Professional employer organizations, or PEOs, are companies that provide human resource outsourcing services to other businesses. A PEO offers many advantages. One of the most important is access to a variety of employee benefits. This includes workers’ compensation insurance.
This blog post explores workers’ compensation, how PEOs can offer this coverage, and the advantages of using a PEO for your workers’ compensation needs.
What is Workers’ Compensation?
Workers’ compensation is insurance that benefits employees who are injured or become ill due to their work. This insurance covers the injured employee’s medical expenses, lost wages, and rehabilitation costs. Workers’ compensation is mandatory in most states in the United States, and businesses must provide coverage for their employees.
How Can PEOs Offer Workers’ Compensation Coverage?
PEOs work by co-employing their clients’ employees. The PEO acts as the employer of record for tax and regulatory purposes. However, the client keeps control over managing their employees on a daily basis. As a co-employer, the PEO manages payroll, benefits, and other HR functions.
PEOs can offer workers’ compensation coverage to their clients because they can pool their clients’ employees together to negotiate better rates with insurance carriers. The PEO also manages workers’ compensation claims and supports the injured employee during the claims process.
Advantages of Using a PEO for Workers’ Compensation
There are several advantages to using a PEO for your workers’ compensation needs. These include:
PEOs can negotiate better rates with insurance carriers because they can pool their clients’ employees together. This can result in significant cost savings for businesses.
PEOs are experts in HR compliance and can ensure that their clients comply with all workers’ compensation laws and regulations.
PEOs are responsible for managing workers’ compensation claims, which can be a complex and time-consuming business process.
PEOs support injured employees during the claims process, which can help reduce the stress and anxiety associated with workplace injuries.
Potential Drawbacks to PEO Workers’ Compensation
While using a PEO to cover workers’ compensation can provide many benefits, there are also potential drawbacks. This section will explore the potential disadvantages of using a PEO for workers’ compensation.
Loss of Control
When a business partners with a PEO, they give up some control over the management of their employees. While the business still retains control over day-to-day responsibilities, it may need to consult with the PEO before making certain HR decisions.
Limited Insurance Options
While PEOs can negotiate better rates with insurance carriers, businesses may have limited options for choosing workers’ compensation insurance. The PEO may work exclusively with certain carriers or have limited options due to the size and makeup of their client pool.
While PEOs can provide cost savings for businesses, they do charge a fee for their services. Businesses should carefully consider the cost of using a PEO versus managing their workers’ compensation coverage in-house.
Incompatibility with Certain Industries
PEOs may not be the best fit for businesses in certain industries. For example, businesses with a high frequency of workplace injuries or high-risk industries may find that traditional workers’ compensation insurance is a better fit.
The level of service provided by PEOs can vary widely. Businesses should carefully research potential PEO partners to ensure that they are reputable and provide high-quality services.
Simplify Your Business with PEO.com
At peo.com, we help you make the best choices for your business. If you decide a PEO is right for you, we make it easy to find the perfect PEO for your organization. You can revolutionize your business with our educational resources and access PEO partners. Connect with our team to shop PEO quotes and receive competitive pricing within 24-72 hours!