- Risk management helps keep your business operational after a catastrophic event.
- A PEO can help you manage your company’s workplace safety and security, drug testing, and hiring and firing processes.
- PEO risk management saves you time and money while giving your business access to other HR services.
- This article is for small business owners looking to understand how outsourcing their HR to a PEO helps with risk management.
No business, even the smallest, operates without risk. Good companies, however, operate with safeguards in place to minimize the potential negative impacts of any risk. This process is known as risk management. Even if you have an internal HR team, you could benefit from partnering with a PEO to manage your risk management.
What is risk management?
Risk management is the development of plans to anticipate and mitigate all kinds of potential adverse events. These events could be as common as an employee tripping over an exposed electrical cord and injuring themselves. They could also be as complex as your business facing a class action lawsuit for repeated wrongs against a large number of consumers.
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Risk management covers all aspects of an organization, not just employee safety. For example, you might need to manage IT or financial risks. Once you’ve identified the risks, the process involves finding ways to reduce their chances of happening and coming up with strategies for what to do if any of these issues do occur.
To remember : Risk management is all of the work a business does to predict adverse events and minimize their consequences.
How important is risk management?
Risk management prepares your business for virtually any challenge that may come your way. It both prepares your business to identify risks when they arise and makes plans to deal with those risks. As a result, you are likely to make better decisions when under the stress that risks introduce.
Even if you can’t think of many risks to your business, managing risk can be a driver of growth. Since the process requires the implementation of plans to deal with all kinds of unforeseeable issues, it prepares your business to handle any events that could hinder your growth. With such preparation, your team can more easily solve problems and resume business growth.
Risk management also has ramifications for leadership. In times of crisis, employees often turn to supervisors and business owners for guidance, but without risk management structures in place, you could all be lost. How can you solve a problem that you never thought might arise? With good risk management, you’ll rarely have to ask this question – your plans will be in place before the problem manifests itself.
To remember : Managing risk is important to keeping your business as stable as possible after any type of disaster without hampering your growth and leadership.
What types of risks do PEOs manage?
As you can probably see by now, risk management is as necessary as it is ambiguous. The sheer volume of unanswered questions that accompany risk management might even deter you from managing your risk in the first place. The good news is, you don’t have to do it alone – a professional employers’ organization (OEO) can help.
The best PEOs are experts in almost every small business risk imaginable. They use their expertise to manage risks such as:
PEO risk management is perhaps more strongly associated with workplace safety. This is because PEOs can perform these services, among others:
- Obtain workers’ compensation insurance on your behalf. In almost all states, workers’ compensation isn’t just a good idea – it’s a legal requirement. However, it doesn’t always make it easy to get this information, so PEOs streamline this crucial business task. In fact, workers’ compensation is one of the benefits PEOs are best known for bringing to the table.
- Oversee the investigation, management and representation of worker complaints. Even the best workers’ compensation insurance cannot prevent workplace accidents. That said, PEOs can help you minimize the financial losses associated with workers’ compensation in the event of an accident. Your PEO should investigate all employee complaints and represent you in related conversations with the employee.
- Implement safety programs. When workers’ compensation cannot quite prevent accidents, safety programs step in. Risk management often involves your PEO working with you or your HR team to design strong workplace safety policies and ensure that your workplace is safe. It can even include an audit of your facilities to ensure OSHA compliance. With these two elements in place, the risk of workplace injuries to your employees is much lower.
- Distribute the safety documents. PEOs know exactly what documents you need to post in your workplace to comply with OSHA. They can also provide workplace safety manuals to you and your employees to help you identify and resolve workplace safety issues.
As human resource companies, PEOs often have a drug testing infrastructure. While employee drug testing is increasingly a legally unclear area, PEOs fully understand what types of testing are and are not legal, given their extensive knowledge of business risks. Legal-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 ill-suited can cost you dearly hundreds of thousands of dollars. PEOs can help you manage this risk. Your PEO can advise you on what to include in your job postings to eliminate bad hires. It can also guide your dismissal processes to minimize your unemployment tax obligations and the risk of unfair dismissal lawsuits.
Some PEOs can guide you through implementing the security system to reduce the risk of your employees stealing from you or using company property for personal needs. This aspect of risk management may involve monitoring areas of concern or installing access control technology. It may also involve cybersecurity measures, although this risk management functionality is less common with PEOs.
What are the benefits of using a PEO to help with risk management?
PEO risk management can offer a wide range of benefits for your business.
- Cost savings: Although you will pay your PEO for its work, its risk management services can prevent events that cost you large sums of money to remedy. The initial cost of hiring a PEO may be less than what you would spend out of pocket to deal with a disaster.
- Better workers compensation rates: PEOs work with their clients under a co-employment arrangement, which means that all employees of a PEO’s client companies are legally employees of the PEO. As a result, insurers view PEOs as large companies, which gives them greater purchasing power. This often results in lower premiums for workers’ compensation insurance, which your PEO can in turn provide to your business.
- Less administrative tasks: The workers’ compensation claim process is notoriously tedious. If you hire a PEO, you will never have to go through this process again; your PEO will take care of it from start to finish.
- Additional services: Risk management is a small part of the PEO cake. Traditionally, PEOs also take care of your payroll processing and payroll tax payments, not to mention your health insurance and other benefits. You can delegate any additional HR tasks to your PEO in your co-employment agreement.