You’ve probably heard of Professional Employer Organizations (PEOs) and have come across others who use their services, but have you ever wondered when a partnership with a PEO is beneficial?
Here are the top 5 solutions a PEO may provide to your business.
- Lessen your administrative burden
A partnership with a PEO can help make your business operations smoother. By letting the PEO handle tasks like hiring, payroll, and benefits, you can avoid the complications of ACA compliance. The PEO acts as the employer of record, taking care of things like paying wages, taxes, and benefits. They also provide guidance on HR matters and make sure you follow employment laws. Plus, they offer services like background checks to help with hiring.
- Provide coverage for a startup operation
Obtaining insurance coverage for startups can be challenging, as most standard market carriers typically require a minimum of 3 years of business experience before offering a quote. PEOs are often willing to work with startups and can help alleviate the burden and potential higher costs associated with securing coverage through the assigned risk pool.
This is particularly beneficial for companies operating across multiple states, as it eliminates the need to navigate numerous state funds for coverage. By leveraging the services of a PEO, startups can access the insurance coverage they need without the typical barriers imposed by traditional carriers.
- Provide coverage in a new state that a staffing company’s current carrier is not licensed in
If a staffing company’s workers’ compensation policy doesn’t cover all states and they have an opportunity in a state where their insurance carrier isn’t licensed, partnering with a PEO can help. This allows the company to explore new opportunities without affecting their existing insurance.
Choosing a PEO is much easier than getting a special policy in that state or switching the whole insurance program to a different carrier. Some states have strict requirements like needing physical offices or a long waiting period. But with a PEO, these requirements can be met, giving the staffing company a practical solution.
- Accommodate a new code that a staffing company’s current carrier cannot accommodate/separate out more hazardous work
Standard market carriers often have specific class codes or exposures that they exclude from their coverage, and the level of strictness can vary among carriers. In situations where a staffing company comes across an opportunity in a class code that their workers’ compensation carrier excludes, partnering with a PEO can offer a potential solution. PEOs often have a broader appetite and may be able to provide coverage for the excluded class code, allowing the staffing company to pursue the opportunity without limitations.
- Overcome poor loss experience
Unfavorable loss years are bound to happen. In cases where a company’s loss experience prevents them from obtaining a favorable renewal based on the insurance carrier’s scheduled rating or an increase in the experience modification (mod), partnering with a PEO can provide a solution. By working with a PEO, the staffing company can secure coverage at a reasonable pricing level until their claims experience improves. This allows the company to maintain insurance coverage without facing exorbitant costs or being denied coverage due to their loss history.
While these are situations where a PEO may be utilized, it’s imperative to consider both the positives and negatives of using a PEO. It’s also important to talk through the best solution with your broker and to properly vet a potential PEO before entering into an agreement.
For more information on PEOs visit our Staffing & PEO page.
