PEOs and Risk Management

What is risk management?

Risk management is the development of plans to anticipate and mitigate all kinds of potential adverse events in your business. These events could be as commonplace as an employee tripping over an exposed electrical cord and injuring themselves. They could also be as complex as your small business facing a lawsuit, such as a class-action suit for repeated wrongs against a large number of consumers.

Risk management covers all aspects of an organization, not just employee or consumer safety. For instance, you may need to manage IT-related or financial risks. Once you’ve identified your company’s risks, the risk management process entails finding ways to reduce their chances of happening and coming up with strategies for what to do if one of the issues does occur.

What is the importance of risk management?

Risk management is important because it sets your company up to handle virtually any challenge that might come its way. It both prepares your business to identify risks when they arise and establishes plans for addressing them. As a result, you’ll likely make better decisions when you’re under the stress that risks introduce.

Even if you can’t think of many risks to your business, risk management can be a conduit to growth. Since the process requires developing plans to address all kinds of possible matters, it prepares your business to handle all events that could hinder your company’s growth. With such preparation, your team can more easily solve problems and get back to growing the business.

Risk management has leadership ramifications, too. In times of crisis, employees often turn to supervisors and business owners for guidance, but without risk management structures in place, you all may be at a loss. How can you address a problem you never considered could arise? With proper risk management, you’ll rarely have to ask this question — your plans will be in place before the problem manifests.

What types of risks do PEOs manage?

As you can probably tell by now, risk management is as necessary as it is ambiguous. The sheer volume of unanswered questions that accompany risk management could even deter you from managing your risks in the first place. The good news is that you don’t need to do it alone — a professional employer organization can help.

The best PEO service providers, which typically handle many outsourced HR tasks on a business’s behalf, are experts in almost every imaginable small business risk. They use their expertise to manage risks such as the following for the businesses they partner with.

Workplace safety

PEO-driven risk management is perhaps most strongly associated with workplace safety. That’s because PEOs can perform the below services, among others.

• Obtain workers’ compensation insurance on your behalf. In almost every state, workers’ compensation isn’t just a good idea — it’s a legal requirement. That doesn’t always make obtaining it easy, though, so PEOs streamline this crucial business task. In fact, workers’ comp is among the benefits PEO vendors are best known for bringing to the table.
• Oversee workers’ comp claim investigations, management and representation. Even the best workers’ compensation insurance can’t actually prevent workplace accidents. Fortunately, PEOs can help you minimize the financial loss associated with workers’ comp when accidents do occur. Your PEO vendor should investigate all employee claims and represent you in related conversations with the employee.
• Implement safety programs. When workers’ compensation can’t quite prevent accidents, safety programs step in. Risk management often involves your PEO partner working alongside you or your HR team to devise firm workplace safety policies and ensure your business facilities or offices are safe. It may even include an audit of your premises to ensure OSHA compliance. With both these pieces in place, your employees’ risk of workplace injuries is far lower.
• Distribute safety documents. PEO vendors know exactly which documents you should display in your place of business to comply with OSHA. They can also provide workplace safety manuals to both you and your employees to help you all identify and resolve possible safety issues.

Drug testing

As HR companies, PEOs often have a drug testing infrastructure. Although employee drug testing is increasingly a murky legal area, PEO partners thoroughly understand what types of testing are and aren’t legal, given their deep knowledge of business risks. Legally compliant testing can reduce the chances of employees working under the influence and making costly mistakes.

Hiring and firing

Hiring an employee who turns out to be a poor fit can cost your business hundreds of thousands of dollars. PEOs can help you manage this risk. Your PEO vendor can advise you on what to include in your job listings to weed out bad hires. The company can also guide your firing processes to minimize your unemployment tax obligations and the chances of wrongful termination lawsuits.

Worksite security

Some PEOs can walk you through security equipment implementation to reduce the chances your employees will steal from you or use company property for personal needs. This aspect of risk management may involve monitoring areas of concern or installing access management technology. It may also involve cybersecurity measures, though this risk management feature is less common with PEO partners. [See our guide to cyberattacks and cybersecurity.]

What are the benefits of using a PEO to help with risk management?

When you hire a PEO, you’ll have a trusted partner to help you shoulder the burden of unexpected liabilities. Below, we’ve listed a few of the top benefits of using a PEO to help manage your organization’s risks.

• Cost savings: Although you’ll pay your PEO vendor for its work, its risk management services can prevent occurrences that cost you large sums of money to remedy. The upfront cost of hiring a PEO may be less than what you’d spend out of pocket to address a catastrophe.
• Better workers’ compensation prices: PEOs work with their clients under a co-employment agreement, meaning that all employees of a PEO’s client businesses are legally the PEO’s employees. As a result, insurers view PEOs as large companies, which gives them greater buying power. This often results in lower workers’ compensation insurance premiums, which your PEO can offer to your company in turn.
• Fewer administrative duties: The workers’ comp claim process is notoriously tedious. If you hire a PEO, you’ll never have to deal with this process again; your PEO partner will handle it for you from start to finish.
• Additional assistance: Risk management is one small piece of the PEO pie. Traditionally, PEO vendors also handle your payroll processing and payroll tax payments, not to mention your health insurance and employee benefits administration. You can delegate any additional HR tasks to your PEO as agreed upon in your co-employment agreement. [Read related article: How Do PEO and Payroll Services Differ?]

Best PEOs for risk management

If you’ve decided working with a PEO is the best way for your business to handle risk management, the next question is — which PEO is best for your company? Luckily, we’ve conducted extensive reviews of the best PEO vendors. Below, we’ve listed a few that provide robust risk management features.

Insperity

From sharing compliant training resources to providing workplace safety experts, Insperity has your back when it comes to risk management. Like other PEOs we reviewed, Insperity handles key risk management components like workers’ compensation coverage, claim resolution and liability insurance. But Insperity goes above and beyond by conducting on-site safety audits to identify any possible issues ahead of time and by proactively reaching out to businesses to alert them to any possible changes in employment law. 

Staying informed of labor law changes that affect your business can be a challenge. Insperity offers peace of mind to employers by taking the guesswork out of staying compliant. It can also help with developing employee handbooks, supervisor training, employee relations and termination assistance. And Insperity is accredited by the Employer Services Assurance Corp. (ESAC), an independent rating organization that ensures PEOs are up to date on industry standards and best practices. Learn more in our Insperity review.

Rippling

Rippling makes it easy for companies to stay compliant with federal, state and local laws, even with remote teams spread across locations. Like other PEOs we reviewed, Rippling allows small and medium-sized businesses access to premium health and workers’ compensation insurance usually reserved for larger companies. Plus, Rippling’s software platform has useful automation features, like automatically updating local employee handbooks with any changes to local labor laws.

Rippling ensures you’re in compliance with local regulations like minimum wage laws, which vary by state. It will also distribute digital labor law posters in every state where you employ workers. It can even provide automatic state and local tax registration and manage Affordable Care Act and COBRA insurance documentation and compliance. Rippling also helps you manage mandatory employee training and connects you with resources and experts for any questions that arise. Find out more in our Rippling review.

Justworks

Justworks offers businesses such useful risk management features as legal document filing, legal guidance and online training programs like workplace harassment prevention training. Organizations that partner with Justworks get a dedicated account manager, a plus for companies looking for more personalized support when it comes to risk management and compliance. Justworks also provides 24/7 support via phone, email, Slack and chat so you can connect with HR consultants. It also offers online resources like a blog, help center and central hub called The Scoop for compliance updates.

Justworks can facilitate employee benefits and workers’ compensation, along with employment practices liability insurance. The vendor also handles tax filings, unemployment insurance and Affordable Care Act filings. These features make it easy for you to stay compliant with local, state and federal laws, regardless of where your employees are located. Our review of Justworks has more information.

TriNet

TriNet’s compliance experts provide specialized guidance on compliance and risk management issues. TriNet can help protect your business from risks related to discrimination, wrongful termination, unlawful retaliation and harassment claims. The vendor offers claims prevention assistance through expert counsel and a resource library, plus claims management and employment practices liability insurance coverage. Claims experts are on hand to manage any claims that arise. 

TriNet handles all compliance requirements related to payroll and benefits, like COBRA administration, Affordable Care Act compliance, unemployment benefits and payroll taxes. The company oversees worker’s compensation insurance and helps your organization comply with federal, state, local and industry-specific laws. Businesses in high-risk industries can also benefit from on-site safety assessments from TriNet’s risk management consultants. See more in our review of TriNet.

Considering other HR outsourcing options? See our guides: PEO vs. ASO, PEO vs. Insurance Broker and PEO vs. EOR

PEOs offer peace of mind for risk management

Even on the best days, being a business owner can be stressful — more so when unexpected liabilities crop up. Working with a PEO can provide peace of mind. You’ll know you have a partner with experience managing liability claims and other adverse events that have the potential for catastrophic impacts on your business. If, like most business owners, you’re not well-versed in risk management and compliance issues, working with a PEO vendor is a great way to protect your company.

What’s more, many PEO agreements have built-in risk management features that flag and fix potential issues ahead of time, warding off problems before they begin. For many business owners, this ounce of prevention is worth a pound of cure. Spending money upfront on a PEO is a valuable investment in the long-term health of your business.

Erin Donaghue contributed to this report.