PROFESSIONAL EMPLOYERS ORGANIZATIONS (PEO)
Outsourced HR, Payroll and Safety Services
with Workers’ Compensation Coverage built in
ABOUT PEOs
Companies looking for an end-to-end turnkey outsourced HR solution often choose to partner with a PEO. A PEO typically provides HR Consulting, Safety/Risk Management, Payroll Processing, Employee Benefits and Labor Compliance as well as Worker’s Compensation coverage and Employee Benefits.
Co-Employment Arrangement
The Client Company and PEO enter into a Co-Employment arrangement using the PEO’s FEIN. Because the PEO is the “employer-of-record,” the PEO is responsible for workers’ compensation coverage, related claims management and defense against any litigated claims.
However, the client company is still responsible for on-site management of employees and is responsible for enforcing labor regulations and responding to any employee or regulatory agency claims.
A PEO is not “Employee Leasing”
The key difference between employee leasing and co-employment is staffing. An employee leasing agency can also be known as a Staffing Agency. They will provide you with temporary workers with an option to hire as regular full-time employees, but a PEO does not do this. In a co-employment arrangement, you supply and manage your own workforce; while the PEO helps you handle HR, Payroll and Safety and supplies the work comp coverage.
HOW PEOs GET GOOD WORKERS' COMPENSATION INSURANCE RATES
How They Get Good Rates
Professional Employer Organization (PEO) is a different approach many small and medium size employers take to obtain reasonably priced workers’ compensation insurance. PEOs use economies of scale by bringing insurance carriers the high-volumes, often thousands of employees who require coverage, thus cheaper rates. Secondly, some employers with a high Experience Modification Rating, (EMR) aka X-Mod can get their EMR rate assigned by the PEO thus reducing premium costs.
Controlling Claim Costs
Most PEO will have insurance with the large, nationwide workers’ compensation insurance companies but they may carry high deductible amounts which they are responsible for, per claim. Some of the large PEOs will have their own workers’ compensation claims management department or outsource claims management to a TPA. PEOs tend to want claims closed quickly as their premium rates are dictated by loss runs, severity of loss and length of time open, just like any policy.
What PEOs Typically Require From Employers
PEOs typically mandate the employer has a safety program and retains the right to perform safety inspections and be OSHA compliant. As the PEO’s cost for workers’ compensation insurance is affected by losses (claim costs) PEOs normally mandate that each client employer has a Return-to-Work program with modified duty.
ABOUT PEO SERVICES
Almost all PEO providers include three basic outsourced services: HR, Payroll and Safety. Typically some form of Workers’ Comp. Claims Management is included, because as the “Employer of Record,” the PEO bears the burden of PEO losses.
HR Management
- Employee on-boarding and training
- Employee Handbooks / HR policies
- State and Federal Labor Compliance
- Compensation / Commission Plans
- Rewards and Recognition
- Investigations of Claims of Harassment, Discrimination and Bullying
- Performance Improvement / Discipline Issues / Termination
- Provide LOA Required documentation for example USERRA, FMLA, PFL
- Manage UE Claims, Disability Claims
Payroll
- Collect new hire documents I-9s, W-4s etc… and state-required new hire reporting
- Time keeping software.
- Run your payroll
- Pay all quarterly and year end state and federal payroll taxes.
- Process pretax deductions and post-tax deductions
- Print, stuff, mail/deliver live checks or Direct Deposit pay advice stub
- Issue off-cycle or termination checks
- Make payments to vendors, such as benefits carriers on your behalf.
- Provide reports sick time, holiday pay, vacation pay, over-time, hours etc.…
- Issue year end W-2s and 1095-Cs, compile ACA and EEO-1 reports as needed
Safety/Risk Management
- Ensure compliance with OSHA and Safety Laws.
- Analyze & Recommend Safety Protocols
- Conduct Onsite Safety Inspections
- Safety Program Development Assistance
- Implement Drug-Free Workplace Program
- Coordinate Safety Training & Certification Compliance
- OSHA Investigation / Violation Assistance
Worker’s Comp. Claims Management
- Initial Claim Intake Reporting
- Design Return-to-Work Program
- Claims Management Oversight
- Monitor Third-party Administration
HOW PEO FEES ARE STRUCTURED
PEO fees are typically broken down by Worker’s Compensation costs, Payroll/HR/Risk Management fees, and Employee Benefits.
Typically fees are month to month on a pay-as-you go basis and are structured around the employee class code for workers’ comp, and services are charged for on
A. Workers’ Comp Charges + A Percentage of Payroll
B. Workers’ Comp Charges + Flat Fee Per-Employee Per-Month
C. Workers’ Comp Charges + Service Fees Per Class Code
Some PEOs offer safety incentive rebates that are paid out for low or zero losses (loss runs).
PEOs ARE WILLING TO TAKE ON MEDIUM TO HIGH WORK COMP RISKS
If you want a PEO quote, talk to us about you need and we will go out to market to find the company that fits your need at reasonable rates. PEOs will often to take on medium to high risk clients and a PEO is often a better alternative then Stat based Assigned Risk Plans if you have been rejected by traditional carriers.