Why Choose a PEO for Workers' Comp Insurance
Workers Compensation insurance protects you, the business owner, and your business against on the job employee injury lawsuits.
Successful employers do everything they can to minimize risks to their business.
Workers Compensation insurance will pay for medical expenses, lost income and disability benefits for injured employees. This reduces the threat of large financial losses resulting from lawsuits by the injured employee to help cover their medical costs and income losses. (The average Workers Comp Claim is $42,000!) So having coverage is a huge financial risk protection.
Almost every State requires all but the smallest businesses to carry Workers Compensation insurance. An option is to go through the voluntary private market and secure a policy on your own - if you can't get coverage through the voluntary market you'll have to buy coverage through the State's assigned risk pool.
But those aren't your only options. Here are 7 reasons why it's not only easier, but also financially wiser and operationally simpler to utilize a PEO for your Workers Compensation policy.
1. Eliminate The Year End Policy Audit
If you're managing your own policy you'll be required to perform a year end policy audit which not only can be painstaking and take loads time, it can also result in additional owed premiums.
The year end audit requires an accounting of the incurred payroll for each class code under your workers comp policy. Small businesses managing their own policy need to forecast expected annual payroll and annual work comp premiums are based on those forecasted numbers.
This is a "best guess" process and the constant change in employment throughout the year creates a wide margin of potential inaccuracy - and the true numbers won't be known until the year end audit.
However PEO's will collect workers compensation premiums upfront, based on the actual payroll precessed during each period. That means 1) you don't pay premiums if you don't run payroll 2) premiums are based on actual payrolls run and collected immediately 3) no additional payment will be owed at the end of the year 5) no annual audit is required.
If you're tired of doing year end audits and forecasting work comp numbers, then using a PEO to manage your policy should be your next immediate move.
2. PEO's Eliminate The Need To Shop For Worker's Comp Policies
By using a PEO business owners outsource the responsibility and time of handling the annual renewal process.
This annual renewal can be time-consuming, tedious, and confusing. The PEO will have the expertise and resources to find the best rates and coverage options which will save money and time in the long run.
This also allows the business owner and management to spend time on other aspects of growing the business rather than managing another employee related legal requirement.
3. Get Competitive Rates
Think of a master policy like a group benefits package. The PEO has a single policy and places all its clients in that policy.
This allows the PEO to have stronger negotiating power with carriers typically resulting in more competitive rates for clients.
Of course this also means the PEO will administer and manage every aspect of the policy including renewals, rates, class codes, payroll billing, and carrier negotiations.
4. No Down Payment
Workers Comp policies have annual premium requirements that can be a real financial strain on small businesses.
Having to pay a large lump sum (thousands or even tens of thousands of dollars) upfront to activate the policy can be a major deterrent to getting a policy to protect your business.
A PEO can relieve this requirement by handling the premiums on behalf of the client and allow them to spread the payments out over time.
These payments are billed as part of payroll processing and can help businesses better manage their employee costs and avoid the upfront financial strain associated with private workers comp premiums.
5. Pay-As -You-Go Billing
As mentioned above, have a PEO manage your workers comp policy enables you to spread out the premiums over the year.
Instead of paying in one lump sum, the premiums are paid in installments during each payroll period and are based on real-time payroll wages and reporting (this is called "actuals").
Paying premiums this way improves business cash flow and ensures you pay only for the coverage you need based on actual payroll per work comp class code.
6. PEOs Can Manage The Claims Process
When you "hire" a PEO one of the most important benefits you are providing to your company is getting a team of experienced and dedicated risk management experts to help you navigate the work comp insurance space.
If an injury does occur there are important steps you have to take to manage a claim. A PEO can help you with what to do before an injury occurs (such as having an appropriate employee handbook in place and signed by employees), make sure injury procedures are well documented, provide training for supervisors, make sure the employee completes the injury report, and manages the overall claim process form beginning to end.
7. A PEO Helps Small Businesses Manage Risk
Handling your own policy takes a lot of time and work and research to make sure you are appropriately covered and can handle all the processes and legal compliance of claims and class codes.
A PEO becomes a knowledgable ally that can provide training, workplace safety audits and other expertise that improves a small company's ability to manage overall workplace risks.