How workers’ compensation works when you use a PEO, the main policy arrangements, what affects your cost, what stays your responsibility and the questions to ask before signing.
Workers’ compensation insurance pays medical costs and part of lost wages for employees injured on the job, and in most cases limits employees’ ability to sue the employer over those injuries. Almost every state requires most employers to carry it, but rules on who must be covered, exemptions and how coverage is bought vary by state. Premiums are typically based on payroll in each job classification, rates for those classifications and an experience modification that reflects your claims history. Our workers’ compensation guide covers the fundamentals.
See how EZTime works for your industry, from time tracking to shift scheduling.
| Arrangement | How it works | Things to check |
|---|---|---|
| PEO master policy | Your employees are covered under the PEO’s policy | How your premium is calculated, what happens when you leave |
| Multiple coordinated policy | A separate policy for your business arranged through the PEO | Who owns the policy and the claims history |
| Client-retained policy | You keep your own policy; the PEO handles payroll and other HR | Coordination of payroll reports and audits |
| State fund or monopolistic state | Coverage comes from a state fund under state rules | Whether the PEO can include you at all |
Which arrangements are allowed depends on the state. A few states run monopolistic state funds where private carriers cannot write workers’ comp, and some states have specific PEO rules. Ask your PEO which arrangement applies in each state where you have employees.
Try our workers’ comp premium calculator for a rough estimate, and compare it with any PEO quote.
Workers’ comp premium follows payroll by class, so mixing classes is expensive. If an employee spends part of the week on office work and part on field work, some states allow payroll to be split between classes only when your records clearly show the hours in each. Without those records, the higher-rated class may apply to all of it. Tagging hours by job or activity, keeping approved timecards and documenting corrections helps at audit time. Accurate clock-in times also help when a claim depends on whether an injury happened during working hours.
Late injury reports are one of the most common and costly problems in any workers’ comp program. Delays can make claims harder to manage and, in some states, can lead to penalties. Agree with your PEO on exactly how to report an injury, who on your team is responsible and what information is needed: the employee, time, place, what happened, witnesses and any first aid given. Make sure shift leads on nights and weekends know the process too, and keep a simple incident form available on every site so nothing depends on finding the right person in the office.
When you leave, you will need new workers’ comp coverage effective the same day, with no gap. Plan this well before your termination date, ask the PEO for loss runs (claims history) and confirm in writing how open claims will be managed. Ask early, because getting quotes without your claims data is difficult.
A landscaping company with 25 employees joins a PEO, partly to get workers’ comp at a better rate. At the first premium audit, the carrier reclassifies several crew leads because records do not show how much of their time is supervisory office work versus field work. The company starts tagging hours by activity and keeps approved timecards. At the next audit, the documented split is accepted where state rules allow.
EZTime is not a PEO or an insurer. It helps you keep the records that workers’ comp depends on: clock-ins by mobile, kiosk or NFC with GPS stamps, hours tagged with job and client tracking, timecard corrections with an audit trail and reports in PDF and Excel. Teams also use digital forms for incident reports.
Many do, through a master policy or a coordinated policy, but it depends on the PEO and the state.
Sometimes, especially for small businesses, but not always. Compare quotes and how premium is calculated.
You are, because you control the worksite and direct the work. The PEO may offer safety resources.
You need new coverage with no gap. Ask for loss runs early and confirm how open claims are handled.
Some states allow payroll to be divided between classes if records clearly show hours in each. Check state rules.
Yes. Report promptly to the PEO and record injuries on OSHA logs where required.
With jobs and clients tagged in EZTime, you can compare what you quoted with the hours the work really took.