Consider this scenario. You wake up the morning after an immense wind storm and discover an ample amount of tree debris in your backyard. Assessing the amount of labor involved in clean-up, you decide it is best to hire a tree service company to do the job for you. One of the first things you ask them for is proof of insurance, in case a worker becomes injured on your property.

If this company has partnered with a PEO, the certificate will show the PEO as the named insured. You may wonder, “The PEO’s staff members aren’t performing the job—why are they named as the insured?”

The answer: The tree company’s employees are, in fact, covered through the PEO. In this article, we’ll shed light on the topic of PEO workers’ comp and provide a refresher about PEO services as well.

Considering a PEO? Learn everything you ever need to know about Professional Employer Organizations (PEOs) in this free guide.

What is workers’ compensation?

Workers’ compensation systems were established to provide partial medical care and income protection to employees who are injured or become ill as a result of doing their job. These systems also provide employers with incentives to reduce work-related injury and illness. A majority of employers buy workers’ compensation insurance coverage through private insurers or state-certified compensation insurance funds. Larger employers may also have the option to self-insure. These systems are complex and governed by state laws.

Currently, each state government collects some claims information for its private industry, state, and local government employers. The federal government maintains separate workers’ compensation databases for federally-governed employers.

Workers’ Compensation In Massachusetts

In Massachusetts, as in most states, employers are required to obtain workers’ compensation insurance covering their employees for injuries sustained while working. Often, prospective clients of a service company request proof that coverage exists. A certificate of worker’s compensation insurance indicates that the “Named Insured” has purchased insurance for its employees.

However, when obtaining a certificate from a company who has partnered with a Professional Employer Organization (PEO), it can be confusing since the PEO is listed as the named insured in many states (Massachusetts included), rather than the company that is providing services.

How is workers’ compensation different with a PEO? What is PEO workers’ compensation?

Rest assured: If your business partners with a PEO, you will be provided with workers’ compensation insurance.

If your business partners with a PEO, you will be provided with workers’ compensation insurance. The only difference is in the logistics. A PEO works like this: The PEO contracts with client businesses to allocate employer rights and responsibilities. As a co-employer, the PEO pays wages and taxes and may be responsible for providing benefits and maintaining workers’ compensation coverage. The PEO establishes and maintains an employer relationship with employees by addressing worker complaints, maintaining employer records and filing workers compensation claims. In a co-employment relationship, the PEO’s role is to guide the employer on details of work performed by employees on matters concerning workers compensation claims.

There are eight key components that should be completed in the entirety, when a PEO is the named insured:

  1. Date (at the top of the certificate)
  2. Producer (insurance agency name)
  3. Insured (PEO’s name and address)
  4. Insurance Company Name
  5. Policy Number
  6. Effective Dates
  7. Description of operations that includes this language: “This replaces any prior certificate issued to the certificate holder affecting Workers’ Compensation coverage. Coverage is restricted to employees leased to (PEO Client Company Name).
  8. Certificate holder which should include the name of the customer.

In Massachusetts, the co-employment arrangement between the PEO and the client dictates that the PEO is responsible for securing workers’ compensation insurance. To learn more about how the rules apply to PEOs in states outside of Massachusetts, visit the NAPEO website. To learn more about how GenesisHR can help you by handling PEO workers’ compensation, contact us.

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