How does a PEO arrangement work?
When a company retains a Professional Employer Organization (PEO), it establishes a co-employment relationship between your company, the PEO and the workers of your company. The retained PEO and your company contractually allocate employment responsibilities and liabilities. The PEO then assumes responsibility for obligations related to human resources, workers’ compensation, payroll, labor law compliance and employment taxes.
Why consider using PEO for Workers’ Compensation Insurance?
Traditional workers compensation providers require business owners to make an upfront deposit, based on an estimate of their gross annual wages. Your company is required to report quarterly information to your insurer, who then calculates the premium and requests payment. Since these are estimates however, an audit is required, including a reconciliation process that would often require adjustments to balance the numbers. This is a similar process to how banks manage your escrow for collecting taxes and insurance. Unfortunately, if your initial deposits and quarterly estimates do not match the total amount due, your business must reimburse the insurer at the end of the year. This could potentially be a substantial amount which may impact a small businesses cash flow. Surprisingly, any payments that extend beyond the balance may roll over into next year’s beginning balance.
As such, businesses reviewing their workers’ compensation needs should take a close look at pay-as-you-go workers comp plan that is offered by a PEO. This flexible model offers a premium payment plan that lessens upfront costs and spreads payments over time. But not just that; no deposit requirements and no mandated audits whatsoever, because the business owner will submit information directly after a payroll cycle, a report of the actual debit amount. Estimates are eliminated and so is worrying about reconciling the differences. In fact, if you outsource your payroll to a PEO, they will deduct the premiums at the same time as the final payroll of that cycle. Naturally, the biggest benefactors are organizations with seasonal or highly fluctuating payroll, because estimating payroll is challenging, however all businesses can benefit, because end of year payment surprises are eliminated
Stay out of the local State Fund!
If your business has what they refer to has “high modifications” or prior workers’ compensation claims, new business start ups or hazardous risk, you may find that your current underwriters do not want to write a policy for your business. A PEO can also help here as well. If other carriers say no or offer cost-prohibitive rates, a PEO may be able to offer affordable rates and potentially keep you out of your local state workers’ compensation fund with higher rates. There are 100’s of qualified PEO to cover the widest variety of customer needs. Many PEO’s specialize in working with insurance agencies like Keystar Insurance.
How are Workers’ Compensation Rates Set by a PEO?
Specifically, your workers’ compensation rates are set based on the services and work your company provides, your location(s), and your previous experience (if any) with your prior carrier. With your PEO, your prices are based on your Class Codes, the PEO’s own internal rates and most importantly, your ability to broker or negotiate a better rate.
How Can Keystar Insurance Help Negotiate My Workers’ Compensation Rates?
Not every client is aware or even comfortable negotiating with their PEO. This is the benefit of calling Keystar Insurance. We are a full service insurance agency that understands the variables of workers’ compensation insurance. We are your advocate that will negotiate for the proper coverage at the most competitive rates with your PEO. There are 100’s of PEO’s today. If we can’t work with your existing PEO then we will find and recommend to you a more competitive PEO. Oftentimes, we can save clients [25%] on their workers’ compensation rate alone in addition to the benefits provided by the PEO.
The savings varies depending on the type of your industry your business serves. We find significant cost savings with a PEO working with blue or grey collar businesses due to the inherently riskier nature of your business. Even so, we may also be able to save money for typical white collar businesses.
Summary
If you are not sure if you are getting the best deal on your workers’ compensation insurance through your PEO, let Keystar Insurance represent you. We are paid by the PEO directly and represent you at no cost. We either negotiate a better rate for you or find a better PEO to serve your business interests.
Not sure you’re getting the best deal on workers’ comp? Give us a call at 866-610-1350 our visit our website at https://keystarins.com/
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