Hire a PEO! Sounds simple, but here is a good article that outlines how PEO’s are able to keep rates low for their clientele.
Just got off the phone with a small business owner that is facing a $2,000 fine for non-compliance for some labor law paperwork they had no idea that they were responsible for. Pretty hefty stuff for a 5 man company, right?
Just another reason that small businesses should consider HR outsourcing models like PEO. Imagine having a staff of 50 employees, but no employer liability. Not to mention the savings in a major medical health plan, workers comp and other benefits.
Good article this week in NJbiz.com, here’s the link.
We have seen it both ways. Company’s cutting jobs and/or limiting hours of employees, however, more companies are now looking at PEO as a way to save a big amount of money on labor costs. PEO allow businesses of all sizes to cut down in their labor costs by downsizing a department, human resources, that is a non-revenue generating cost center within the business.
Not too mention that PEO allows also for companies to save thousands annually in health insurance premiums and workers comp premiums.
Just got off the phone with a client. Seems that some big name providers like to put together a quote for services that they have no intention of writing.
For example…a PEO will tell a prospect everything they want to hear…provide a “contingent” quote, then when the client has signed the client service agreement, put down their deposit and are a couple of days from calling in their first payroll, the provider’s risk management department will call the client and tell them they cannot write one or more of the proposed workers comp codes.
This happens more often than not. How do you protect yourself from this egregious business tactic? Insist on a non-contingent quote for services. If the provider hedges, for whatever reason, it likely means his workers comp coverage cannot take on your risk. Be aware, some of the big name PEO’s do this all the time to block business from going to smaller PEO’s that can write that business.
Just got off the phone with a client that we set up with a PEO in the midwest. They could not be happier with the safety program that was implemented.
They have been with the PEO for a little over a year now and estimate that their 37-man company has saved them more than $20,000 in the past year in comp premiums. In addition, due the to safety plan that was implemented, they will likely save another $25,000 – $30,000 in the coming 12 months.
Moving to an HR outsourcing company, particularly a PEO (professional employer organization) can have tremendous benefits when dealing with workers compensation insurance as it pertains to State-sponsored funds. One major state-sponsored fund, the California State Fund, will be seeing a large increase in rates in the coming months. There is a great opportunity for all businesses to reevaluate that relationship to see if there is a better way of doing business.
How can PEO’s help these businesses? By getting you out of the fund entirely and partnering with the PEO and placing your risk (employees) on their books.
From our experience we have seen discounts on workers comp by as much as 50 percent. In addition, the comp coverage becomes a pay-as-you-go solution, freeing up your cash flow.
I just completed a conference call with a manufacturing company with more than 400 employees. The savings from the PEO on the workers comp and benefits pay for the hr services…payroll, benefits admin, hr consulting, compliance.
I am amazed sometimes at why more companies, especially those with high mod’s (modifier rating) do not explore this opportunity for their companies.
My calculation, and this is hard dollar savings, is more than $300,000 annually. That is more than $700 per employee per year. Every year. That does not include the savings of having a separate 401k and other benefits.
Generally speaking, PEO, or other HR outsourcing solution, can save their clients upwards of 10 to 25% on their current workers compensation insurance.
How can they do that? By better managing the risk management and billing process over a larger group. Again, this is basic economies of scale. If you are a 25 man manufacturing company, doesn’t it stand to reason that you would be better served piggy-backing on a larger company’s insurance program as they have the capacity to manage claims and cut costs?
In addition, most PEO’s, offer pay-as-you-go workers compensation insurance. So the “big deposit” and/or make-up payments at the end of your insurance year are no longer a factor. Giving smaller businesses a more flexible cash flow.