3 Ways PEOs Save on Workers' Comp
By Chris PetersonFirst published Updated
The short answer
A PEO can lower workers' comp costs three ways: it prices coverage for a large pooled group, it bills premiums with each payroll instead of an upfront deposit and year-end audit, and claims are filed and managed under its program. Whether you pay less depends on your job class codes, claims history and the PEO.
1. How does pooling lower workers' comp rates?
Small businesses benefit from the large number of employees grouped together under a PEO. That grouping often lets a PEO provide workers' comp at a better rate than a small company can get on its own. Your class codes and claims history still drive the price.
2. How does a PEO help cash flow on workers' comp?
Traditionally, companies buy workers' comp with a deposit up front and an audit at year end. With a PEO, you usually pay with each payroll instead. That helps companies with large premiums and keeps cash in the business.
3. What happens when a claim is filed?
Under co-employment, your company is tied to the PEO's workers' comp program. On a master policy, the PEO is the policyholder and your employees are covered under it, so a claim goes against the PEO's policy and its team manages it. Some PEOs instead give each client its own policy that keeps the client's own experience mod, so ask which model a PEO uses. Either way, handling claims efficiently is the PEO's job, and it's in the PEO's financial interest too.