Manufacturers across Ohio are navigating a challenging landscape as global trade uncertainties – particularly tariffs – ripple through all sectors. Tariffs (taxes on imported goods) can lead to higher costs for raw materials and components, squeezing profit margins. Many Ohio firms depend on international trade: about 13% of Ohio manufacturers import raw materials and 28% export products abroad. This means shifts in trade policy or new tariffs have widespread effects, from Cleveland machine shops to Cincinnati food processors. Indeed, recent U.S. data shows tariffs were straining supply chains and keeping input prices elevated. Such volatility makes it hard for businesses to plan ahead – as one Ohio manufacturer put it, “We cannot take that long-term view right now because we don’t know what will happen four months from now.”
Staying Agile with an AEO Partnership
During uncertain times – whether it’s volatile trade policy, rising labor costs, or new regulatory demands – partnering with an AEO can help Ohio manufacturers save money and stay agile. First, the cost benefits are significant: outsourcing HR can convert fixed overhead into a more flexible expense. Studies have found that businesses partnering with a PEO/AEO can save around $1,775 per employee per year in HR and administrative costs – savings which go straight to the bottom line. These cost reductions stem from efficiencies and economies of scale (for example, AEOs can often negotiate better rates on benefits or workers’ comp insurance, and automate processes that might be costly in-house). For a manufacturer facing slimmer margins due to tariff-induced cost spikes, such savings are invaluable.
Beyond hard dollars saved, an AEO contributes to agility in several ways. With the AEO handling payroll and compliance, manufacturers can adjust more quickly to market changes. For instance, if tariffs force a sudden shift to a new supplier or a need to scale down production temporarily, the company can implement those changes without worrying about staffing administration or legal compliance gaps – the AEO ensures all employee-related matters stay in order. Likewise, if an opportunity arises to expand (say, an overseas competitor faces tariffs, opening market share for an Ohio firm), an AEO makes it easier to ramp up hiring and onboarding quickly by taking care of the HR logistics.
Crucially, AEOs also help manage risk in a turbulent environment. They keep up with the constantly changing regulations – from labor laws to safety standards – so the manufacturer remains compliant even as rules evolve. This reduces the chance of costly penalties or disruptions. It also provides peace of mind: companies know that even if external factors (trade laws, economic conditions) fluctuate, their internal operations (payroll, benefits, legal compliance) will remain steady and professionally managed.
In summary, tariffs and global uncertainty pose real challenges to Ohio’s manufacturing sector by driving up costs and complicating business planning. However, by leveraging Ohio’s unique AEO model, manufacturers can mitigate some of these pressures. An AEO partnership allows companies to operate leaner and more flexibly – cutting administrative costs, ensuring compliance, and freeing management to focus on strategic decisions. In turbulent times, this combination of cost savings and agility can be a vital asset, helping Ohio manufacturers stay competitive and resilient no matter what changes come over the horizon.
Ohio’s Unique Alternative Employer Organization (AEO)
To help businesses remain agile, Ohio offers a unique tool: the Alternative Employer Organization (AEO). An AEO is a special type of HR outsourcing arrangement established by Ohio law in 2021 that is similar to a Professional Employer Organization (PEO) co-employment model, but with a key twist. Under an AEO, the provider files payroll taxes under the client company’s own tax ID (EIN), rather than under the PEO’s ID. This gives the client-employer greater transparency and control over tax reporting while still enjoying full-service HR support. In practice, an AEO becomes a co-employer of the manufacturer’s workforce, taking on responsibilities for payroll, wages, and workers’ compensation just like a PEO.
In essence, the AEO model allows Ohio manufacturers to outsource vital employer functions without losing visibility into important filings. AEOs must be licensed in Ohio and adhere to state regulations, ensuring they remain accountable. This model was pioneered in Ohio and is not available in most other states, making it a uniquely Ohio solution for businesses seeking efficiency.
What services does an AEO provide? Typically, an AEO handles a broad range of administrative and human resource tasks on behalf of the manufacturing company, such as:
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Payroll Processing and Tax Administration: Running payroll and handling all tax withholdings, filings, and documentation (under the client’s EIN).
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HR Management: Managing employee onboarding, records, benefits administration, and HR policy compliance.
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Workers’ Compensation & Safety Programs: Providing workers’ comp coverage or management and helping implement workplace safety and injury prevention programs (AEOs in Ohio can even be self-insured for workers’ comp like PEOs).
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Regulatory Compliance: Ensuring the company complies with labor laws, OSHA regulations, and employment requirements, reducing legal risk.
By offloading these time-consuming functions to an AEO, a manufacturer’s leadership can focus more on production, innovation, and navigating strategic challenges, rather than paperwork.