Category Workers’ Comp

Why is pay as you go workers’ comp insurance the right choice for so many businesses these days?

What is Pay as you Go?
In this video clip, CEO John Will Tenney was interviewed by a local real estate office and answers a few questions about Pay as you Go Payroll and Taxes, as well as Pay as you Go Workers’ Comp. Both of these business options can help reduce costly audits and large bills at the end of a fiscal quarter, or the fiscal year.

A big thank you to Rick Aguirre of Remax Realty of Avalon Park for his help with the video.

Pay as you Go for Workers’ Comp
A “standard” workers’ comp policy comes with some “baggage” that many business owners would like to avoid. Not only are there extra fees for a “standard” policy and a possibly expensive audit every year, there are also some added risks. Why else are so many employers now looking at alternative methods? In today’s economy and business environment it pays to be flexible and innovative.

You may be asking what kind of baggage there is. Have you ever asked these questions?

• Who wants to pay a large premium deposit?
• What is this “expense constant” thing they charge?
• Why is it an estimate?
• Why is there an annual audit that usually ends up costing the business owner more money?
• Why is the timing on the big payment always so bad?
• Why are they telling me I am “mis-coded”?

Does any of this sound familiar in your business? How about these?

• Have you ever wondered why they can’t just take the comp premium at the same time you do payroll?
• Did you even know there are “Pay as you Go” workers’ comp insurance programs available?
• Is the only reason you are NOT doing pay as you go because you think it gives up control of your money?
• What is Pay as you go workers’ comp?”

All good questions. Here are some basic answers. (Please contact us to get more answers.)

Workers’ Comp premium is figured as a percentage of payroll for each employee in each “class code.” A “class code” is based upon the job description of the employee. For example, clerical employees and roofers have a different class code and of course a completely different rate of premium. “Mis-coding” is when the people are actually working at, or have different duties than those described in the class code.

PEO Pros functions both as a licensed insurance agency and employer consultants to assist employers in this area. Usually this involves placing the employer with a payroll service, or even a PEO. In many cases the payroll service is optional. Yes, you can still enjoy the transferred liability of a PEO without giving up your payroll.

The advantages to pay as you go services are many but here a few headaches that go away:

• Workers’ Comp annual audit is no longer needed
• Tax forms will be filed by the payroll service
• Large premium deposits go away
• Fewer problems predicting cost of employees
• Easier to add employees without incurring insurance increases
• Since reporting is more frequent (each payroll) changes in job description will likely result in less “mis-coding”

If any of this addresses a problem with your business or company, you may want to give us a call at 800.788.8343 or use the form below to contact us with your inquiry:

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New York is a very interesting state for PEO services. The state owns and operates a competitive workers’ comp state fund which makes it difficult sometimes to compete in the PEO environment.

PEOs using a traditional carrier will pay a 19.4% “state fund assessment” to replenish the state fund, which was depleted by a corrupt administration several years ago. Oddly, the state fund itself only charges 6.5% to clients for the same fund, which gives it nearly a 13% advantage right from the start.

However, there are PEO options in NY that can be competitive in many situations. Even if direct savings cannot be achieved on workers comp premium, there are other advantages available, such as reduced rates for unemployment assessment, risk sharing, HR support, liability sharing and other PEO benefits.

The PEO industry is alive and well in NY, even if it is not driven by workers’ comp savings as it is in other states.

Here is an article that explains a little more about PEO Services: Why Use a PEO?

If you would like to get some more information on a quote, please use the form below:

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PEO Services Workers Compensation Pay As You Go Comp Services Construction General Liability Health Insurance Broker/Agency Alliance Other Business Insurance Agent Appointment Other

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We understand that PEO and staffing company owners can be frustrated with the completely different set of skills required to negotiate larger policies with national carriers. For this and other reasons, they come to us for help. Our typical client is someone who realizes that it is better to be represented with an agency with custom solution expertise, rather than get stuck with an “off the shelf” program.

PEO Pros has many alliances which allow us to offer more custom choices to our clients. We work closely with Stonehenge Insurance Solutions, relying on their extensive experience in the field.

In addition to being a licensed General Agency in several states, we also function as master policy insurance wholesalers.

Products we negotiate for PEOs and staffing companies include:

1: Various policies for Workers’ Comp including:

• Master Workers’ Comp Policy
• Multiple Coordinated Workers’ Comp Policies
• Multi-State Workers’ Comp Policies
• Client-based Workers’ Comp Policies

2: Guaranteed cost, high deductible, retroactive and captive management programs
3: EPLI for clients

Should you find yourself in a situation where dealing directly with a carrier (or carriers) is not working to your satisfaction and profit, you may wish to contact us to explore the possibility of a client-agent relationship. Please use the Quick Contact form shown below or give us a call at 800.788.8343. We can’t help you if you don’t contact us.

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Has your workers’ comp coverage been denied or canceled? Not yet? Maybe it isn’t your turn just yet? If renewal time is coming up and you are worried, there are some steps you can take to make it easier.

What is involved in getting workers’ comp coverage? Understand that the insurance company is in the business of managing risks and they are taking a risk every time they add or renew a client. Your goal as a business owner then, along with your agent, is to convince the insurance company, or more specifically the underwriter, that you are a risk worth taking.

Here are the top 10 reasons why company owners either can’t get workers’ comp coverage or have it canceled or denied.

#10: Failure to be specific about what you do.
The ACORD form isn’t always enough. A detailed description of operations goes a long way in to convincing an underwriter that you are worth underwriting. It’s important to use percentages as well. For example, a lawn service company may want to say “80% residential and 20% commercial.” Make sure to list known excessive risk exposures too, such as how often you trim trees, or clean out gutters (involves getting on a roof.) Underwriters do not like surprises!

#9: Failure to maintain a safety program.
This is going to show up in your claims report sooner or later. A safety program not only has to be written, but enforced. Some roofers were seen working on a county school roof recently. They all had harnesses on but they were hooked to nothing. Doesn’t help much. Make sure your employees know the safety program and follow the rules.

#8: Spreading your company too thin.
So many companies try to do more than one thing. A famous person once said “If you try to be everything to everyone, you are going to end up being nothing to nobody.” Find your niche, stick to it, and don’t branch out in to other, riskier areas.

#7: “Shopping” your insurance around on a regular basis.
Sounds like a good business move doesn’t it? It’s not. Underwriters do not want to see your application year after year. Your company will get a reputation as a “policy jumper” and it will become more and more difficult to get a single company to take a chance on you.

#6: Underestimating your payroll to reduce premium.
Admittedly, a lot of times this is the fault of the agent. He or she underestimates your payroll to get you a lower quote. It has a downside, in that it makes you that much less attractive to the carrier. Report your payroll figures as accurately as possible. You plan on growing your company don’t you? It is OK to put that growth in your estimated payroll.

#5: Using too many subcontractors.
Lawyers have learned to “pierce the veil” and “climb the ladder” in subcontractor claims. If more than 20% of your business is handled by subs you are going to have a difficult time getting a traditional workers’ comp policy. Some companies have gone to strategic partner – referral arrangements, rather than subcontracting, because it separates the liability. Granted, you lose control of the cash flow but it is a lot easier to insure.

#4: Using “1099 employees”.
Let’s be clear, there is no such thing as a “1099 employee”. 1099s are reserved for independent contractors. Employees get W-2s. There is no middle ground. If you are paying employees as contractors, and therefore avoiding taxes and premium, sooner or later it will be revealed. The longer it takes to get caught, the more expensive it will be. Be very careful with this. Many states (and the IRS) are cracking down on this.

#3: Owning too many corporations or LLCs.
Workers’ compensation rules are different in different states, but all of them realize the potential cross-company liability of shared ownership companies. So much in fact, that there is a special form (ERM-14) that has a section dedicated to insuring companies with common ownership. While it may seem like a good idea to have multiple companies, most CPAs will tell you that the advantage is minimal compared with the extra paperwork and insurance difficulties. Check with your CPA of course, but it may be to your advantage to have different divisions within one company as opposed to having separate entities.

#2: Putting too much on your website.
Underwriters have the internet on their computers. They know how to use Google. Be assured they will comb every inch of your website to make sure you aren’t doing some high risk activity that you aren’t reporting. This has been the killing blow for several companies trying to get comp coverage. Which leads to the last, and most grievous error companies can commit:

#1: Lying to the insurance company (or agent).
Once you are caught lying on a form, or in an underwriting survey you are pretty much done for. We don’t know exactly how but we know that underwriters communicate with each other. We suspect they have a private Facebook group they tell stories in, and have good laughs about their latest “applicant.”

Never, ever, ever put false information on an insurance form. It’s in writing then and goes on your record. Don’t do it.

Why is it important to have a “rated carrier” for your workers’ comp coverage?

When does it make a difference?

Common questions and answers
How does a carrier get rated anyway?
In most cases it is done by evaluation by an independent company. In almost all cases in the United States today this company is AM Best, Inc. They evaluate several factors, such as diversity of business, financial stability, size of current book of business, amount of surplus on hand, value of outstanding claims, etc. An “A” rating indicates the highest rating, with “B” next and then “C” and so on. There are also “+” and “-” ratings in between (such as A++ all the way down.)

Does a rating make a difference in premium cost?
The correct answer is “It depends”. In certain states the premium is fixed, so only secondary factors come in to effect. Those secondary factors can be affected by rating, or more accurately by the characteristics used to compile that rating. Experienced carriers with large amounts of surplus have more flexibility in offering different plans, which can include discounts, deductibles and credits.

What is the danger of going with an unrated carrier?
he most obvious danger is the possible lack of financial stability in the carrier. In the last few years several unrated carriers have gotten in to financial difficulties and been placed in custodianship with the state they reside in. In this case, coverage may be revoked or terminated without sufficient notice to procure new coverage.

to be continued …

Can things go wrong for an employer? Of course. What can an employer do to ease the pain When Things Go Wrong?

Proper preparation can prevent problems. Having a professional partner can help solve problems.

Having a professional employer organization on your side can help prevent problems be the difference between making or breaking during an employee crisis. Things can go wrong. Things can go wrong with employees and administration, too. There are times having an experienced and professional group on the same team as the employer can help clean up the mess.

Some of the problems that can cripple a business that goes solo are:

Payroll/Tax errors.
No business owner is happy to receive letters from the IRS. Wouldn’t it be great if this could become Somebody Else’s Problem? Wouldn’t it be an advantage if all the employees were on someone else’s Federal ID number?

Workplace injuries.
It happens. Employees can get hurt on the job. What are the procedures? How does an employer avoid legal issues? Workers’ Comp Insurance is expensive for a reason. Doctors, Lawyers and Hospitals love comp claims, since there are no co-pays, deductibles or limits. How can employer make this problem “go away”? How does an employer keep the workers’ comp insurance premiums from rising? How do they avoid costly, end of year audits?

Disputes between Employees.
What are employers allowed to do? How do you handle a fight? How do you terminate a bad employee without incurring risk? How do you avoid an unemployment claim? How can you minimize the damage?

Employment Practices.
Is everything being done right? In compliance? Are there any potential lawsuits sitting out there? How can employers protect themselves from employee lawsuits?

Bad Employees
What can employer do to get rid of a bad employee without opening the gates for wrongful termination? What are the documentation procedures? Is there counseling required? Who knows the answers?

These are challenging questions. Is having a PEO an answer for all of them? Maybe. It depends a lot on the employer, the PEO and the relationship defined in the Client-Service agreement. Do you need an expert to help you select a PEO that matches your needs? That’s where PEO Pros comes in.

If any of the problems listed here sound familiar, or keep you up at night, perhaps you should contact us using the form below, or give us a call at 800-788-8343.

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Why would anyone expect to find all their payroll, workers’ comp insurance and HR answers from one PEO?

Would you buy a suit that didn’t fit? So why expect one PEO to do it all?

Many business owners are frustrated that they can’t find the right payroll, workers’ comp or PEO solution that matches their business. Some small businesses feel “swallowed up” in the machine of a large, national payroll company. Larger businesses find that a local PEO or payroll provider just doesn’t have the experience, service or access to products that they need. There is no “One Size Fits All” in business.

Do any of these comments sound familiar?

• “My PEO doesn’t offer the services I need”
• “Nice fancy PEO website, but I know I am paying for it”
• “All we need is workers’ comp and payroll, why are we paying for all this other stuff?
• “We keep getting denied for workers’ comp coverage”
• “We’re tired of calling a machine. We want to talk to a person!”
• “Our rep? You mean this month’s rep? We’ve had 6 different reps in 6 months”
• “I wish my insurance agent could help us with more than just insurance”

Perhaps you might need a Custom PEO Solution. We may be able to help. Tell us what is missing. Please feel free to contact us using the form below.

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PEO Services Workers Compensation Pay As You Go Comp Services Construction General Liability Health Insurance Broker/Agency Alliance Other Business Insurance Agent Appointment Other

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Please tell us more about your business? What do you do? Your line of business?

Comments - for PEO services it would be helpful to know how many employees you have, what states do they work, what do they do, and an rough idea of what your payroll is and how often (weekly, bi-weekly, etc)

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Is it worth it to go get a workers’ comp exemption from the state?

“Oh I don’t need comp, I’m exempt.” Have you heard this before?

Perhaps it is best to start with a few definitions to clear things up.

In Florida, Every employer is subject to the workers’ compensation act, regardless of how many employees they have¹. The statute more or less states that an employer shall cover the expenses and lost time of any employee hurt on the job.²

An exemption from outside coverage is available from several states when there are certain conditions met, such as 1 employee or less, all employees are also 25% or more owners, etc. This exemption must be applied for, paid for and filed with the state.³

There are no “automatic exemptions.” No one is “exempt” by default. The state must approve the exemption.

Once an employer has received such an exemption, he or she is making a promise to the state that they will pay for all workers’ compensation claims with their own funds. In a phrase, they are “self-insured.”

Some employers argue that being self-insured is enough, since a lawsuit will only proceed against an insurance company. Please be advised that lawyers are aware that most small business owners have other assets, such as homes, cars, retirement funds, children’s college funds, etc. Since some collect a percentage based on what is recovered, it can be profitable to pursue private assets.

Exemptions No Longer Being Honored
Add to this confusion that many larger contractors and municipalities are no longer accepting workers’ comp exemptions in lieu of an actual policy. They have found that lawyers have learned to pierce the veil of an exemption and perform what is known as “climbing the ladder” to the actual contractor in the case of a sub-contractor injury. Exemptions do not protect the contractors.

So is it worth the fee ($50 to $100 for “construction” business based on the state) and the application to get an exemption? A small business owner may consider getting comp coverage instead. There are many options available, including direct policies, “pay as you go” polices from payroll companies (even Paychex and ADP are offering this now) or even the more extensive liability coverage available from a PEO (formerly Employee Leasing Company).

It is true that initially it would appear that an exemption is indeed cheaper. But as is the case with all insurance, consider this: What if something happens? What if someone gets hurt? What if the OWNER gets hurt seriously? Loses a limb or loss of an organ? A properly written and paid workers’ compensation policy will pay for all medical expenses, legal fees and up to two-thirds of lost wages for as long as the injury is in effect.

Choices: It’s left up to the business owner.
The business owner has a decision to make, to run with an exemption or to have peace of mind through a somewhat more expensive workers’ comp policy.
If a small business owner wishes to know more about exemptions, their relative uses and other options available, please use the contact form below.

The authors of this article had assistance from the members of The PEO Message, a Facebook group used to communicate within the PEO and Workers’ Comp industry. Specifically, thanks go to Doug Lilak, Christopher Yarn, Chad Filley, and Jeffrey Rendel for their valued input.

Notes:
From Florida Statutes Chapter 440
¹ 440.03 Application.–Every employer and employee as defined in s. 440.02 shall be bound by the provisions of this chapter.

² 440.02 (16)(a) “Employer” means the state and all political subdivisions thereof, all public and quasi-public corporations therein, every person carrying on any employment, and the legal representative of a deceased person or the receiver or trustees of any person. “Employer” also includes employment agencies, employee leasing companies, and similar agents who provide employees to other persons. If the employer is a corporation, parties in actual control of the corporation, including, but not limited to, the president, officers who exercise broad corporate powers, directors, and all shareholders who directly or indirectly own a controlling interest in the corporation, are considered the employer for the purposes of ss. 440.105, 440.106, and 440.107.

³ 440.05

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While there are many advantages to having a PEO manage your workforce, many times it is troubles with Workers’ Compensation Insurance that brings the client to a PEO.

Is it better to be with a PEO? To have a professional partner to assist you with risk management? We of course, have a bias, but here is another point of view. This is an excellent article written by Antony Kelly
Antony Kelly’s Article

Here are some excerpts we particularly liked:
“Simply put, traditional workers comp coverage will require a small business owner to make an upfront deposit, based on an estimate of their gross annual wages. The company will send quarterly information to the insurer, who then calculates the bill and requests payments. Since these are all estimates, however, an audit is required, including a reconciliation process that will help bring the numbers together. Unfortunately, if the deposits and quarterly estimates do not cover the total amount due, the company is mandated to reimburse the carrier at the end of the year. This could potentially be a substantial cut to the small business person’s cash flow. Interestingly enough, payments that extend beyond the balance may roll over into next years beginning balance; nice for the carrier, bad for the business owner. ”

“PEO companies not only provide you with pay as you go workers compensation but also outsourced benefits and a variety of resources that help you comply with employment related issues and administrative paperwork. In fact, many businesses under 100 employees should be able to significanly reduce their in-house administrative burden through the use of a PEO, which provides additional value over traditional and pay as you go workers comp plans. ”

Thank you to Antony Kelly for writing this article, and to Shane Underwood for finding it.

People ask us when they need a PEO, or even why?

Hard question to answer with anything other than “Maybe you don’t!”

Our staff can spend a lot of time telling you why you should have a PEO, and you can probably find some of that on other parts of this site. For fun though, and maybe for educational purposes, we asked them, “When DON’T you need a PEO?” Well they tossed it around the bullpen and surprise surprise, they came up with at least 7 scenarios when a PEO is not called for.

Here’s some situations they gave us when you DON’T need a PEO:

1: You don’t have any employees
2: You have employees but they cause no problems and create no risks
3: You are a government entity who cannot be sued
4: You are a very large company with an internal legal and HR department
5: You are a very large company with annual workers’ comp premiums in excess of $250,000. (In this case you should have your own, custom comp solution, such as a captive or a self funded plan. Ask us about that)
6: You are a short term company, not likely to be around for a while
7: You will never want to sell your company, or facilitate an easy ownership transfer

Can you think of some others? Please let us know!

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