The Professional Employer

  As I’m sure you are well aware by now, I advocate the benefits of small businesses outsourcing employment and payroll responsibilities to Professional Employment Organizations.  However I do not advocate small businesses outsource blindly.
Not all PEOs are created equal.  Some PEOs are self-insured. That allows them to offer workers comp coverage at a lower rate than other organizations, but there is a downside. The Houston Business Journal recently reported on the hazzards of self-insured groups:

Small business owners are not aware of the financial risks involved in obtaining workers’ compensation insurance through self-insured groups, according to a new study by Opinion Research Corp.
Eighty-five percent of the 501 small business owners and managers surveyed nationwide by the Princeton, N.J.-based research group said they hadn’t seen, read or heard about the closure of several self-insured trusts last year. Seven such companies failed this year in New York, and litigation continues in the financial failures of groups in Tennessee, Kentucky and California.

Before outsourcing your employment and payroll responsibilites please do your homework. Confirm whether or not your Professional Employer is self-insured. Then decide if you can afford the risk.