Recently the topic of Work Comp insurance through a payroll or employee leasing company has come up with some of our insureds, so we thought this to be a good topic for FYI Friday. 😊
We understand that using a payroll company or a PEO (Professional Employer Organization) and often referred to as employee leasing for workers comp may seem like a good idea, but there are various reasons why we advise to have your own coverage.
Some of the cons include, but are not limited to: loss of control over HR processes, limited access to employee data, increased cost and the possibility of reduced flexibility in decision-making due to relying on a third-party to handle HR functions.
A policy through a PEO is NOT your policy and your history is not accounted for because your history becomes the history of the PEO, not yours.
With your own policy and good claims experience, you can be earning Experience MODS (discounts) which are applied to the premium. (see below for some details)
In addition, if you were to add an employee on a Friday at 3pm and they were to start working, but have not been “vetted” and approved by the PEO and was injured – they would not be covered.
With your own policy when you hire an employee, they are automatically part of your policy IMMEDIATELY.
Bottom line, you have no control and the cost is often higher due to the included administrative costs and other factors when using a payroll company for work comp insurance.
We have learned that in many cases, the insured unknowingly signs an Agent of Record letter included in the DocuSign packets during onboarding with a PEO that are digitally executed giving them the authority to control your work comp. This is an incredibly sneaky practice!
Let’s at least look at giving you a quote – protecting you, your company and your employees. To do so, please provide me with a copy of the paperwork you have from the payroll company with the employee list, job description and payroll per employee. A copy of your complete payroll packet, including detail for the last payroll period of 2024 and the packet for the most recent period this year will allow us to do an in-depth analysis for you.
They should also be able to provide you with their version of a “loss run” report (a detailed listing of your claims – if any). A good claims history report will serve to attract carriers interested in offering you terms of your own.
No harm in seeing what we can offer! Plus, it will save time when needing a COI to have all your insurance with East Coast Insurors. One call does it all!
For those who have Workers Comp insurance directly through a Carrier, but not managed by East Coast Insurors…. Please give us a shot at moving your policy to our Agency. This will surely speed up the process when you need certificates of insurance.
*An experience modification (aka MOD) is an adjustment of an employer’s premium for worker’s compensation coverage based on the losses the insurer has experienced.
Insurance companies translate the MOD into a number, or an Experience Modification Factor.
This number is based on your company’s historical cost of injuries and future risk chances.
A company’s Mod is then compared to the average losses of other employers in your state in the same industry.