Workers' Comp Insurance – PEOs
Many people say yes.
Let’s modify the question.
Do You Like Shopping for Payroll Services, Workers’ Comp, HR, or Benefits?
The answer is usually no!
We have a division, EmployerNomics, which does that for business owners. Please check us out!
PEO Pros broker services has transitioned to a new division, EmployerNomics, which handles the retail side of PEO. To clarify, if you are an employer, and your employees aren’t perfect, you might want to consider some HR outsourcing solutions. You can reach EmployerNomics on this site or go to the direct site.
Either way works.
Of course, you can always call us at 407-490-2468. Remember, we can’t help you unless you reach out.
If you are a PEO owner and looking for insurance options for your PEO, this is the right place to be.
What’s The Difference?
In many ways, a Professional Employer Organization (PEO) and an Employee Staffing (Staffing) company are similar, but in fact they live at opposite ends of the HR spectrum. In this article, John Will Tenney of EmployerNomics and PEO Pros explains the history and formation of PEOs and a little of the differences and similarities between PEOs and Staffing.
A Brief History of Staffing and Employee Leasing Companies (which are now called PEOs)
In the early 80’s, a few enterprising, hi-tech individuals left their large traditional companies and formed their own hi-tech firms, with an emphasis on bidding on large government contracts, including military and other DOD contracts.
These problem solvers saw a way to better control costs by avoiding permanent hires, and hence avoiding the liability of permanent employees, by forming and using hi-tech staffing companies. The staff of these companies were only “employed” when the hiring firms had existing contracts that could cover the costs of the staff. Hence, they were able to bid a fixed cost with lower overhead, these new hi-tech firms were very competitive and won many contracts.
In response, the older, traditional hi-tech companies (who also had some brilliant business minds) put their heads together to come up with an answer to this challenge.
The idea of firing all their employees and hiring long-term staffing employees was not attractive, so they came up with what was called “reverse staffing.” All of their current employees were “transferred” to staffing companies created just for this purpose, maintaining longevity and seniority. These initial “reverse staffing” companies came to be known as Employee Leasing Companies, or ELCs.
In this case, the ELC was the employer of record, and handled all payroll, benefits, insurance and HR needs for the employees. In this way, the employee cost became a line item for the hi-tech firm, which in the accounting world is very desirable for simplification of taxes.
It wasn’t long before the owners and operators of the ELCs discovered that this benefit didn’t need to be restricted to the parent company, but could be shared, or more to the point sold, to third parties.
The construction and security industries were the first to recognize the advantage (hence Wackenhut was one of the first ELCs) but others soon followed. It was convenient and reassuring to place employees with an outsourcing firm that assumed much of the reliability and headaches associated with being an employer.
Currently, it is estimated that about 40% of the Florida workforce is either employed by a staffing company or a PEO (formerly known as an Employee Leasing Company).
So How Are They Alike?
Both entities provide payroll, insurance, benefits and HR services for employees “leased” to other companies. Both have advantages of “master” insurance policies which allows leveraging for better rates. Both can take advantage of professional HR systems and procedures to insure a safer workplace and lower unemployment rates.
OK So How Are They Different?
The easiest way to explain it is that if you don’t have employees yet, but are thinking of adding some staff or labor to your workforce, you may consider a staffing company. Kelly is a famous temp staffing company. There are also many hi-tech staffing companies still around such as Volt Technical. If you already have employees but wish that someone else would take care of the headaches of payroll, the hassles of workers’ comp insurance, the difficulties of large group health plans, the perennial fear of increased unemployment tax rates or even just remove the fear of an employee lawsuit by getting professional HR assistance, you would consider entering into an agreement with a PEO.
So What is Co-Employment and How is it Different than Leasing?
Recently, many states are passing legislation and codes to limit the complete transfer of employment to a PEO, and a new term has emerged, called “co-employment.” In this case both the PEO and the client are considered employers of record, but the duties and responsibilities of each or both are defined in the contract between the client and the PEO, called the Client Service Agreement (or CSA). It is very important to read this CSA thoroughly before entering in to an agreement with a PEO. It will be the governing document in any future employee disputes.
Where Can I Find Out More?
You can consult a labor attorney of course, and you should also consult a competent PEO broker. We became brokers because we could see the need for a third party in the agreement between a client and a PEO, much the same as any company will always need an insurance agent to negotiate with an insurance company.
And of course you can always contact one of us at PEO Pros or EmployerNomics. But remember, we can’t help you if you don’t call.
407-490-2468
No matter what the outcome of the elections in November, change is in the air. Obamacare will change one way or the other. Medical costs are rising. Associated legal costs are also rising. This will affect payroll, payroll taxes, workers’ comp premiums, health premiums, HR issues and no doubt increase employer liability.
We heard this quote in a recent PEO services meeting: “No matter who wins in November, things are going to change. While you can’t plan, you can certainly prepare by choosing a professional HR partner.”
Small businesses will need to be prepared. So while it may be impossible to plan for what may happen, since it is such an unknown, there are still ways to prepare for whatever may come.
At PEO Pros, we have prepared by expanding our HR Outsourcing Brokers division, EmployerNomics. Not only have we added staff at our corporate office, we are now adding regional franchises.
We hope to assist small to medium sized employers with outsourcing these services, now more than ever:
We are here if you need us. If you would like to consider joining us, we have several attractive franchise areas still open. But either way, we can’t help you if you don’t call. So call us at 407-490-2468 or use the contact form below.
It took a lot of time, energy and resources, but EmployerNomics is now a nationally available franchise.
With help from Franchise Marketing Systems, we have completed our compliance and due diligence. We are still finishing up the licensing in some states but that should be done very shortly.
Use the contact form below to get more information on franchising.
If you are looking for a low overhead, low maintenance business with long term residual income, we may be the answer for you.
Consider these points:
Go to our EmployerNomics franchise page Franchise Info to get our sales information.
“But you accepted this risk last year!”
How often do underwriters hear that? Often, a risk that was accepted last year is declined this year even though it appears nothing is changed. Sometimes the reverse happens. You’ll hear that something they declined from you last year was just accepted this year, and even worse, through another agent or PEO.
Why?
Why do underwriting standards change? What causes this?
We’ll discuss several things that can change:
These are constantly spiraling upward. Rather than reducing them, as originally intended, it is now apparent that the “Affordable Care Act” has nearly doubled the cost of medical care. This comes from numerous sources but seems to be centered around increased paperwork, taxes and administrative cost.
The cost of a cut finger nearly doubled, according to our PEO Pros actuarial staff, going from $300 with a $20,000 reserve up to $550 with a $40,000 reserve. The reserves are set based upon actuarial history of re-opened claims that involve further medical attention, lost wages and of course, (the big one) legal expenses.
Carriers will often change direction of work covered due to numerous reasons. Some of those reasons include a change in ownership, change in AM Best rating, and determination of risk management spread. The company actuaries determine the optimum “spread” of risk, often called a “balanced portfolio.” The ideal balance is a mix of high risk (higher premiums), medium risk (moderate premiums) and low risk (very low premiums.) If a company finds itself unbalanced in one particular area it is a good business practice to shift the underwriting back to the proper balance.
The NCCI relies not only on actuarial data but also on pressure from the various state boards that regulate workers’ comp. This can often lead to a negative situation. For example, for years in Florida, small contractors were complaining that they couldn’t get workers’ comp policies. “Fine.” the politicians replied, “We’ll lower the rates.” Unfortunately this has the opposite effect. Lower rates mean more risk and less profitability for comp carriers so they are in fact more likely to decline a small contractor. In fact, raising the rates would increase the possibility of a small contractor getting approved, but no politician wants to be the one who “raised the rates.”
Many states are “administrative”, which means the rates per code are set by the National Council on Compensation Insurance (NCCI). In other states, the rates are approved by the state workers’ comp board. Getting a rate change in those states can be a long and cumbersome experience.
In either case, a carrier can find themselves in a different balance situation when rates change. Obviously this can affect the appetite for particular codes.
In a code/rate change situation, the powers that be (including the actuaries) of the carrier may be pushing for a change in underwriting standards.
Even though great strides have been made to limit how much lawyers can charge in representing an injured employee (including some precedent setting court cases) the expense of legal fees have continued to spiral upwards. Naturally, this can have an effect on underwriting standards.
One particular effect, known in the industry as the “TV effect”, is the attraction of certain kinds of accidents, incidents and injuries to the media (such as anything aviation related, for example), that is causing many carriers to shy away from those lines of employment. The belief is that high profile accidents and injuries attract the media (seeking ratings) which then attract lawyers (seeking improved public awareness of their services), and therefore those relatively safe (from an incidence and occurrence standpoint) codes become classed as high risk, due to the increased likelihood of expensive legal fees.
This can be directly related to the above paragraph but there are also situations where certain governmental type institutions will become ineligible to certain carriers. Municipalities, for example, have an unusually high percentage of suspected fraudulent claims. In particular, in the last few decades, there is an alarming trend to treat the workers’ comp insurance as “100% health coverage”, simply by claiming the accident occurred at work. Since an increased experience mod does not directly impact municipal officials (it’s not their money, they just pass the expense on to tax payers) the incentive to reduce fraudulent claims is removed. Legislation has been added to address this but it is self defeating, as after all, who enforces it but the government officials? A dilemma to say the least.
By far the biggest factor in underwriting guidelines is available surplus capital. All states require a carrier to carry a certain amount of surplus capital to offset catastrophic losses. If surplus is low, underwriters will be directed tighten up the risk window until more surplus can be found. On the other hand, when there is adequate surplus, carriers will be more likely to expand the riskier parts of their balanced portfolio.
These are just six reasons a carrier can change underwriting standards. If there are any we have missed, please use the contact form below to help us improve this article.
Wouldn’t it be great if employers could make all their employee problems go away? Make them “Somebody Else’s Problem”?
We believe that when the Employee Leasing industry chose “PEO” as their new, politically correct moniker, they chose the wrong letters. We think they should call them Employer SEP’s – where the Employee Problems become Somebody Else’s Problems. When an employer and a PEO form a business partnership, defined by the Client Service Agreement (CSA), many of the risks and responsibilities are transferred (in whole or in part) to the PEO and are no longer the employer’s headache.
Will Tenney talks about the choice of the letters “PEO”
Some of the headaches that can be shifted or at least alleviated include:
Since the employees are now employees of the PEO for tax purposes, and registered on the PEO’s FEIN, IRS payroll tax audits are not as much of a threat anymore. In most cases the client isn’t even involved. The PEO is audited, shows their records and it’s all over. In rare cases, a PEO might have to produce information supplied by the client, but this happens so seldom you might call it a Payroll Unicorn.
The PEO will be the employer of record, so they will be responsible for paying all workers’ comp premiums, and involved in negotiating the claims. In most states, the experience modifier will stay with the PEO, and the client will not be adversely affected in the future by past claims. In addition, the PEO has safety expertise, training and written programs to put in place to reduce the frequency and severity of claims.
Similar to workers’ comp, this becomes the responsibility (and liability) of the PEO, who is the employer of record. The State Unemployment Tax Act rate (SUTA rate) of the PEO is the SUTA rate that gets affected (in most states. There are some exceptions) and the client can maintain a clean record. In addition, the PEOs are much more experienced at handling and negotiating claims and experience has shown they are much more effective at removing false claims.
Again, since the PEO is the employer of record, some or all of the liability shifts to the PEO in these cases. This could include:
… to name but a few.
If you would like to make some of your employer problems become Somebody Else’s Problem, please feel free to use the contact form below, or call us at 407-490-2468
More and more states are legalizing prescription cannabis (for medical use.) This has got people to thinking about how this can affect workers’ comp “Drug Free Workplace” programs.
Tuesday November 4th marks a landmark day in Florida as (by early polls) this amendment shows signs of passing by an overwhelming margin.
PEO Pros would like your input on the situation. Please use the contact form at the bottom of this post to give us your opinion, feedback, etc.
We found one very interesting article published by Mountain Land Rehabilitation, (excerpts shown below).
Can we continue to have a drug-free work place policy?
• Absolutely. In fact, some states specifically permit you to do so.
If an employee is using medical marijuana, is he/she responsible for notifying the employer he/she is using medical marijuana?
• No. (PEO Pros thinks that this will be changed in Florida, as use of medical marijuana will probably be proscribed in sensitive job capacities, such as driving, operating heavy machinery, or other critical positions.)
Does federal law trump state law?
• Yes, in most cases. However that is a continuing issue of debate.
Can we take adverse action against an employee who is legally using marijuana?
• Yes, with some state-specific exceptions.
How will this affect the Department of Transportation (DOT) Drug Testing program?
• It won’t at all. The DOT has issued a statement noting that there will be no impact to federal programs.
What happens if an employee who has a prescription for medicinal marijuana has an accident at work?
• This will depend on the specific state, along with the details within your workplace policy. Marijuana cannot be prescribed (with very limited exceptions). The use of marijuana can only be recommended by doctors. You may also be able to deny Workers’ Compensation benefits in states that allow you to do so.
Will Workers’ Compensation insurance cover the injury or will that be an exclusion due to the employee being under the influence? If not covered, will the employee have a legal claim due to his usage being tied to a medical need?
• So far nothing has changed in the Workers’ Compensation world with regards to marijuana use. Some states have specified that insurance does not have to cover medical marijuana.
Can any physician prescribe medical marijuana for any medical condition or are prescribers and conditions limited?
• Medical marijuana cannot be prescribed in any state (with one exception used in very limited instances). The use of marijuana can only be recommended in such states that allow for medicinal use. Each state law outlines who is able to make the recommendation and under what qualifying conditions.
We have staff in multiple states. What is the best way to standardize policies across the board?
• Due to the way state laws differ and are ever changing, you simply can’t standardize a policy across the board.
What if an employee lives in a state where marijuana is legal, but works in a state where it is not?
• Typically employers have the right to include the screening for marijuana in their drug-free workplace policy, but this can vary by state law. In general, employers are not required to impose legal marijuana standards in states where the personal use of marijuana is illegal.
Will a candidate’s state-issued marijuana drug card be proof enough that he can legally use the drug?
• This will depend on the criteria in each state. The recommendation card is only the result of the individual qualifying under state criteria.
How long does marijuana stay in your system?
• This will depend on many different factors, including but certainly not limited to: the frequency of use; potency of substance; method of ingestion; personal metabolism; and the method used for screening. The recent use of marijuana can be best detected via oral fluid (approximately 1-12 hour detection time window). Other screening methods include urine (approximately 2-30 day detection time window) and hair follicle (approximately 2-90 day detection time window).
How will legal marijuana use by employees impact our insurance rates?
• In most states, you cannot have insurance pay for marijuana. However, that doesn’t address the other health-related impacts that may or may not affect health insurance rates
Please give us your comments below.
What can possibly go wrong with a small business?
Why would a small business need a professional HR partner?
Isn’t that a waste of time and money?
No one wants to fine us do they?
Our lead agent, John Will Tenney, appears below in a candid video discussing this situation:
Business owners, if you’ve ever asked yourselves these or similar questions, consider the recent judgment handed down in Georgia where a business was fined 1.7 million dollars for I-9 violations. That’s right, $1,700,000. If that’s not a significant amount of money to you, there is no reason for you to keep reading.
The Employment Eligibility Verification Form I-9 is a U.S. Citizenship and Immigration Services (USCIS) form. It is used by an employer to verify an employee’s identity and to establish that the worker is eligible to accept employment in the United States. (*1)
The form requires documents that establish both identity and employment authorization. The USCIS defines these documents in three “columns” on the form: A, B and C.
Column A are documents that establish both, and if one of these can be documented, there is no need to go to the other two columns. Examples of a column A document are:
Column B are documents that establish identity only and include:
Acceptable Column B Documents for persons under age 18 who are unable to present a document listed above:
If a Column B document is presented, a Column C document must also be provided to establish authorization to work in the USA.
Examples of Column C documents are:
Are your I-9s filled out properly? Could you handle a USCIC (formerly the INS) audit today?
If you’ve though about making this “Somebody Else’s Problem” perhaps you should contact us and let us find a Professional HR Partner, a PEO, to take this problem away from you. Please use the form at the bottom of this screen to contact us.
References:
(*1) Wikipedia
(*2) USCIS Website List A Documents
(*3) USCIS Website
(*4) USCIS Website List C Documents
Can making a mistake in hiring or firing an employee cost you money? Your business? Your personal possessions?
What do you think in this litigious society?
You may be expecting an insurance agency to recommend getting Employment Practices Liability Insurance (EPLI) and it’s not a bad idea, but how about avoiding the need for it as much as possible in the first place?
Is it possible to know the right way to do everything with employees? Possible, but easy? No. It would certainly require staying on top of all the latest laws, practices and codes. Sounds like a lot of research to us.
Wouldn’t it be easier to have it be Somebody Else’s Problem?
Entering in to PEO relationship may be an easier (and safer) solution. After all, it is their job to handle all the employee issues related to employment. In most cases their EPLI policy offers you, the employer, some coverage as well.
Here is a brief story from one of our clients:
“A few years ago we had an employee who was not performing satisfactorily. We didn’t know what to do. She was very well liked and a personal friend of ours. We tried to talk to her but she told us what ‘we wanted to hear’ and still failed to do her job satisfactorily.
We decided to call our PEO. After a very relaxing call we asked ourselves, ‘Why didn’t we do this before?’ After all, they are professionals aren’t they?
They handled it very well. They called our employee and asked if she knew what her job duties were. She listed them fairly accurately. They asked her if she could complete those tasks in the next two weeks. She said yes. They scheduled a phone meeting at the end of the two weeks. They went down the list with her and asked her if she had completed the tasks. Not surprisingly, she hadn’t completed more than a couple. They asked her ‘What should we do?’ She said ‘I guess I shouldn’t be at this job’ and they offered her a chance to resign rather than be terminated for cause. She took it.
When she handed in her resignation to us she told us that the PEO did a great job and she apologized for wasting our time. We took her out for a farewell lunch and she told us she already had a new position lined up. In fact, she entered a new career that suits her better and we are still friends. FOrgive us for stealing someone else’s tag line but:
‘That was easy’
Thanks to PEO Pros for putting us with such a Professional Employer Organization.”
If you want to have less stress and a more comfortable relationship with your employees, consider asking us to match you with the right PEO.
At PEO Pros, we are your professional PEO matchmakers. Use the contact form below for more information.