If you’re in a high risk industry such as construction or if you have varying degrees of risk such as a staffing service, workers’ compensation insurance can be one of your company’s largest employer expenses. In fact, it’s an expense that could prevent you from growing as quickly as you would like. As your business grows and adds employees, your workers’ compensation costs also increase. You may be able to reduce those costs however, by working with a Professional Employer Organization (PEO).
When you contract with a PEO (also referred to as “employee leasing”) the PEO becomes the employer of record for your employees. This co-employment relationship means that while you manage the day-to-day operations of your business the PEO is behind the scenes processing and filing payroll taxes, administering employee benefits and managing any workers comp claims. This is a contractual arrangement in which the PEO shares the risk and responsibly of employing your workers, including payment of payroll taxes and providing workers’ compensation insurance.
One of the main reasons companies choose to work with PEOs is that the PEO can offer better rates on workers’ comp than companies can typically get on their own. Because the PEO pools the risk of many companies it’s able to negotiate discounted rates on workers’ comp, rates it can then pass on to it’s clients in the form of lower overall service fees.
In addition to offering workers’ compensation at lower rates, the PEO is responsible for payroll processing, including remitting payroll taxes and complying with all federal and state payroll tax regulations. Another advantage of using a PEO is that because they process your payroll and provide your worker’s comp there are no workers’ compensation payroll audits each year.
PEOs also offer benefits management, which means your employees can receive the same benefits as employees of larger companies, at reasonable rates. Again, the PEO works with many companies so it can negotiate large savings which it passes down to its clients.
While you may be a little apprehensive about co-employing your workers with another company many employers feel that actually gain control. Most companies find that by working with a PEO, they are able to focus more effectively on their own business, without the distraction of administrative tasks. By allowing a PEO to be the employer of record, your company can devote more staff time to your business operations, while the PEO handles employment-related administration functions such as benefits administration, safety programs and payroll processing.
When talking with PEO providers keep in mind that you’ll hopefully be working with your chosen provider for the long term. When you’re ready to consider a PEO be sure to review a number of PEO quotes. A good place to start is at a HR-focused web site such as EmployHR.com where you can obtain up to five free quotes from PEOs that meet your criteria.
In summary, while price is important, the deciding factor when selecting a PEO should be the overall fit between your company. Partnering with the right PEO is the most effective strategy for long term workers’ compensation cost savings.
By: Charles Everett
© 2010 Administration Jobs
