If you’re in a high-risk business such as construction or whenever you have varying levels of danger such as a staffing service, workers’ compensation insurance may be one of your company’s largest company expenses. In fact, it’s an expense that could prevent you from growing as quickly as you want. As your business grows and adds employees, your workers’ compensation costs also increase. You could be able to decrease these costs, however, by working with a Professional Employer Organization (PEO).
Once you contract with a PEO (also known as”employee leasing”) the PEO becomes the employer of record for your workers. This co-employment relationship means while you manage the day-to-day operations of your business the PEO is behind the scenes processing and submitting payroll taxes, administering employee benefits and managing any workers comp claims. That is a contractual arrangement where the PEO shares the risk and responsibly of using your workers, including payment of payroll taxes and providing workers’ compensation insurance.
One of the key reasons companies choose to work with PEOs is the PEO can offer better prices on workers’ comp than companies can typically get by themselves. Since the PEO pools that the risk of several companies it’s ready to negotiate discounted prices on workers’ comp, rates it can then pass on to its customers in the form of lower total service fees.
As well as offering workers’ compensation at lower prices, the PEO Canada is responsible for payroll processing, including remitting payroll taxes and complying with all federal and state payroll tax regulations. Another benefit of working with a PEO is because they process your payroll and supply your worker’s comp there are no workers’ compensation payroll audits each year.
PEOs also supply benefits management, which means that your employees can get the very same benefits as employees of larger businesses, at reasonable prices. Again, the PEO works with many companies so it can negotiate massive savings which it moves down to its clients.
While you may be a little worried about co-employing your workers with a different firm many employers feel that actually acquire control. Most firms find that by working with a PEO, they are able to focus more efficiently on their own business, without the joys of administrative jobs. By permitting a PEO to be the employer of record, your organization can devote more staff time for your business operations, whereas the Human Resources | PEO Canada handles employment-related management functions such as benefits administration, safety programs, and payroll processing. Learn about Workers’s Compensation | PEO Canada here.
PEO Uses Economies of Scale To Obtain Workers Compensation
The PEO employs the economies of scale, to search for and obtain workers’ compensation insurance. Many PEO will have insurance together with the big, nationally workers’ compensation insurance companies. PEOs that restrict their services to one state or geographical region may use a smaller insurer. Some of the big PEOs will have their own workers’ compensation claims handling unit using an insurer providing the coverage.
PEOs enhance the employer’s cash flow by decreasing or eliminating the down payments often connected to the cost of workers’ compensation insurance. Depending upon how big the employer connecting the PEO, and the total of business services being provided throughout the PEO, the PEO may allow the employer to pay work comp premiums on a monthly basis similar to a Pay As You Go program provided by some work comp insurance providers.
Employers using a tall experience modification factor, E-mod,” (also known as an X-mod in certain states), frequently connect a PEO as the employer takes on the E-mod of the PEO. Usually, but not always, the E-mod of this PEO is about 1.0. This is good for an employer that has an unusual string of accidents or a couple of bad accidents. On the other hand, the employer with a tall E-mod should realize the PEO isn’t going to let 1 client employers’ poor safety practices raise the work comp prices for all the other companies from the PEO. The PEO is going to require security improvements and will be providing risk management advice that has to be followed.
PEO Becomes Co-Employer & Leases Employees To Employer
For the PEO to supply these solutions, the PEO becomes the co-employee and rents the workers to the company. A PEO differs from a staffing service in that the employer keeps the duty of hiring and firing of employees and has to offer the PEO together with the initial benefits information for each employee together with any changes in employee benefits (most notably salary changes).
As the PEO is providing rewards for several companies; it can use the combined size of all of the employers in the PEO to receive volume discounts normally reserved for its very large companies. This larger size makes it possible for the PEO to provide improved health insurance, disability insurance, 401K plans and other benefits that a small employer frequently cannot afford.
While better worker benefits at a lower price is a selling point of PEOs, the most common reason why an employer joins a PEO is to get better management of the company’s workers’ compensation cost.
In short, while the purchase price is essential, the deciding factor when selecting a PEO should be the total fit for your business. Partnering with the ideal PEO is the most effective strategy for long-term workers’ compensation cost economies.