If you're in a joint employer relationship or are an employee of such a relationship, there are some specific differences as it pertains to workers' compensation insurance that you need to be aware of. Knowing how it could affect you and your insurance policy is just plain good sense.
An independent insurance agent is another excellent resource when it comes to a joint employer relationship and workers' compensation. They have the knowledge and licensing to back up their advice and are prepared for your questions. So ask on.
What Is Workers' Compensation Insurance?
Workers' compensation insurance is a policy taken out by the employer and provides coverage for medical expenses arising from an at-work injury or illness. This policy will also pay for the partial wages of the injured employee or worker.
Don't be fooled, this policy is just as much for you as it is for your employees. it saves you some well-deserved funds that you no longer have to pay when you have a workers' compensation policy in place. Medical expenses from a work-related injury could put you in the poor house if serious enough, so it's best to let the professionals foot the bill.
What Is a Joint Employer?
Now for the hard stuff. When it comes to a joint employer relationship, it normally suggests that you as the employer have joined forces with what the industry refers to as a professional employer organization aka a PEO. This PEO and you are co-owners. They come on board to help your business with administrative tasks such as:
- Payroll processing
- Human resources
- Employee training
- Employee management
- Employee hiring and termination
- And even workers' compensation insurance
Essentially you and your PEO are joint employers. A PEO will take on the responsibilities of the above, and you will relinquish some of your rights as the business owner in order for the PEO to take on the responsibilities you may not want to deal with. As with anything, there is a catch — your employees are no longer your own as long as you remain with a PEO joint employer model.
They are leasing your employees back to you which makes your control factor pretty much zero until you get out of the PEO. Most PEOs lock you in with lengthy contracts that are pretty unbreakable without a large price tag attached to get out of them.
How Does Being a Joint Employer Affect Your Workers' Compensation?
Being a joint employer can affect your workers' compensation insurance in a number of ways, but the most weighing factor is that your employees aren't actually considered your employees any longer. Instead, you have passed that responsibility of hiring and firing and training and all the other items that go into having employees off to the joint or co-employer usually in the form of a PEO.
Remember when leased employees were mentioned? Well, that's what they are — leased back to you to help run your business. Think of it like leasing a car. You drive it, you eat in it, you at times live in it, but at the end of the day you have to give the control back to the dealership because they technically own that vehicle.
And because you have given up control of your employees to the co-employer, your workers' compensation carrier may not be able to insure you. There are a lot of PEOs that will offer a workers' compensation market where they pool all the other co-employers together to get cheaper insurance rates. The fees that they may charge on top of getting you the lower workers' compensation rate usually outweigh the discount.
Even if you are a joint employer, you can at times still have the option of obtaining your own workers' compensation insurance through your trusted independent insurance agent. Before signing any joint employer paperwork on the dotted line, speaking with your independent insurance agent about the pros and cons of both sides would only be beneficial to your business success.
Workers' Compensation Costs When You're a Joint Employer
If you're already in a joint employer relationship, don't panic. There are still some good options, and there's always a way to make a change. Now it is true that usually your workers' compensation rates are lower with a PEO joint employer type model because the workers' compensation insurance that a PEO offers is pooled with a larger group of co-employers, and the insurance company cuts them a deal because of the volume of clientele.
However, the fees and percentage of gross annual payroll requirements they tack on almost always outweigh the discount. Now not all joint employer relationships are the same, and not all of them require that you obtain workers' compensation insurance through them, and not all of them charge astronomical fees. But being alert in your research is always a good idea before any final decision is made.
If you are already with a PEO that requires you to use their workers' compensation insurance, chat with your independent insurance agent on some alternative coverage options. There is always another option.
Benefits of an Independent Insurance Agent
An independent insurance agent can help you navigate the world of joint employer relationships, going over the pros and cons of either option and advising in a manner that best benefits you. After all, they are working for you. They have a multitude of different options when it comes to workers' compensation insurance and can aid in lighting the way to proper protection.
Not to mention they love a good challenge. So if you find yourself currently in a joint employer or PEO relationship and need some solid advice, then an independent insurance agent is a good start.