A brand new union construction company opened their second business. The owners were experienced in construction but this was their first union shop, and there was real complexity to navigate. They went to their broker for guidance. His answer was blunt: "Your only choice is State Fund. You're a startup. No one else will touch you."
The owners had used this broker for years and trusted him. So they believed him. They thought they had no other options for workers compensation.
They still needed HR services and someone who understood certified payroll and could handle the administrative side of running a union shop. So they found a PEO and started getting quoted for payroll processing, HR services, and certified payroll support. They planned to use State Fund for workers comp and layer the PEO services on top.
The PEO quoted them a 2 percent administrative fee. That number was clear.
But then something critical happened: the payroll tax piece showed up as "TBD" on the quote. To be determined. It would be calculated and added to the contract later. The owners assumed payroll taxes were just payroll taxes. A pass-through. Nothing to worry about.
They had no idea that "TBD" on a PEO quote could mean anything. They did not know there was a choice about how payroll taxes get handled. And nobody told them to ask.
There are four payroll taxes: Federal unemployment insurance, Social Security, Medicare, and state unemployment insurance. Three of those have cutoffs. Once an employee reaches a certain wage threshold during the year, the employer stops paying into that tax for the rest of the calendar year.
When a PEO fills in that TBD later, they can handle it two ways: actual liability with proper cutoffs applied as a pass-through, or a blended estimated rate billed the same for the entire policy period.
Jon works with 25-plus PEOs and all of them charge actual tax liability with 100 percent pass-through cutoffs. It is non-negotiable. But not all PEOs operate this way.
Full-service PEO. Payroll processing. HR services. Time and attendance with certified payroll for the union work. A full-service 401k program. Great workers compensation coverage that was pay-as-you-go with zero audits. Everything they needed, actually priced competitively.
The broker said they had no options. They actually had multiple options. They just needed someone to show them.
A brand new business, told their only choice was State Fund and overpriced PEO services. One phone call from a friend who knew to ask. One conversation that made the numbers clear. And suddenly they could see what was actually available and what things actually cost.
The owners almost signed what they were told was their only option. Instead, they saved over $135,000 in year one.
If you are a new business getting quoted for workers comp or PEO services, the most important thing you can do before signing is let someone else look at the numbers first. It takes one conversation.
Talk to Jon Before You Sign →