Temp Staffing: Workers Compensation Misclassification
Workers compensation for staffing companies is no easy task to manage. Most staffing companies do not have a few classifications as most industries do. They can have dozens of different classifications depending on the types of clients and industries they serve. We recently brought on a new staffing company that has been with a PEO for a little over a year. The PEO had their workers comp severely misclassified. Just by reviewing each of their client's operations and reclassifying the workers comp, we were able to save them over $50K in premium a year! This sort of scenario is much more likely to happen under a PEO arrangement since traditional policies are audited and reviewed annually. Traditional policy audits can be good or bad depending on how it shakes out with the auditor and carrier. There is far more room for discrepancy within a PEO arrangement since there isn't technically a premium audit each policy year. The misclassification was very likely unintentional. However, it still happened. In this case, it was to the detriment of the client company significantly overpaying their premium. I suppose this post should just be a warning that some (not all) PEOs do not do an adequate job of reviewing their client's operations and making sure they are properly classified. I don't say this to cause concern about using a PEO. In fact, quite the opposite. The benefits and value proposition a PEO brings with a pay as you go policy, claims administration, payroll and HR support, and not to mention, significant cost savings, greatly outweighs any perceived negatives. I say this to emphasize the importance and value of using a knowledgeable PEO broker and consultant that not only knows how to navigate the PEO space, but is also proficient on the insurance and underwriting side as well. Classification review and audits are something that Reliance Brokers does for all of our staffing clients on an annual basis and proactively as they are writing new requisition contracts. We have identified hundreds of thousands in premium savings for our clients just by simply doing some due diligence. Our clients and insurance agents know that we have their best interest in mind and will put in the work to maintain their loyalty. With this recent new client, it only took me an hour or so to do a little research and structure them the right way. This is something their previous PEO could have (and should have) done which would have saved the client a lot of money and kept them on for years. Just some food for thought... If you are a staffing company or you are an agent with a staffing client that is currently with a PEO and have not done a thorough review of your workers compensation classifications lately, it is certainly time to do so. Your company could be paying tens of thousands in additional premium every year. Reliance Brokers would love to assist you in a full review of your workers compensation.
If you company is considered high risk, has a high experience MOD, never had workers comp coverage, or has a lapse in coverage... Reliance Brokers can help! We specialize in high risk workers compensation and can typically save our clients 20%-40% compared to State Fund. Get in touch today and let us help!