If you are currently with a PEO or are considering joining a PEO, you’ve likely noticed that one of the core services a PEO provides is Workers’ Compensation. When you enter a co-employment relationship with a PEO, you join the PEO’s Master Workers’ Compensation policy, relieving you of the need to carry your own Workers’ Comp policy (with the exception of 1099 workers – 1099 contractors are not covered through a PEO’s plan).
What are the benefits of partnering with a PEO and joining their Workers’ Comp Master Policy?
- Savings. Due to economies of scale, Workers’ Comp with a PEO is usually 10-15% more cost effective than your own policy. You’ll never pay more than if you had your own policy. In addition, the PEO will help you make sure your classifications are correct. This important step ensures you have no surprises and that you are paying the correct rate for each of your employees.
- National Master Policy. Your PEO already has their Workers’ Comp policy established in every state, which means no headaches when it comes to hiring an employee in a new state. Just let the PEO know you’re hiring, and they’ll do the rest.
- Risk Management. When you’re in a PEO partnership, the PEO cares about your Workers’ Comp policy like it’s their own – and they’re there to help mitigate your risk. Your PEO will help with safety reviews, recommendations, and resources to position your business at lower risk for Workers’ Comp claims. This can include building return-to-work programs and improving employee morale to encourage employees to care about the company as well. In addition, when there are claims, you’ll have the PEO’s team on your side to investigate, navigate the claims process and control fraud.
- No deposits or audits. With a traditional Workers’ Comp policy, you’ll estimate the exposure that is anticipated for each class code in which you have employees. You’ll give a deposit at the beginning of the policy term to cover your insurance premium, and at the end of the policy term you’ll have to complete an audit. Any difference between the estimated exposure and the actual exposure will adjust your premium; you’ll either receive a refund or pay the difference at the completion of the audit. With a PEO, none of this applies! You’ll work with the PEO to classify which class codes each of your employees fall under and you’ll pay as you go for Workers’ Comp through the PEO’s payroll integration. No more audits, no more estimating, and no more massive premium deposits.
- No extra fees. With the PEO administering your policy and charging you a rate for each class code, they’ll generally include any additional fees in your percentage rate, so you’re not surprised with any extra fees for Workers’ Comp.
- High-Risk coverage. Some PEOs specialize in high-risk industries. If you work in one of these industries, you’ll be facing sky high rates with an independent policy and, sometimes, may even be unable to take out a policy! When looking for a PEO, you can choose a PEO that has the appetite for high-risk business like yours at competitive rates.
Note that if you do have any 1099 contractors, you’ll need to maintain a separate policy to cover them in case of a lack of coverage on their part; however, best practice is to collect current Workers’ Comp COIs from all contractors so you’re not left with the exposure.
Hit the comments or schedule a call to learn more!
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