Questions on Professional Employer Organizations
A new “old trend” in Workers Compensation. Professional Employer Organizations (PEOs) are another area we are questioned on when we talk or consult with employers. The main question we receive on them is about the recent investigations and convictions of some of the larger PEO owners.
PEOs are a twist on a temporary agency. Most employers seem to think that PEOs only provide Workers Comp services. The PEOs provide almost all and sometimes more benefits than their original employer. The employees of a company that uses a PEO are no longer employees of that employer. They are employees of the PEO. What PEOs give is a “buying power” as they consolidate all the employees of their client companies into one large company.
With Workers Comp insurance, the PEO can negotiate better rates than individual employers. They pass along some of the savings to their client employers. It is a win-win if all goes well.
The states’ Insurance Commissioners are starting to monitor PEOs more closely. Two states used to have less than two pages of regulations on PEOs, but now each has more than 24 pages of regulations.
The one area where employers need to look over their WC policies very closely is when and if the company ever decides to leave a PEO arrangement and go back to regular Workers Comp insurance. We have seen this often.
Should a company use a PEO? PEOs have been under a dark cloud as of late. A PEO may be good for a company with a high E-Mod or a quickly increasing E-Mod. I look at them the same as Captive arrangements. Are they a true type of Workers Comp insurance? Time will tell, but do not ignore this option. Make sure you have someone look over the PEO arrangement very closely before signing on, and MONITOR the PEO and the claims services you are receiving.
Next Up– Answering more Work Comp questions from our blog readers.
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