By Greg Arnold CEO of Jackhammer HR

Every few years, I refresh the discussion on PEO (employee leasing) as a workers compensation insurance product for contractors. In my 12 years as a PEO broker, I have seen the cycle of workers compensation rates trend from high to low, and now everyone will agree that rates are on their way back up again, and will be for the foreseeable future. No one gets hit harder than contractors when these rates go up.

Actuarial back studies show that small, family owned contractors generate few comp claims, on average, given the inherent loyalty of crews comprised of friends and family. The largest contractors trend low as well, because they tend to have formal safety programs and robust risk management. It is the mid-sized contractors that land in the cross hairs.

If you are a mid-sized contractor, then here are some red flags to watch for: overzealous pressure on production timetable to get your company to the next level, high employee turnover, risk management spread too thin, dicey subs. Mid-sized contractors often fall into the 3 to 10 million sales spectrum, often referred to as the 'growing pain' demographic. One of many examples of growing pains: rapid hiring. Rapid hiring, while not innately bad, can lead to less than desirable hires without proper screening, ie "predatory hires" who are looking to make a quick buck from litigating a sudden "back pain".

A general rule of thumb is to keep your claims at or below 30% of your total premium. This will keep your modifier at or trending down from a 1.0. A realistic objective is to trend your mod to a 0.8, which equals a 20% discount on workers compensation rates.

I advocate considering PEO as an option for not only lowering your comp rates, but also for providing you with risk management, payroll, and HR services in order to continue a downward mod trend. Moreover, a good tip is to save money in anticipation of work comp increases down the road; put the money into someplace relatively liquid, and if you manage your claims properly then the money will build into something substantial, which can be invested into a high deductible workers comp policy OR a high deductible PEO program, gaining you ultra-competitive rates.

PEOs are abundant. They are a zero deposit, no audit, pay-as-you-go solution. If you do choose to shop, I recommend that you research PEOs that are specifically construction friendly, rather than a one-size-fits-all PEO. Always request a sample workers comp certificate before entering into a relationship. Verify that cert. If you need AM Best A-rated coverage, or inordinately high limits, then it is wise to mention this up front to assure that the PEO can accommodate. There are thousands of PEOs, and hundreds of quality PEO brokers who can help you to obtain multiple quotes and programs. Expect highly competitive rates, and negotiate accordingly.

For More information, please Greg Arnold CEO Jackhammer HR, Consultant at (813) 541-3514 or gregoryarn@gmail.com