Most people know that a Professional Employer Organization (PEO) can help you streamline your payroll, give you access to affordable benefits from national carriers, and access to expert HR guidance. But many people do not know that a PEO can help you with your Workers’ Compensation insurance. 

A PEO can make your Workers’ Compensation a breeze even if you are a white-collar company.

Let’s take a look at three ways a PEO can lower your Workers’ Compensation cost 

1. Lower Work Comp Rates: a PEO offers lower rates than you would get on your own because they have the buying power. 

2. Claims Administration: the PEO handles all of your claims for you. 

3. Year-End Audits: in a PEO, you do not have to worry about owing money or employees being misclassified.  

Why does my company need Workers' Comp?

Every business with W-2 employees must have Workers' Compensation insurance (unless you are in Texas). Let's assume you are not in Texas for the sake of this blog. This legal requirement ensures that your business complies with regulations and avoids potential penalties. It is crucial to prioritize Workers' Compensation coverage, as it not only fulfills legal obligations but also safeguards your business from the unexpected financial burden of workplace injuries or illnesses.

Lower Workers' Compensation rates are an additional advantage that can significantly reduce your cost per employee. While this benefit is particularly beneficial for white-collar companies, it is important to recognize that blue-collar companies often have first-hand experience with the burden of Claims Management. With Workers' Compensation coverage, you can alleviate the complexities and challenges of managing claims, allowing your business to focus on its core operations.

Year-end audits can cause stress for many businesses, often resulting in owing money to your insurance carrier. However, these concerns are alleviated within a PEO (Professional Employer Organization), providing you with peace of mind and fewer worries. By partnering with a PEO, you can access their expertise in managing workers' compensation claims and audits, reducing the administrative burden on your business.

In conclusion, having Workers' Compensation insurance is crucial for your company. It ensures compliance with legal requirements and protects your business from potential lawsuits, provides cost savings through lower rates, and minimizes the complexities associated with claims management and year-end audits. By prioritizing Workers' Compensation coverage, you safeguard your business's financial stability and reputation.

But wait, there’s more 

There are other benefits, and after speaking to Scott Hanson from KeyHR, a leading PEO provider, here are more reasons that might not be visible right away. 

I asked Scott to give me a few reasons that are not as obvious.

Scott highlighted that a PEO allows you to focus on improving your Modification Rating by utilizing a PEO’s Risk Management department and establishing best-in-class practices. You are taking advantage of possible safety incentive programs that particular PEOs might have.

Get rewarded for having a focus on worksite safety measures. Scott added that if your PEO doesn’t offer these services and isn’t proactive - you’re in the wrong PEO. We agree, Scott. We agree. 

Everything in one place

It’s important to consider why you should use a Professional Employer Organization (PEO) for your Workers’ Compensation. 

• Lower Workers’ Comp Rates - Save Money 

• Claims Administration - No Paperwork 

• No Year-End Audits - No Fines or Fees

• Lower Modification Rate(s) - Save More Money 

• Worksite Safety Measures - Being safe, saving money 

What benefits do employees receive from Workers' Compensation Insurance?

Workers' Compensation rates play a crucial role in managing costs per employee, which is always a positive outcome. While it is true that white-collar companies may not prioritize Workers' Comp claims management, those in the blue-collar industry understand firsthand the burden it can be. Dealing with claims can be time-consuming and financially draining for businesses. Moreover, the dreaded year-end audits often result in unexpected expenses owed to insurance carriers, causing additional stress and financial strain.

However, these concerns are alleviated within a Professional Employer Organization (PEO), giving employers one less worry. PEOs specialize in managing Workers' Comp claims efficiently, ensuring that employees receive the benefits they are entitled to in a timely manner. This includes indemnity benefits for partial wage replacement in work-related injuries or illnesses and medical benefits to cover necessary treatment or alleviate the effects of permanent injuries or illnesses.

Unlike health insurance policies, Workers' Compensation does not impose policy limits on reasonable medical benefits. This means that employees can access the necessary medical care without worrying about arbitrary coverage limits. This comprehensive coverage provides peace of mind to employees, knowing that their medical needs will be addressed, allowing them to focus on their recovery and return to work.

In summary, while Workers' Compensation rates are essential for reducing costs per employee, the benefits extend far beyond just financial considerations. By partnering with a PEO, employers can benefit from streamlined claims management, ensuring employees receive their entitled benefits promptly. This comprehensive coverage includes indemnity benefits for income replacement and medical benefits to address injuries or illnesses.

The absence of policy limits in Workers' Compensation further enhances employee confidence in receiving necessary medical care. With PEOs handling Workers' Comp claims, employers can focus on the growth and success of their businesses, free from the worries and burdens associated with claims management and year-end audits.

How do you calculate Workers' Comp premiums?

Calculating Workers' Compensation premiums involves considering several factors, including the industry type, an employer's experience, and administrative costs. However, one critical factor applicable in all states is the payroll of specific employee classes.

Each employee is assigned a class code based on job tasks and associated risk level to determine the premium. The estimated yearly payroll for each class is then multiplied by the corresponding class rate.

For example, if an engineering firm has three employee classes, namely engineers, clerical staff, and outside sales personnel, the base premium can be calculated accordingly.

In some states, premiums for officers, key employees, or highly compensated individuals may be based on a maximum salary rather than their actual compensation.

Workers' Compensation premiums are initially based on the projected plan year's estimated payroll. However, at the end of each plan year, the insurance company audits the employer's payroll for that specific period.

An additional premium will be due if the payroll exceeds the estimated amount. Conversely, if the actual payroll is lower than the estimated amount, the employer may receive either a credit or a refund accordingly. This ensures that premiums align with the actual payroll expenses incurred by the employer throughout the plan year.

How can a PEO help with compliance with Workers' Compensation insurance?

PEOs assist companies with their workers' compensation insurance compliance needs. PEO platforms simplify obtaining and managing coverage by bringing all our customers together under a single workers' compensation policy.

This means businesses can easily meet the applicable requirements and focus on other important aspects of their operations. With a PEO’s streamlined approach, we eliminate any worries or burdens related to compliance, allowing businesses to concentrate on their core activities. Don't hesitate to contact us today to learn more about how we can help your company comply with workers' comp.

If you are not sure about your workers’ compensation, we can help you.