challenging times and be able to do it as affordably as possible. So by removing some costs such as co-pays and allowing people to access this care in their own -- in the comforts of their own home as opposed to going to a doctor's office to help eliminate any potential spread of COVID-19 as well as be able to do it comfortably and affordably. This is something that most health care plans should have included and something that we're really looking at making sure is included as time goes on. It's a lot less expensive than going to a regular doctor, taking the time out of your day to access a certain level of care, whether it be in a traditional doctor's office or in urgent care. And the quality of care that you can receive via telemedicine today is comparable to what you'd be able to receive in a doctor's office. And they do have the ability to write prescriptions and recommend follow-up treatments for you as well. So if this is not something that's currently in a benefit plan that you're currently working with, it's definitely something that we would recommend to start looking into in order to be able to help save on claims costs for both companies as well as for those out-of-pocket cost that employees will be paying when they go to the doctor. As we're looking at 2021 rate increases and forecasting out, a lot of renewals are still being released for January 1 effective date. However, indications are expected that a lot of the increases are going to be coming in around the high single digits. And part of the reason for that is because COVID-19 really impacting the majority of the country going into the late spring, early summer. A lot of these claims costs are still being adjudicated. We still don't know what the full cost of care is for a lot of individuals. And a lot of these claim costs are still hitting plans as we're going into the end of the year. So one thing to take a look at as you're approaching your medical renewals is not only to take a look at the medical percentage increases on the medical plan, but also taking a look at the planned changes that are impacting plans and how carriers are changing those plans in order to make sure that we're addressing those out-of-pocket costs for employees or members of the plans as well. There are 2 parts to your health insurance plan costs, which we're working with clients on: one is going to be the monthly premium that the company pays and the other is going to be that out-of-pocket costs that the employee feels. So while the monthly cost for the business may not feel substantial, the appreciation that the employee will have for that health insurance plan could still be impacted based on what they're paying when they go to see the doctor to get a prescription filled or to have a procedure done. So that's an example of where telemedicine will be able to help reduce some of those out-of-pocket costs. And we can work with members in order to really address what we can do to help manage some of those out-of-pocket costs, so it's not hitting them directly when they go to use the plan. Closely related to that are going to be the benefits that both businesses and individuals will feel through evaluating voluntary plans. Popular brands of voluntary benefits include Aflac or Colonial Life and these are all different types of plans that have no cost to the company and are paid for completely by the individual employee at a very affordable rate. So by being able to implement these plans and to work with employees to understand where their individual pain points are in terms of covering health care expenses, we can supplement these Aflac plans to cover hospitalizations, accident, critical illnesses and be able to offset those out-of-pocket costs at, again, no cost to the company. So by implementing some of these plans, employees can actually see much richer benefits and pay a lot less money out of cost while paying a comparable amount in terms of overall total plan cost or paycheck deductions. Now some businesses have had these types of Aflac plans in place for years and they're not always visited -- revisited as frequently in terms of cost and plan design. So it's definitely something that we recommend employers to look at, at a regular basis as you're going through your medical renewal to make sure that those plans reflect the medical plans and there's true value to all of the employees and members of the plan. Over the -- in the past 10 years as the Affordable Care Act has been implemented, there's been a lot of attention paid to the medical plan side, but not as much paid to that voluntary coverage side. So some people may have these plans, but may not be realizing the full value of them and what they can really be doing for managing their health care costs. Compliance and risk is something that's definitely going to be on the top of mind, specifically as we're going into the beginning of November. We know that there's going to be a Supreme Court case going that will be heard regarding the Affordable Care Act, and there will be a lot of information that will be shared proactively about which direction the Affordable Care Act will be going. And that will only reinforce the importance of the compliance and the risk services that employers are responsible for as benefit administrators. We expect that federal guidelines regarding compliance and risk to still be a top priority over the course of the next year. While the government appears to have been more relaxed in recent years, we do expect an uptick in enforcement of employer mandates as well as reporting guidelines if there's a change in the White House for 2021. So that would include employer mandates, your employee benefit plans meeting affordability statistics as well as making sure that 5500s and other tax documents are filed accurately and timely in accordance with the health care plans at ERISA. The other thing to keep in mind regarding compliance and risk where a lot of businesses will have a major responsibility going into 2021 are employers that were involved in restaffing and layoffs or furloughing employees and making sure that they are up-to-date on COBRA notices, making sure that enrollments are done accurately and timely and that all of the COBRA documentation is issued in accordance. So being able to look to partners to be able to help manage that process will definitely be important for businesses going into 2021. The last environmental change that we are seeing and I think that Sam and Shannon did a good job of expressing the importance of some of these changes is the administration and technology integration and being able to utilize technology to be able to manage all of these challenges that we've been discussing, whether it be compliance, whether it be the reporting functionality that's required in order to be able to manage the compliance and the risk services and the tools that are available in the platform in order to be able to fully administer the health care plan. So whether you're needing assistance with or manually calculating right now look-back periods, handling eligibility verification audits, gathering a census data or the automatic processing of enrollments and terminations, that administration and technology piece is something we're continuing to see become more important, specifically, as Shannon mentioned, because of the amount of time that it's taking to actually handle all of these transactions as well as being able to support that from an administrative perspective -- administratively and through knowledge as well as the technology piece as well.

Great. Thank you, Kyle. Much appreciated. And we definitely wanted to open up the webinar to Q&A for any of our guests or myself. So Ali, are there any questions in the chat room?

Yes, Barry. There are a couple of questions. I will run through them now. So one person asks, how do eligible employers claim the credits? I think this was...

I can take that one. So dependent upon the credit, there's different ways that it can be claimed. Some credits are claimed through the 941, the quarterly filing, as well as the employee retention credit Form 7200 would allow the employer to claim the refundable portion in advance. Most of them will run through your payroll system or your payroll tracking. It's important to ensure that the proper codes have been set up, especially for leave requirements. You don't want to use just a regular sick leave or regular paid family leave. You want to ensure that they are properly associated as COVID leave and COVID sick. So that way, if you had to provide any backup reports to the IRS to substantiate those hours or wages for the employee, that you have them properly associated. So that would just, in turn, go to your Form 941, where the credits would become refundable to you at the end of quarter next.

Yes. Next question. What documentation must an eligible employer retain to substantiate eligibility to claim the tax credits?

So similar question there. Again, it's not so much that you have to put forth documentation to the IRS or the federal government. You just should have backup documentation should you go under audit for any reason. You just need to be able to properly track and record these on your federal reports and returns to substantiate that you've utilized some of the credit. Again, it depends on which credit you are using. There are different requirements for each.

Excellent. Next question. How do you guys stack up to ADP?

I think that the big difference between what we do and what ADP does, ADP is a very sales-oriented organization where reps going to make client visits is really their business model. ADP is one of the leaders in payroll, has been so for close to 40 years. It is hard to get the senior management attention that you would get at an organization like ours to get senior answers on very technical aspects in many instances. If you've got a question, you're going into an 800 number and you're going into a call center that's possibly not even in this particular country. The other thing I would say relative to the software solution that we use versus ADP, ADP's history and development in the business they've done through acquisition and acquired multiple platforms. So the software really isn't as fully integrated and it's not a full, what I would refer, as a Human Capital Management system. Also, the one thing I would say that's important is, realistically speaking, that what we talked about today is an integration of health and benefits, insurance relating to workmen's compensation and payroll software and HR tools. We give that to you in one platform. In addition, many of our financial institution partners that we use are asset gatherers as is ADP and 401(k) and other assets that they accumulate for the client. So particularly for our broker-dealer relationships, we help them maintain and bring on 401(k) business, we're not competing with them. ADP and Paychex are some of the largest competitors for that type of business. So for channel partners, we would like to think that we're a better partner in terms of helping them to acquire assets and integrate the existing assets and retain them. And for end users, we believe we've got a true full integrated Human Capital Management system. And if clients take all the solutions like the health care and the workmen's comp, we certainly can offer monthly payroll tax credits to the ultimate bill, which will help them alleviate some of the early costs.

Excellent. Thanks, Barry. Next question. May an eligible employer received both the tax credits for qualified leave wages under the FFCRA and a Small Business Interruption Loan under the CARES Act.

So the leave credits are not alone in any way. They are a tax credit, so they would be completely independent of any type of loans that are offered through the SBA or any CARES Act loans that have been enacted at this point.

Next question. This one is for Shannon. What's important in the toolbox, the essentials, can you please elaborate on that?

I apologize, I had -- I was on mute. Sure. The essentials and the toolbox would be applicant management, being able to recruit onboard, rehire employees. So it would be applicant management, including onboarding, which would be electronic as well as management, benefits services, learning management tools, compliance, time and attendance along with scheduling so you can do attendance tracking as well as dot boards remotely with your staff. There's dashboards and analytics. I can go on and on and on. The tools that are available -- or basically, you could look at the onboarding of an employee from hiring to retiring. Start to finish. Everything is there within the toolbox.

Excellent. Thank you, Shannon. Next question. How do funds move? So for example, does Newtek originate an ACH from the business account in the amount of the net payroll than originate credits out to the bank accounts of employees?

Shannon, you want to grab that one?

Sure. So that's absolutely what we do. So when we run payroll with our customers, we will -- ACH, through NACHA file that we send through our bank. So we will collect the funds from the employer and then we dispersed the credits for the direct deposit via ACH to the employees. That is part of our service that we do. We also are able to do pay cards. So if you have unbanked employees or employers that have many live checks and they're having to go through the difficulty of break and selling those checks with the bank account each month. And they're looking for tools where they don't have to deliver a paper check. We have pay card options. And we can also -- if employees are boarding with us and they have a pay card that they're currently assigned that they're using that they own, we are able to send to that pay card as well. The pay card basically becomes the -- like a debit card for the employee to be able to receive their funds timely on check date without having to go to a check cashing place to cash that, incur fees as well as having to go to the office to collect the check. So it's all electronic and done via ACH.

Well, thank you, Shannon. Next question. It's kind of a 2-part question. So this individual said, we have multiple clients. Can you speak about the costs? I wonder what the engagement plans are all about? Can you elaborate and touch up on those topics?

Sure. So the engagement, the employee engagement, it is an additional tool that we use, that we offer. And it really comes down to what aspects of the tool that you would like to use. What we do here at Newtek when we're working with business owners and HR professionals is that we actually work with you to look at what is it that you absolutely need that you may not have today? What tools do you have that you are utilizing that you would like to have and make sure that we're able to offer as well as bringing on additional tools to make sure that you are in compliance. So we work with you for the tools based on your need for today and grow with -- as you grow. So within those employee engagement tools, there are HR surveys to your employees. You could also have customer surveys built in as well. So it really just depends on what aspect of the tools that you would need, but we could work with you on that.

Excellent. Thank you. Next question is for Kyle. What kind of savings can Newtek provide in our EDU sector, savings of approximately how much?

Sure. So when looking at the -- at health care plans, we can -- we brought savings back of 15% to 20% on a health care plan. What's more important than the actual percentage savings is understanding really the needs of the group, how the group is using the health care plan and what's going to be most important? We wouldn't want to bring back a plan that's going to be substantially less expensive on a monthly basis and then have unusable out-of-pocket costs or bring something back that's so rich in terms of benefit and just isn't worth the monthly on a monthly basis. So it's really working with the individual clients in order to understand how the group is using the health care plans, how the individuals are using it and then being able to come back and supplement the appropriate plan, network and plan options.

And just to jump in here for a second, Kyle. I think the question was a relevant one and it really does roll across all the 3 areas of what we refer to as Human Capital Management. And I mean by that, in many cases, we get clients that say what's going to cost me to do my payroll? You can see we have addressed a lot of complicated issues. Now obviously, for really smaller businesses that have a limited budget, I realize, for the most part, the concept of not going too far out, doing as little as you can just to get the service is important. But you've got real complicated issues relative to tax, Department of Labor issues, changing environment. And it's important to basically try to put all of these aspects together. We can certainly work with you unbundled pricing for the full solution to get you your best pricing. But the reality of it is if you're using, for example, a really inexpensive payroll software where it's online, you can't talk to anybody, you don't have a customer service representative that's yours. The way to communicate is to send an e-mail to somebody and hope you get a response back when they decide to get back to responding to you or, for that matter, you're having questions relative to your policy and the claims and what's the right policy and plan for you whether it's FSA or HSA accounts. These are all things that you really do need a certain level of expertise. So it's great to be able to go online and get payroll for $10, $20 or $30 a month, but sometimes you do pay for what you get. We are extremely cost-effective and high quality because we don't have salespeople running around all over the country looking to take you out for breakfast, lunch and dinner. So that's one thing Newtek really isn't good at. We're not good on meals. We probably won't take you out for golf. But we have a really good service. We've got experts in that remote location that are here when you need them. And that's, I think, the benefit of dealing with us.

Thanks, Barry. The next question, I can take this one. Will your presentation material be available for download. Yes, we will send a copy of the webinar to everyone who's in attendance today as well as a copy of the slide deck. Next question. How do eligible employers claim the credits? I think we already addressed this, right?

Yes.

Yes. Sam got it.

Okay. Excellent. What's considered affordable, Kyle, including those supplemental plans that are optional?

Sure. So the affordability statistic as of 2020 was 9.78% of employee wages for applicable large groups that are required to offer health care. The health care expenses can't be more than 9.78% of wages. So affordability -- that's going to be the bare minimum for what the government is looking for. Naturally, affordability is going to be subject to the industry, the type of plan the employer is looking to offer. So that's where we're able to work with the employer to shop out what the right plan and mixture of options is. Maybe it's going to be, a, the employer finds a high-deductible health plan more affordable and we can couple that with a voluntary plan that the employee finds to be affordable. And then combined, that's going to give the richest benefit to the employee at the end of the day.

Okay. Excellent. Next question. How do you help clients gain 401(k) business?

Well, the way that we do that, particularly with the broker-dealer community, is we work closely with them. We're able to obviously do the direct reduction of the regular payroll check and send that money over to the 401(k) providers. But importantly, the 401(k) area is an important aspect to benefits. To be able to go in and position yourself as a great 401(k) solution, you're kind of doing it half loaded because you don't have the payroll solution or the health insurance or the other benefits surrounding it. So where we tend to work very well is with the broker-dealer community in partnership because we don't compete. And we go in and present a united front where the recipient, the end client user, doesn't feel that they're getting ADP across-the-board including ADP's 401 choices, which they're not particularly an investment house nor is Paychex. So that's how we work really well with the broker-dealer community in both retaining 401(k) accounts, particularly where we could be extremely price competitive as well as seeking new 401(k) business going in, in a partnership format and displaying a great software solution as well as dedicated customer service reps to be able to answer all the complicated issues that we talked about today.

Excellent. Thank you, Barry. Next question, another competitor question. How does QuickBooks payroll -- how does Newtek stack up to QuickBooks?

QuickBooks payroll is basically -- and QuickBooks is really a 1-to-10 employee payroll solution. You're online, you're not talking to anybody. There's really no level of customer service. There's no connectivity to a workmen's comp, insurance policy or connectivity to a health insurance policy or a benefits policy. It's very, very limited. It's for people that, frankly, don't want to speak to anyone, don't want to have human interaction. I just want to go online, pick up the service, it's all price related. And frankly, I think our prices for our low-end model are competitive to theirs plus you get a human being to deal with it and have them answer any questions that they can.

Excellent. Thank you, Barry. Next question. Regarding offering payroll cards for unbankable employees of a company. Does Newtek have a minimum number of cards they require of payroll cards? For example, Newtek is doing a company's payroll with 50 employees and only need 2 payroll cards.

We have no minimum on the payroll cards. If you have 50 employees and you only need 1, we can do just one. There are no extra costs either. So it works the same way as the direct deposit would work. Again, it would go over straight to the card. So you can have just 1 or you can have up to 50, it's really however many you would need for any of your unbanked employees.

Excellent. Thank you. And then we have just three more questions. How useful is it to attempt to use a single provider for the entire solution for managing one's HR function?

Shannon, I'll let you answer that one.

Okay. It's very important, very vital to the business. Having one single solution as well as being able to have all your tools in one single solution and advisers is very key. If you're working on multiple systems, as I said before, or having multiple advisers that you're working with, you're having to repeat your story over and over again. You're having -- and maybe this time when you worded what you need assistance with, you worded it just a little bit different, so you may get a different answer. It's very important to make sure all your documentation, all of the correspondence is there and available and the history is there in one single place. You know who you're communicating with. You're not having to repeat your stories or tell -- or be able to go back. For instance, let me give you an example, like if you're asking a question about tracking information. Somebody is going to claim unemployment and you know that you need to look at where is the information for the employee, what disciplinary actions have been taken, I can go look in that same system. I can also go look at any history of communications that I may have had with the employee that I can use when I'm working with the adviser for HR. So it's all there. It just makes sure that you're keeping your documentation continuous and accurate. I hope I answer that question. If not, please let me know.

Yes. I think, Shannon, I wanted you to answer that. I think you did a great job relative to the fact that the -- you basically can go to one cloud-based software solution and see what you need to see with respect to health and benefits, workmen's comp, voluntary benefits, 401(k) deductions, payroll, taxes and et cetera. Furthermore, on the pricing by utilizing us for workmen's comp, health and payroll, we can give you the best pricing because you're across 3 different product areas and we can bundle it all together and do a better job in serving you that way. So very, very competitive to use a single provider that sort of knows the company, knows the history. The one other thing I would say, and this is not the case from a competitive perspective for ADP and Paychex, many people do, do payroll with really small local payroll providers. And the issue there is you're not dealing with a publicly traded company relative to the concept of having reps and warrants, public and financial wherewithal behind it and the security of the payroll data. Very, very important. God forbid, you had a reach -- a breach, you have an ACH provider go down, you really need to know who your counterparty is. So I would strongly suggest that from a payroll perspective, you've got very sensitive, important data. You want to make sure that you're dealing with a counterparty that is financially strong enough and is willing to share their income statement and balance sheet with you, which we are.

Thanks, Barry. Next question. What was the general market for premium increases in 2020? And what do you anticipate for renewal?

So in 2020, we found for most of the groups that we were working with the increases to be coming in a little bit lower in the mid-single digits as opposed to the high single digits. As I had mentioned, right now, we're starting to see January 1 renewals starting to come in, in the high single digits. Part of that is because a lot of the COVID-related claims are still being adjudicated. So not everything has actually hit all of the medical plans yet. So if we have groups that are renewed later in the year, they may start to see some larger increases as we go into the year and the claims actually start getting fully processed. Usually, a medical renewal is going to be calculated anywhere from 60 to 120 days out prior to even releasing it. So there's a lot of data that still hasn't even been calculated in yet, and especially as we're going into the cold and flu season, we could see additional pricing implications and medical plans going into the next year.

Excellent. Thank you. Next question. How do you protect yourself on security issues when picking a payroll provider?

Well, we did discuss that briefly. I think, once again, you want to deal with a counterparty that has your data in the cloud. You want to make sure that the data is in a very secure data center. You also want to deal with a counterparty that's got the financial wherewithal. So sometimes, I'm surprised that business owners will wind up sending confidential information to small payroll providers. I think that's something you want to avoid. You want to deal with a party that will share their financial statements and that's creditworthy.

Excellent. That concludes all the questions today. Thank you, everyone, for joining us. And I'll hand it off to Barry.

Thank you, everyone, and certainly appreciate the attendance today. I appreciate the thoughtful questions. That's great. We'd love the opportunity to chat with you further. On the final page of the slide, you could see all the phone numbers, e-mail information. We will e-mail the webinar to everybody that attended today. And once again, I want to thank you all for participating. Success, we look forward to having the next one in the near future. Thank you.