Every company faces risks. A key difference between successful and failed businesses is how risk is managed.
That’s why so many have chosen to outsource risk management services to a Professional Employer Organization (PEO). PEO help with risk management, starting with obtaining workers' comp from a PEO at better rates than you could get on your own.
A PEO is the most comprehensive form of Human Resources (HR) outsourcing available and compliments your employees by taking on HR tasks that are time-consuming and complex. This frees up your in-house team to focus on growing a thriving company culture and other HR functions that attract and retain top talent in your industry.
A PEO also enables cost savings on employee benefits and mandatory insurance coverage. When you join a PEO, you can access their workers' compensation coverage. Usually, the PEO's experience modifier rate is low, so it could lower your premiums if you have a history of claims against your company.
This is made possible through a co-employment agreement. As a co-employer, you maintain day-to-day control and management of the employees; it does not equate to losing control over staff or operations. The PEO, acting as the employer of record, only uses it to take on administrative responsibilities such as remitting payroll taxes, procuring benefits packages, and complying with employment laws. This is what is meant by saying that employer responsibilities are shared.
PEOs use their Federal Employer Identification Number (FEIN) for tax purposes and reporting employee wages, which helps streamline administrative processes and ensures compliance with tax obligations.
PEO risk management refers to HR services provided by a professional employer organization related to risk analysis and mitigation of identified risks. Because a PEO is the most comprehensive form of HR outsourcing, they are also the most comprehensive form of outsourcing risk management. Here are the top ways a PEO mitigates your company's risk.
Small and mid-sized business payroll processing is ripe for errors and mistakes. Too often, employees who don't specialize in payroll deal with payroll tax remittance. This creates the opportunity for multiple errors and fines for non-compliance with government regulations.
A PEO will process payroll on your behalf and calculate and remit your taxes for you. You are not at risk for filing employment taxes, late fees, or non-compliance fines associated with a missed filing. Instead, the PEO assumes those risks for you.
Small businesses owners often struggle to get affordable workers' comp program, especially in certain industries or if the company has had several claims. That's why partnering with a PEO can be just the solution you need.
A PEO gives you access to their WC plan at their experience modifier rate. They have already paid the deposit for the plan, so you simply pay-as-you-go monthly, most likely at a rate much lower than you would have been able to get on your own. That means a potential reduction of your workers' compensation insurance premiums.
Especially in certain industries, workplace safety and risk management are regulated, and OSHA compliance violations can be costly. A PEO will conduct a safety audit, looking at your company's injury record, your policies, and OSHA 300 logs to work with you to create and update improved safety policies. This can prevent accidents and injuries among employees.
PEOs staff industry experts who can identify new risks early on. They will take swift action to keep your workplace as safe as possible and can even administer drug-testing services if necessary.
Workers' comp claims can come unexpectedly and overwhelm in-house employees. These are typically too complex and time-consuming for small businesses. Untrained HR workers won't know how to review or challenge a claim that may not be valid.
A PEO does. PEOs staff claims experts who will review every claim on behalf of your company. They will challenge invalid claims and work to allow only valid claims through.
A PEO can minimize the chances of invalid unemployment claims by reviewing each claim and responding to every single one with documentation. Your PEO will also represent you at any disputed claim hearings.
Beyond that, your PEO will help you build and maintain accurate and compliant job descriptions. They'll also ensure you properly document the termination process to avoid unemployment claims as best as possible. This can minimize the impact of valid unemployment claims on your unemployment insurance rates.
Retirement plans are wonderful to help attract top talent, but they are a headache to administer. Many regulations must be followed, and even innocent mistakes can lead to costly fines and employee lawsuits.
Your PEO handles the retirement plan administration for you. They will also handle the annual audits and discrimination testing to ensure retirement plans are fairly distributed.
Employee lawsuits can quickly derail your organization. They can come from wrongful termination, discrimination claims, and other reasons. These are typically grounded in labor laws such as the Fair Labor Standards Act (FLSA).
Your PEO will train your managers to minimize the chances of a discrimination lawsuit. They will also help you avoid wrongful termination lawsuits through proper documentation procedures.
Employment laws and regulations are constantly changing. Keeping up with these laws is truly a full-time job.
Your PEO will staff compliance experts who do just that. They will monitor changes in employment laws at the federal, state, and local levels, managing any changes your company may need to make due to legal changes.
You need to focus on your business. Your HR team needs to focus on creating an engaging and attractive company culture. Outsourcing your HR needs to a PEO lets you do all that, plus gives you peace of mind that your business is properly managing risk and not facing any unnecessary legal or financial burdens.