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Which employers need workers compensation insurance and where do they get it?

Florida law requires all companies with 4 or more employees to be covered by W/C insurance. For construction companies the law requires W/C if there are one or more employees. Owners and corporate officers can get an individual exemption from the requirement for W/C by completing the “notice of election to be exempt” form found at... www.myfloridacfo/wc/keycoverage.html.

A company can speak with a local insurance agent about getting a W/C policy; most likely the agent who handles their liability and property insurance. The challange for small businesses is that most insurance companies do not want to underwrite the risk of an on the job injury for the small (in their minds) premium. Increasing medical costs for an injury are not worth the insurer’s risk with a premium of only a few thousand dollars per year.

If a small company does get a W/C policy from the insurance agent, the insurance company will usually require an upfront payment of the first year’s premium based on an estimate of the company’s annual payroll. Then at the end of the policy year, the insurance company will audit the company’s payroll to see if actual payroll was greater than the estimate. If so, an additional premium is due immediately.

Even more troubling is if there is a job injury that costs the insurance company more than the annual premium, the insurance company is likely to raise the rate or not renew the policy.

A popular way for the small company to solve the W/C problem is to use employee leasing with a licensed PEO (Professional Employer Organization) because…

  • As the legal relationship with the PEO is as a “co-employer” the small company’s employees are covered under the PEO’s W/C policy
  • With a PEO the W/C premium are paid each payroll, “pay as you go”. There is no up- front premium and no year end audit
  • The size and buying power of the PEO usually results in lower rates for W/C compared to what a company can get on their own.
  • The W/C insurance company likes to work with a PEO as they know the payroll reporting is accurate and there is no need for a year end audit

There are many reasons for a small to mid-size company to consider using a PEO and W/C has become a major one!

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