$100,000
Workers’ compensation cost
$200,000
Benefits program and 401(k)
Held at 2
Internal administrative staff
Every figure here is stated in the text above.
The situation
A custom sport fishing boat manufacturer with facilities in two coastal states employs well over a hundred people. Almost all of the work happens on land. But a finished boat has to be tested, and testing happens in canals and on open water — which is enough to change how the entire payroll is rated for workers’ compensation.
This is the mechanism worth understanding, because it catches employers who assume classification follows the majority of the work. It does not always. A small proportion of hours in a high-hazard setting can pull the rate for a much larger population, and in the open market the result had become cost-prohibitive. The company had originally moved to a PEO for exactly that reason.
Years later the need had changed shape. Human resources, compliance, recruitment and retention had all become live issues, and the incumbent PEO could not meet them.
What we did
A sixty-day RFP and bidding process. Comp-driven placements reward a longer window than most: the rating question is genuinely technical, and a provider needs time to underwrite it properly rather than quote defensively. A fast process on this kind of risk produces conservative pricing, which the buyer then reads as the market’s answer.
The outcome
A $100,000 reduction in workers’ compensation cost, and a further $200,000 saved through the PEO’s benefits program and a 401(k) plan. The company held its internal administrative staff at two people rather than growing it.
Two things came out of the transition that were not on the original brief. An HR audit brought the employee handbook, policies and procedures into compliance. And employment practices liability coverage was extended to the company through the PEO — the firm had never had it.
The part nobody asks about
The EPLI gap is the one that should worry a reader more than the savings should please them. A manufacturer with a hundred-plus employees across two states, operating for four decades without employment practices liability cover, was carrying an exposure nobody had priced. It surfaced during a workers’ compensation exercise because that is when someone finally read the whole insurance position rather than the line that was hurting.
If this resembles your situation
Ask what proportion of your payroll sits in your highest-rated class code, and then ask why that code was assigned. If the answer involves an activity that occupies a small share of actual hours, the classification is worth challenging before the arrangement is. Sometimes the fix is a rating argument rather than a change of model, and that is a far cheaper piece of work.
Published outcomes follow BRG’s confidentiality standard: industry category and outcome only. Fuller detail is shared in the live discussion. Related practice: PEO / ASO Advisory.
