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PEO workers' comp solutions are a strategic decision for small to mid-sized businesses keen on optimizing their approach to employee protection in the aftermath of workplace incidents. One of the biggest advantages? Access to pay as you go workers' comp — a flexible billing option that improves cash flow by tying premium payments directly to each payroll run.
As you contemplate making the shift to a workers' comp PEO, understanding the tangible benefits becomes paramount.
Let’s take a look at workers' compensation requirements, where to get coverage, and the top seven reasons why a PEO may provide the best workers' comp insurance for small businesses.
Smart employers take steps to protect employees from job-related injuries by providing a safe and healthy work environment. Still, workplace accidents and illnesses happen — and when they do, workers’ comp insurance steps in to cover medical expenses, lost income, and disability benefits for the injured employee.
This type of workers' compensation coverage also helps employers avoid significant financial losses, which is critical when the average workers’ comp insurance cost is more than $41,000 per claim.
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Most states, including Kansas and Missouri, require all but the tiniest of companies to carry workers’ compensation insurance. Businesses that fail to do so may face fines and penalties.
Because the requirements for small business workers' comp insurance vary from state to state and can be complex, it's crucial for small business owners to check with their state's workers' compensation board or a worker's comp insurance expert, like a PEO, to understand the specific rules and obligations for their location and industry.
Even if your business isn't legally required to carry coverage, partnering with a PEO for workers’ comp insurance can still be a smart move — providing protection from liability and helping you stay ahead of future compliance needs.
RELATED: Workers' Compensation Laws in Kansas and Missouri >>
Your first option for small business workers’ comp insurance may be to secure it from private insurance carriers who are licensed to do business in the state where your business is located. This is known as the voluntary market.
If a smaller business is unsuccessful in buying a market policy, it must buy coverage through the state’s assigned risk pool.
However, there are good reasons your small business might want to consider another option. PEO workers' comp insurance — available through a professional employer organization — can often provide better rates, less administrative hassle, and greater flexibility than traditional standalone policies.
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PEO’s workers’ comp insurance provides advantages over policies small companies might procure from other providers. Here's how:
One of the mainstays of a PEO's service model is its ability to provide a PEO workers' comp insurance master policy. Instead of multiple, individualized policies for each business, a master policy consolidates coverage under one umbrella.
This leads to uniformity, potentially broader coverage and often a simplification in administrative processes. It also translates into cost savings due to the pooling of many clients under one policy.
By placing its clients into one workers’ compensation program, the PEO has weightier negotiating power, often resulting in lower costs than a small business could get on its own.
One Axcet HR Solutions client puts it this way:
“Our company just skipped having workers’ comp insurance altogether due to the hassle and expense. Since all our employees work in an office, I convinced myself that someday I would get workers’ comp, but we’d be OK until then. I rationalized that we were a small fish and would ‘fly under the radar.’ What a foolish mindset!"
"One day, an Axcet sales rep sent me a proposal that handled all our HR responsibilities. The thought of finally having workers’ comp insurance – and all our other HR issues handled for me – was a godsend. But the kicker was that Axcet actually saved us money over what we were already spending. It was crazy – we got more and paid less!” - J.W, Small Business Owner in Olathe, Kansas
The annual renewal process is time-consuming and can be cumbersome and confusing for small business owners or their internal team members. It involves shopping around for different policies, comparing rates and coverage, and deciding which policy best fits the business’s needs.
By using PEO workers' comp insurance, small business owners can outsource this responsibility to a PEO, which handles all aspects of the annual renewal process. This eliminates the need for the business owner or their team members to spend time and effort on this task, freeing them up to focus on other aspects of the business.
The PEO also has the expertise and resources to find the best workers' comp insurance for small business in terms of rates and coverage options, which saves money in the long run.
RELATED: Simplifying Your Business Cuts Costs, Reduces Liability >>
Annual workers’ compensation insurance premiums may represent thousands or tens of thousands of dollars. Even for a fiscally sound small business, having to make a lump-sum annual premium payment, or even a down payment on the total before installment payments begin, can create a financial strain.
PEO workers' compensation programs can help alleviate this burden by eliminating large upfront premium payments. The PEO handles the payment of workers' compensation insurance premiums on behalf of its clients, allowing the business to spread out the cost over time.
This can help small businesses better manage their financial obligations and avoid any potential financial strain caused by the upfront payment of workers' comp insurance premiums.
RELATED: How to Research and Vet PEO Companies >>
Pay as you go workers' comp is one of the most compelling reasons small businesses choose to partner with a PEO. Traditional workers’ compensation insurance often requires businesses to estimate their payroll for the year and make large, upfront premium payments based on that guesswork. If payroll is under- or overestimated, a complicated audit process follows — and it may result in unexpected costs.
With a PEO’s pay-as-you-go workers’ comp insurance program, those challenges go away. Premiums are calculated and paid automatically with each payroll cycle based on actual payroll numbers — not projections.
This billing method provides several key advantages:
No large upfront payments
Improved cash flow and financial predictability
Reduced risk of audit adjustments
Accurate, real-time premium calculations
Administrative ease with automatic payroll integration
For small businesses, this is a game-changer. Instead of tying up capital in lump-sum premiums or worrying about year-end surprises, pay-as-you-go simplifies workers’ comp into a manageable, ongoing process.
If you’re searching for pay as you go workers comp that reduces hassle and aligns with your payroll process, a PEO may be the perfect solution.
With traditional workers’ compensation insurance, small businesses forecast expected annual payroll. Premium costs are based on those projections. The best-guess process has a wide margin for inaccuracy, and the reality won’t be known until an audit is conducted at the end of the year.
With traditional policies, the year-end audit requires a thorough accounting of the incurred payroll for each workers’ compensation class code. The painstaking audit process then often leads to additional premiums being owed or returned.
Because PEOs collect workers’ compensation charges based on the actual payroll processed during each pay period, no additional payments will be owed at the end of the policy period and no annual audit is required for PEO workers' comp insurance.
Beyond the policy advantages, perhaps the greatest benefit of participating in a PEO’s workers’ compensation program is gaining access to a dedicated team of experienced risk management professionals. A PEO’s team thoroughly understands the workers’ compensation insurance system and manages claims to reduce the numerous exposures associated with workplace injury.
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Traditional small business workers’ comp insurance policies do the bare minimum — covering claims, but offering little else. By contrast, PEO workers' comp insurance brings proactive risk management and compliance expertise that helps reduce claims, control workers' comp insurance costs, and create a safer workplace.
As a certified professional employer organization, Axcet HR Solutions provides a master PEO workers’ comp program and a highly experienced risk management team.
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