Temporary Labor Firms and Insurance Coverage

It is very popular nowadays to outsource your employees via a temporary labor firm. Sometimes small businesses are using PEO’s (professional employer organizations). You need to have your labor services contract reviewed by your attorney, as this is a multifaceted minefield of potential claims for your small business organization.

Typically, the claims that we see coming back to haunt our clients are from general liability claims and workers compensation claims. This is primarily due to vague labor contracts with the temporary service firm and thereby expanding the potential for liability to your small business.

Usually the allure is the carrot of large savings on your workers compensation insurance. The insurance rates and premiums that are set by the Worker’s Compensation carriers are filed with the individual states based upon classes of business that they choose to write. The rates and premiums are the same for every insured that fits into the specific classification code. Thus, the exact same insurance carrier that is providing coverage for the temporary agency cannot charge a lower premium or price than if you purchased the policy yourself directly through an insurance broker with that exact same carrier.

Therefore, as you go out to bid for your insurance portfolio be careful when using temporary labor firms as you never get anything for free. There are hidden costs and fees to using a temporary labor firm. When it comes to Worker’s Compensation insurance, you are not going to get a lower rate from a temporary firm then if you purchased the policy direct thru a retail broker. Again, as we have stated the rates are filed with the state insurance departments for every insured that fits into that classification. There are no “special deals or rates” when it comes to workers compensation as to “where” you buy the policy from.

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