Questions on Professional Employer Organizations
A new “old trend” in Workers Compensation. Professional Employer Organizations (PEO’s) is 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’s owners.
PEO’s are really a twist on a temporary agency. Most employers seem to think that PEO’s only provide Workers Comp services. The PEO’s provide almost all and sometimes more benefits than their original employer. The employees of a company that uses a PEO are really no longer employees of that employer. They are employees of the PEO. What PEO’s 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 is able to 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 PEO’s more closely. There are two states that used to have less than two pages of regulations on PEO’s, but now each have 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? PEO’s 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 really 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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