PEO Workers’ Compensation

Throughout the world, companies turn to Professional Employer Organizations (PEO) for help with HR, payroll, taxes, and benefits administration. PEO providers are especially effective for small- and mid-sized businesses that can’t afford to staff entire departments. Additionally, top PEO providers make it easier to enter new market regions by simplifying compliance and handling your administrative tasks. 

One way PEOs can help is through workers’ compensation coverage. While this coverage is known for providing employees with support after a mishap at work, it’s also an incredibly important form of protection for companies. Read on to learn more.

A PEO is a third party that takes on some of the duties of employing your workers. They are considered co-employers, which means they share in the burden of employment. Because of this, your company and the PEO are both liable and responsible for different employment obligations. 

PEOs can handle a range of different HR and payroll tasks. On top of providing top HR expertise, they can ensure you’re in legal compliance as you move into different regions. Thanks to their support, your workers can focus on your company’s core activities instead of getting distracted by administrative tasks.

While the United States Department of Labor handles workers’ compensation for federal workers, it’s up to each state to decide what type of workers’ comp should be offered for private and state employees. Each state is also responsible for deciding when or if workers’ compensation is required. For example, Florida requires non-construction businesses to get workers’ compensation once they have four employees. In Texas, workers’ comp is optional. 

Workers’ compensation insurance is designed to provide support if a worker becomes ill, gets injured, or is killed at work. It provides them with a wage replacement, the cost of medical treatment, and similar expenses. To be covered, the illness or injury must be directly due to the worker’s employment.

Workers’ compensation insurance isn’t just a useful benefit for your workers. It’s essential for employers as well. In addition to ensuring your legal compliance, workers’ comp helps reduce your company’s liability. You don’t have to worry about paying penalties for a lack of coverage or out-of-pocket expenses for medical costs. It protects you from lawsuits and helps to financially support your employees when they’re harmed at work.

Compliance With State or Local Laws

One of the most important reasons why you should invest in workers’ compensation is to ensure you’re in compliance with state or local laws. Currently, Texas is the only state that doesn’t require workers’ compensation. Every other state requires it for all or the majority of businesses. 

Penalty Prevention

There are significant penalties for not having workers’ compensation coverage. For example, the state may charge a premium for each unpaid worker and a percentage per month for unpaid workers’ comp. If the premiums and penalties are unpaid, the state can place a lien on the company’s property. In some cases, the state can even shut down your business for not having workers’ compensation.

Liability Mitigation and “Exclusive Remedy” Protection

Workers’ compensation is known as an “exclusive remedy.” This means workers can’t simply sue you for their injuries in most cases. Instead, they must use the workers’ comp coverage to pay their medical costs and get support. Considering how expensive lawsuits can be in the United States, this is an important benefit for businesses. 

Employee Support and Satisfaction

By making sure your employees are cared for, you can boost your employee satisfaction rate. Workers want to know that they are protected if something happens, and workers’ comp insurance is just another way to ensure they’re cared for.

Coverage of Lost Wages, Death Benefits, and Medical Care

Your workers’ compensation insurance protects employees in a few important ways. After the injury, it can cover their lost wages and medical care. If they die as a result of the incident, it can also pay for death benefits. By covering the cost of these services, workers’ compensation insurance gives employers predictable costs and an added level of financial protection.

Absolutely. To find out, you should talk to your PEO. A good workers’ compensation insurance plan should cover the cost of injuries, provide death benefits, and replace lost wages. In many states, you will need to have workers’ compensation insurance as soon as you hire your first employee.

The entire process begins when you sign a PEO contract and the PEO becomes your co-employer. From this moment on, the PEO takes on some of the legal duties of being the employer.

Then, you can have your workers placed under a single master policy at the PEO. This master policy covers all of the workers under the PEO’s umbrella. Because the PEO can pool employees from multiple companies, they are able to provide a lower cost and higher quality level than small businesses would generally be able to get on their own.

By working with a PEO for your workers’ compensation, your company can take advantage of a few key benefits.

• Easier Administration: By working with the PEO for coverage, you can enjoy having lower administrative costs. The PEO handles all of your administrative burden for workers’ comp, so you don’t have to spend as much on labor costs. 
• Pay-as-You-Go Plans: Often, PEOs let you pay workers’ compensation premiums as you go. Instead of providing a lump sum payment, they are processed during each payroll cycle.
• Return-to-Work Programs: To help keep costs down, the PEO will often design return-to-work programs so that employees can get back to work sooner in a modified form.
• Better Safety: PEOs can help you prevent and manage claims through safety training, pre-employment drug testing, and other measures.

Depending on the country, state, and PEO involved, there are a few different types of workers’ compensation policies that you may be able to get.

Master Policies

 
This is the most common type of PEO workers’ comp policy offered. It involves pooling all of the employees from client businesses together and providing all of them with workers’ comp insurance. All leased staff and direct employees end up getting insured.

Because everything is pooled together, you don’t get to keep your individual experience modifier (mod), which determines how big or small your base premium is based on your claim history. Instead, your mod is impacted by the experiences of every other client company.

Multiple PEO Policies

 
This type of policy covers compensation and benefits for leased employees. With multiple PEO policies, every client of the PEO needs to have a policy that covers their leased employees. The PEO must be the primary named insured. Then, each client’s name is referenced in separate insurance policies. While you’re still able to benefit from the PEO’s better negotiating capacity, you get greater independence.

However, this type of policy can potentially open up ownership questions because of how the PEO is listed as the primary insured. Additionally, there is less pooling leverage than can normally be found in master policies.

Multiple Coordinated Policy (MCP)

 
With an MCP, each client at the PEO has a separate policy that is listed under their unique tax ID. Then, the insurer coordinates all of the coverage so that there aren’t any gaps. This type of option gives you more control over how your company’s data is tracked and allows you to get lower premiums through your mod.

Unfortunately, there are a few key downsides as well. In many cases, master policy pooling offers steeper discounts. It can also be fairly complex to manage.

Client-Secured Coverage

 
If you opt for client-secured coverage, then you must buy the policy on your own. Then, the PEO handles administration and claims processing. This gives you full control over selecting the insurer, and your mod remains separate from other client companies.

However, you don’t get to take advantage of the PEO’s group policy discount. Additionally, you’ll have to handle contract renewals and negotiations on your own.

As you shop for the right PEO, pay attention to the type of services and benefits they offer. It’s important to remember that workers’ compensation coverage is just one of the PEO services you will be using. To make sure you find the right PEO workers’ compensation policy for your needs, remember the following tips and considerations.

• Optimization for NCCI Class Codes: Consider how the PEO helps you optimize for NCCI class codes. These codes help you separate different workers based on their injury risk profiles, so optimization can save you money.
• Safety Programs: Strong workplace safety programs can prevent injuries from happening and reduce the overall cost of workers’ compensation over time by having a direct impact on the mod.
• Return-to-Work Programs: A good workers’ comp administrator can provide return-to-work plans that reduce the amount of time workers have to miss work. 
• Claims Handling: A good workers’ compensation program will provide 24/7 claims handling and top-notch support.
• Premium Structure: Before starting a workers’ comp plan, investigate the premium structure. Normally, premiums are based on your mod, employee classifications, and total payroll.

Navigating workers’ compensation issues can be challenging on your own. By working with a PEO provider, you can save money through group policies. More importantly, by allowing a PEO to help with your workers’ compensation, you can streamline your administrative processes and avoid potential liability for injuries.