What are workers’ compensation alternatives?

Workers’ Compensation traditionally speaking comes in the form of a standalone policy. While standalone policies are great policies for some companies, they ignore some of the primary issues with workers’ compensation needs. At SecureWorkComp, we understand this and focus on alternatives that make workers’ compensation obtainable to more clients. Our alternatives include PEO (Professional Employer Organization) and Pay-Go programs. 

What is a PEO?

A Professional Employer Organization (PEO) is a firm that provides a service under which an employer can source employee management tasks, such as workers' compensation, employee benefits, payroll, recruiting, risk/safety management, and training and development. PEOs enable employers to cost-effectively assign the above administrative tasks to a third party allowing them to focus on running their business. The Professional Employer Organization (PEO) concept was started over 20 years ago and is also known as “co-employment” or “employee leasing”. Today there are approximately 960 PEOs servicing millions of American workers.

What Companies use a Professional Employer Organization?

In most cases small to medium sized businesses with US operations that have between 2 - 800 employees. Larger companies with several thousand employees are also known to work with PEOs. PEO clients come from almost every business vertical. Some PEOs cater to white collar verticals like technology and professional services. Other PEOs cater specifically to blue-collar verticals such as trucking and manufacturing. There are also boutique-like PEOs that cater to start-ups and international companies. The common thread between all PEO clients is the desire to reduce HR liabilities and streamline HR administration. 

How large is the PEO Industry?

There are over 960 PEOs nationwide. The PEO industry has seen steady growth since its inception in the early 1980s. It is estimated that about 4 million American employees are in a co-employed relationship, yet overall PEO industry market penetration is still lower than 2%. Many PEOs have reported record growth since 2010, which is largely attributed to the onset of Patient Protection and Affordable Care Act (Obamacare). The PEO value proposition gets more valuable as American employers are faced with increased employment regulations and healthcare costs.

Do I fit with a PEO?

The truth is, everyone can fit into the PEO model. Businesses today need help managing increasingly complex employee related matters, including employee concerns, health benefits, workers’ compensation claims,payroll, payroll tax compliance, and unemployment insurance claims. They contract with a PEO to assume these responsibilities and provide expertise in human resources management. This allows the PEO client to concentrate on the operational and revenue-producing side of its operations.

Can a company save money by using a PEO?

Yes, depending on the exact situation PEOs have a significant ability to reduce a company’s costs. PEO’s use their buying power for the cooperative purchasing of items such as health insurance and workers comp insurance, which are the most common place PEOs save companies money. Additionally, PEOs can help companies leverage off the SUTA rates of the PEO, potentially saving thousands annually.  PEOs also save companies significant soft cost as PEOs are proven to improve employee retention, increase employee motivation, and reduce employment litigation and legal fees.

Do business owners lose control of their employees when they use a PEO?

No. PEO clients retain ownership of their company and have control over its operations. Through co-employment, PEOs and clients essentially split the responsibilities of employing a workforce. The PEO will become the “employer of record”, which re-distributes certain liabilities to the PEO. For example the PEO files all their clients’ payroll taxes under its own tax ID #s. The PEO will sponsor the health insurance plan that is offered to employees, which means they are responsible for its administration and compliance with all regulations, including Healthcare Reform. Under co-employment the PEO client will become the “work-site employer” which means the client still controls, among many other things, employee job functions, hours of operation, hiring and firing.