Employee Leasing Quotes : PEO Blog

Many times during the year when we connect an employer with an employee leasing company, the business owner will ask if they can continue to remain work comp exempt. The answer would be yes, (with some providers) if you want to continue to handle all the payroll administration on yourself separately from the rest of your employees.

Typically, this would seem to defeat the purpose of using the services but in some circumstances - it can make sense. For example, a small roofing company where the owner is working on roofs may see the hassles of performing all his payroll administrative tasks worth the costs of potentially thousands of dollars of work comp premium – just on himself.

On the other hand, if the employer is strictly in the office or out selling potential new work, the costs of workers’ compensation coverage would be so minimal that it wouldn’t be worth the frustrations of separating out their own payroll management.

The employee leasing or PEO service agreement, includes work comp coverage on every employee on the payroll.

For more questions regarding workers’ compensation or employee leasing questions, call us at 1-888-582-8388.

Amendments to the Texas PEO licensing statutes (HB 2249) were signed into in early June, providing more security for the thousands of Texas small businesses who outsource with employee leasing/PEO services.

Passage of the bill strengthens working capital requirements and requires PEOs to provide audited financial statements, which further protects small businesses engaged in a PEO arrangement.” Provisions of the new law become effective on September 1, 2009. PEOs have until the end of 2011 to comply with enhanced financial statement requirements.

This is a simplified and excellent article written by a work comp expert and friend of mine, James Moore, with J&L Risk Mgmt Consultants, Inc. (www.cutcompcosts.com):

How long does one bad year of claims affect a company’s Workers Comp insurance premiums? This is a question we receive very often.

The first thing to look at is the state laws and rules on how your E-Mod or X-Mod is calculated. That will have some bearing on the length of time. Most states calculate the E-Mod/X-Mod over a three year span. However, the three year span does not “kick-in” immediately the next year. What happens, for example in 2008 will not affect your insurance company premiums until the 2010 policy? Why?

Workers Comp is calculated on a delayed system. The E-Mod for a claim in 2008 will hit the E-Mod on the 2010, 2011, and 2012 policy years. Yes, you pay THREE times for a bad claims year. That is the way the Workers Compensation system is structured for losses.

Do you pay 1/3, 1/3, and then 1/3 of the bad claims year of 2008? NO You will pay more like 60%, 60%, and 60%. But wait, that does not add up to 100%. You can now see how a bad claims year can be very expensive.

The NCCI or State Rating system that is in place amplifies the amount that the Work Comp carrier reserves on the claims. Is it a fair system? It is the one we have in place. The best way to stay out of the system is with a safety program, making sure that you are being charged the proper premiums, and making sure that the reserves on your files are accurate.

The Florida Unemployment Compensation Trust Fund has been paying out more funds than it has been taking in, due to increased unemployment in Florida. As a result, effective January 1, 2010, employers must pay tax on the first $8,500 of wages per calendar year, rather than the first $7,000 of wages per calendar year.

The amount of wages subject to unemployment tax will remain at $8,500 through December 31, 2014. The taxable amount will return to the first $7,000 of wages effective January 1, 2015 - so they say?.

Employee Leasing/PEO Revenues & Operators

Ø The National Association of Professional Employer Organizations (NAPEO) estimates the PEO industry grew a very robust $5 billion in 2008, to $68 billion in gross revenues. (The industry defines gross revenues as the total of its clients’ payrolls and the fees PEOs charge them for taking on their human-resource activities.)

Ø About 700 PEOs are now operating in 50 states.

Employee Leasing/PEO Growth Trends

Ø A relatively youthful industry - only about 25 years old – PEO services continue to bring value to employers. Double digit growth rate over the last decade, coupled with high client retentions rates, supply ample evidence of an industry on the move.

Ø A US Department of Labor statistic predicts that by the year 2020 more than half of all Americans will be employed by an Employee Leasing/PEO company.

Employee Leasing/PEO Clients

Ø The average client of an employee leasing company is a small business with an average of 19 employees.

Ø PEOs service a broad range of clients from construction and manufacturing to medical and high-tech businesses.

The #1 Reason Why Business Owners Choose PEO Services?

Administrative Relief -Between 1980 and 2000, the number of labor laws and regulations grew by almost two thirds - Small Business Administration. Business owners currently spend up to 25% of their time on employment-related paperwork. These are tasks that add nothing to the bottom-line when the focus should be on income producing ideas. PEOs assume many of these burdensome responsibilities and help companies comply with these regulations – all for less than the employer can do on their own.