Many staffing firms utilize professional employer organizations (PEOs) as a workers’ compensation solution. Staffing agencies face unique challenges when it comes to workers’ comp. The insurance market for such coverage is small and specialized. Find out whether a PEO could be a profitable solution for your business.
What is a PEO?
A PEO is a company through which you outsource specific employee management tasks such as workers’ compensation, payroll, and employee benefits. They are an outstanding opportunity for staffing firms that need workers’ compensation. They can typically entertain a more broad spectrum of labor needs than traditional workers’ comp. Certain PEOs specialize in in hard-to-insure business sectors such as heavy industry.
Employer of Record
Under a PEO, the PEO becomes the employer of record for the staffing agency’s temporary employees. The staffing agency retains all previous operational control such as hiring, firing, and training. Thus, from an operational perspective, very little changes. However, since the PEO is now the employer of record, the temps can be covered by the PEO’s workers’ compensation.
PEOs vary and may provide other services as well, only some of them being required. Be sure to understand the costs associated with each.
Payroll
Payroll must be run through the PEO. In other words, they cut the checks. This is a required service and can include federal and state reporting which can streamline a staffing firm’s operations while removing liability for noncompliance.
Administrative Fees
On top of workers’ compensation costs, PEOs charge an administrative fee for payroll and other required services. When reviewing a quote from a PEO, be sure you are including administrative fees in your comparisons. Even with admin fees added, PEOs can still cost the same or less than standard workers’ comp.
Pros and Cons
There are, of course, considerations. PEOs are a great solution for some, but not all.
Unemployment Tax
Your staffing firm pays unemployment tax based on the rate assigned to the PEO. Thus, if your firm has low turnover, you may pay more in this area. However, if you have high turnover, you could enjoy a savings.
Employee Benefits
PEOs can provide health insurance, dental, vision, 401k, and other common employee benefits. These are typically optional services and a staffing agency would pay only for those services they chose to utilize.
Employment Practices Liability
Since a PEO is the employer of record, many carry employment practices liability insurance that extends over their staffing agencies. Thus, if the agency were found liable due to discrimination, wrongful dismissal, sexual harassment, or similar acts, the PEO’s insurance would protect them.
Questions regarding temporary staffing agency insurance? Contact us. Not a client of ours? Let us earn your business! Each client is assigned a personal agent in our office, given their email address, and provided a phone number that rings right on their desk.
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