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How PEOs Reduce Workers’ Compensation Costs

Workers' Compensation written on notepad on desk

Your company deals with myriad expenses. One area often overlooked when company’s want to reduce costs is workers’ compensation insurance. Reducing workers’ comp premiums is a quick and effective way to reduce your company’s expenses. 

A key to lowering workers’ comp costs is to partner with a Michigan Professional Employer Organization (PEO). PEOs provide multiple ways for you to lower your company’s workers’ compensation premiums.


How are workers’ comp premiums calculated?

Calculating workers’ compensation premiums for your company can cause frustration and headaches. Here’s the formula: employee classification rate x employer payroll x experience modifier rate (EMR). Multiplying those three factors together gives you your workers’ comp premium. 

The employee classification rate is determined by the type of work your employees do. For example, if your employees sit at desks all day working on computers, your rate will be pennies per $100 of taxable wages. If your company is a construction or manufacturing company, however, your rate will be dollars per $100 of taxable wages. This difference results from construction being more dangerous than administrative work.

The EMR compares your business to others in your industry. This rate considers the age of your company, how many workers’ comp claims your business has received, and if those claims are minor or severe. The higher your EMR, the higher your workers’ comp premium. Each year, your EMR is re-calculated based on these changing factors.


How do PEOs lower premiums?

Reducing your workers’ comp premiums can help your company save money and keep your workers safe. Here are the ways a PEO can efficiently reduce your workers’ compensation premiums.

Join PEO’s Workers’ Comp Plan

When you partner with a PEO, you enter a co-employment relationship. This relationship enables your PEO to handle your company’s payroll and tax remittance. You do not give up any control over your day-to-day operations and personnel decisions. Co-employment also allows your PEO to add your company to the PEO’s existing workers’ comp plan, potentially lowering your premiums, especially if your business has a high EMR.

Safety Manuals

Part of reducing workers’ comp costs includes keeping your employees safe. You do that by making sure your safety manuals are up to date and include best-in-class safety practices. The best way to make sure your safety manuals are compliant and regularly updated is to outsource that activity to your PEO who has a team of experts working behind the scenes to keep your safety manuals updated.

Safety Training

Keeping your employees safe also requires safety training. This needs to happen not only when you hire a new employee but also at regular intervals. Conducting this training effectively and regularly will help to reduce the number of workplace accidents which will reduce your worker’s compensation insurance premiums. PEOs provide this training at no extra expense.

Workers’ Comp Administration

Dealing with workers’ comp claims is a pain and it is ripe for mistakes. There are many deadlines and reporting requirements. You do not have the time or energy to deal with these claims. When a worker suffers an injury, your PEO will handle the claim for you. They will also work with your workers’ comp provider to make sure no mistakes are made and all deadlines are met.

Return-to-Work Programs

After an employee suffers an injury on the job, your company needs to have a plan to bring them back to work. The longer your employee is out of work, the more your workers’ compensation coverage may pay to them. That raises your EMR. Getting your employee back to work quickly and safely will help reduce the amount of worker’s comp they receive, keeping your premiums down. Having a structured return-to-work program can make it easier and faster for your employees to return to work safely, reducing your overall workers’ comp costs. PEOs will help you set up a return-to-work program to reduce costs.


Find Your PEO Today

Working with a trusted PEO can give you the peace of mind you deserve that your workers’ comp claims are handled with precision. You also get the added benefit of having expert resources to lean on to help you reduce the frequency of workplace accidents.

The right PEO will not only improve the safety of your employees and ensure proper training, but it will also help your company save money by joining the PEO’s workers’ compensation plan. Besides that, joining a workers’ comp plan that already exists means you do not have the burden of up-front costs. The PEO has already paid the deposit when the plan started, saving you even more money.

Your company’s success depends on being profitable. One of the best ways to increase your profits is by reducing your workers’ comp costs through a PEO partnership.