(Using a Professional Employer Organization)
I have been a broker for Professional Employer Organizations for the past 5 years. Prior to that, I was a staffing company owner with 60 offices in 35 States. One of the responsibilities that always kept me busy was assessing my company’s workers’ compensation status in each state and developing strategies for achieving the best possible rates. After doing this for 16 years, I found that while challenging and sometimes frustrating, it was also a process that was very fulfilling when I made the right choice for the company.
There are a variety of workers compensation options that all staffing company owners should investigate when researching workers’ compensation solutions. They range from using the state fund or pool, to buying a direct policy from a carrier through an insurance agent that is experienced with staffing companies. Within this range of options, a very popular solution also includes using a Professional Employer Organization or PEO. The appropriateness of a particular workers’ compensation solution for your staffing company will depend on the five main factors including 1) what states you operate in 2) the size of your payroll 3) your annual worker’s compensation premium 4) your workers compensation loss history and 5) type of employees you are placing.
In my staffing company, where we generated about 25,000 W-2’s a year; we used a variety of solutions depending on the state. One solution that we used very successfully was the Professional Employer Organization or PEO solution. There are a multitude of reasons we liked using a PEO. The PEO was able to reduce our back office personnel expenses. I maintained a back office staff of about 4 people who managed the PEO relationship for our 25000 employees The PEO’s generally charge about 1.5% of payroll for their payroll and human resource management services. Given the human resource and payroll services they offer, this is a very economical price. Also PEO’s can usually offer you less expensive worker compensation rates as compared to State Fund rates. In fact, a PEO can sometimes offer you workers compensation rates that are 20% lower than state rates if your loss history is good. I also liked the fact that all workers’ compensation payments were on a pay as you go basis, and I did not have to maintain deposits with the PEO.
From my experience I would recommend that you only consider PEO’s that meet the following criteria. They have experience working with staffing companies. Staffing companies generally have high turnover, the PEO should have this experience in order to best service you. I would highly recommend that you work with a PEO that has been in business at least 5 years and manages at least 200 million dollars in payroll. This will usually give the PEO the buying power to get a good deal on workers compensation programs (so they can pass on the discounts to you.) Also the larger and more experienced firms tend to provide better payroll and human resource services.
Using a PEO is an excellent workers compensation solution that each staffing company should examine at least once a year. Worker’s compensation laws, which are largely dictated by each state, change regularly and these changes can affect your rates. Since your profits and margins may have been reduced in the last few years due to the recession, workers’ compensation is even more important these days. It is certainly worth the time to review your current program with a trained staffing and workers compensation specialist.
This article was written by David Schek of Work Comp Staffing Solutions. Please feel free to contact David Schek at 202-302-1212 or at david@StaffingCompSolutions.com. and will appear in Staffing Digest