5 Scenarios Where a Staffing Company May Utilize a PEO
5 Solutions a PEO May Provide
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.
1. Lessen your administrative burden
The PEO onboards new employees and manages payroll, paychecks and benefits on your behalf. Their services can alleviate the burden of ACA compliance. While the relationship is co-employment, the PEO is deemed the employer of record for the payment of wages, employment taxes, statutory benefits and voluntary benefits. The PEO also aids and advises on human resource issues and compliance with employment related laws and regulations. Additionally, they can provide background checks and other screening services.
2. Provide coverage for a startup operation
Most standard market carriers require at least 3 years of business experience to offer a quote. Many PEOs will entertain startups and can relieve the burden – and potential higher cost – of having to secure coverage through the assigned risk pool. This includes numerous state funds if the company’s geographic scope covers multiple states.
3. 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 provide “all other states” coverage and an opportunity arises in a state the company’s carrier is not licensed in, a PEO may be a solution to entertain the business without disrupting the current program.
Depending on the state, utilizing a PEO may be much less burdensome than trying to obtain an assigned risk policy in that state or moving the entire insurance program to a carrier that can accommodate the state. For example, some states require physical offices or a 90-day lead time, and using a PEO may be a solution to accommodate those requirements.
4. Accommodate a new code that a staffing company’s current carrier cannot accommodate/separate out more hazardous work
All standard market carriers have excluded class codes or exposures, and some are stricter than others. If a staffing company has an opportunity in a class code that their workers’ compensation carrier excludes, they may be able to find a PEO that has a broader appetite.
5. Overcome poor loss experience
Unfavorable loss years are bound to happen. If loss experience precludes a staffing company from being able to obtain a favorable renewal either based on the insurance carrier’s scheduled rating or an uptick in the experience mod, a PEO may be a solution to obtain coverage at a reasonable pricing level until claims experience improves.
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, reach out to a member of the ‘A’ Team today.
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