Workers' compensation is one of the two reasons small employers use a professional employer organisation, and it is the one least well explained at the demo. Under most arrangements your staff are covered by the provider's policy rather than your own, and that has consequences at entry, during the relationship and at exit.
Whose policy covers the work
In a typical arrangement the provider's workers' compensation policy covers the worksite employees, and the premium is passed through to you as part of the invoice, usually as a rate per hundred dollars of payroll by job classification. For an employer in a trade with difficult classifications, or one with a poor claims history, access to a large provider's programme can be the whole value of the deal. For a low-risk office employer it is often worth less than the pitch implies.
Classification is where the money is
The rate depends on how your roles are classified, and misclassification is the most common expensive error in this part of the arrangement. Ask which classification codes the provider will apply to each role and get them in writing before you sign, because a single wrong code on your largest group of employees costs more than any negotiation on the administrative fee will save.
What happens when you leave
This is the question to ask first, not last. Ask what happens to your own experience rating while you are in the arrangement and how it is treated when you go, what run-off cover applies to claims from that period, and whether you can obtain a loss history to take to a new insurer. Employers who never ask discover the answer at renewal, when they are least able to do anything about it.
Questions people ask about peo workers comp insurance
Does a PEO provide workers' compensation?
In most arrangements yes: worksite employees are covered under the provider's policy and the premium is passed through in your invoice, typically as a rate per hundred dollars of payroll by classification.
What happens to my experience rating with a PEO?
Treatment varies and it is worth asking directly, both for the period inside the arrangement and for what you can take with you. Ask whether you can obtain a loss history when you leave, because a new insurer will want one.
Can I keep my own workers' comp policy?
Sometimes, and some providers will accommodate it. Ask early, because the provider's programme is often part of how the overall price is built, and keeping your own can change the fee.