FAQ: Can a PEO Reduce Your Small Business Liability?
Part of running a business – a significant part – is protecting yourself from risk. Risk lurks around every corner in the form of safety issues, lawsuits, workers’ compensation claims, unemployment claims, compliance, and tax regulations. If you fail to dot an “i” or cross a “t,” you’ll be slammed with fines or legal procedures.
Small businesses with fewer than twenty employees pay 36% more to comply with federal regulations than larger businesses do for things like environmental compliance and tax compliance, according to the U.S. Small Business Administration.
And not only are small businesses paying more, but they also aren’t prepared for problems. In the United States, three out of four businesses have less insurance than they should. That means if an employee files a workers’ compensation claim or someone sues the business, there’s not enough protection to cover expenses.
Liability is an expensive risk that contributes to almost half of small businesses closing their doors within five years. But working with a PEO can stop the domino effect.
Co-Employment: How a PEO Reduces Your Liability
Working with a PEO isn’t just about handing off your least favorite HR tasks to someone else. It’s about finding a partner who is committed to your success. That’s why choosing the right PEO is so important.
A PEO partnership is based on co-employment. As a co-employer, the PEO will come alongside you and help you shoulder the burden of risk and liability. You can trust them because they have skin in the game. If compliance guidelines aren’t met, you won’t face repercussions alone. If a workers’ compensation claim is filed, the PEO will have your back by providing insurance coverage and walking with you through the claims process.
And because the PEO serves as co-employer for hundreds of other companies as well, they can bundle all of those employees together and get big business benefits for you without the huge costs you would face on your own.
But How Exactly Can a PEO Help You Manage Risk?
Co-employment protects you from many of the prohibitive costs and risks of running a business. Here are some of the ways a PEO can reduce your liability and save you money:
- Employee Insurance Rates– In most cases you can get better insurance through the PEO’s group plan. There may be certain instances where you can get better rates on your own, but for most small businesses, the group plan is a good bet. Some PEOs offer insurance brokerage services in addition to or instead of a group plan. Either way, the goal is to find the best possible insurance rate while still offering excellent coverage to your employees.
- Workers’ Compensation– Again, most companies will be able to get better rates through the PEO than they could on their own. The added benefit of going through a PEO is that they will also help you manage the claim and work toward a resolution. This might include safety reviews, safety training, and helping injured employees return to work quickly.
- EPLI – General liability insurance and workers’ compensation do not cover employment related claims such as EEOC violations or harassment. EPLI steps in to cover those claims and protect you from steep legal fees. As with other kinds of insurance, PEOs can often get lower rates for EPLI than you would otherwise qualify for.
- Tax Compliance– Small business owners spend, on average, at least $12,000 and 80 hours every year to stay compliant with state and federal regulations. It’s no surprise that the federal tax code eats up the lion’s share of that time and money investment. When you work with a PEO, you can take back those hours, reduce your risk of non-compliance, and trust that your taxes are accurate and on time, every time.
- Legal Assistance– Some PEOs provide legal counsel and assistance to their clients, either as a standard offering or as a separate add-on service. At Engage PEO, for example, all HR consultants are employment lawyers. This gives them the ability to provide detailed legal advice to clients and provides an added layer of risk protection.
Back to our original question: Can a PEO reduce your liability? Absolutely yes. Partnering with a PEO not only protects you from many of the risks of business ownership, but also frees you up to focus on running your business rather than getting buried in paperwork.
This protection, along with reduced costs and freedom from administrative burden, is why more than 150,000 small and midsize businesses have made the decision to work with a PEO. It's the next step in managing growth, staying compliant, and building the business you've always dreamed of.
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