Is workers' comp cheaper through a PEO or standalone policy?

Standalone policies are usually cheaper in total cost. PEOs charge 2-12% of gross payroll in administrative fees on top of premium, and your experience mod may be blended with other clients. However, PEOs can be useful for very small or high-risk businesses that struggle to get standalone coverage.

What do I need to get a standalone workers' comp policy?

You'll need 3 years of loss runs (claims history), current payroll broken down by class code, employee count, and your FEIN. An independent agent can use this to get quotes from multiple carriers — rates for the same class code can vary 25-40% between carriers.

Can I Get Workers' Comp Without a Payroll Service or PEO?

Q: Can I get workers' comp without a payroll service or PEO?

Yes. You can buy a standalone workers' comp policy directly from a carrier through an independent insurance agent. No payroll service or PEO is required. Standalone policies often provide more carrier options and lower total cost than PEO-bundled coverage.

Yes — And You Probably Should

You do not need a payroll service or PEO (Professional Employer Organization) to get workers' compensation insurance. You can buy a standalone workers' comp policy directly from an insurance carrier, and in many cases that's the smarter financial move.

The confusion comes from two sources: PEOs that market workers' comp as a bundled benefit of their service, and payroll companies that partner with WC carriers for "pay-as-you-go" billing. Both are convenient — but neither is required.

Your Three Options

Option 1: Standalone Workers' Comp Policy (Direct or Through an Agent)

How it works: You buy a policy from a workers' comp carrier. You report your payroll quarterly or annually. The carrier bills based on estimated payroll and reconciles at year-end audit.
Best for: Businesses that want full control, already run their own payroll (or use basic payroll software like QuickBooks or Gusto), and want to shop the broadest carrier market.
Cost: Premium only — no service fees, no PEO markup.
Downside: You handle payroll reporting yourself. Year-end audit may result in additional premium or a refund.

Option 2: Pay-As-You-Go Through a Payroll Provider

How it works: Your payroll provider (ADP, Paychex, Gusto, etc.) integrates with a WC carrier. Premium is deducted each pay period based on actual payroll — no large upfront deposit, no year-end audit surprise.
Best for: Businesses with fluctuating payroll (seasonal, project-based) who want predictable billing.
Cost: Premium + payroll service fees. The carrier options are limited to whoever the payroll provider partners with.
Downside: You're locked into the payroll provider's carrier partners. Often just 1-3 options, versus 20+ through an independent agent.

Option 3: PEO (Professional Employer Organization)

How it works: The PEO becomes the "co-employer" of your workforce. They handle payroll, HR, benefits, and workers' comp under their master policy. Your employees technically work for the PEO.
Best for: Very small businesses (under 10 employees) in high-risk industries who can't get standalone coverage, or businesses that want full HR outsourcing.
Cost: Highest total cost. PEO administrative fees typically run 2-12% of gross payroll on top of the WC premium. You're also paying for HR services you may not need.
Downside: You lose control over your carrier, your experience mod may be blended with other PEO clients, and leaving a PEO mid-year can create coverage gaps.

The Hidden Cost of PEOs

Many small contractors end up in a PEO because their first carrier non-renewed them or they couldn't find standalone coverage. But PEOs come with trade-offs:

Blended experience mod. Your clean claims history gets pooled with other PEO clients. If the pool has high losses, you pay for it.
No mod portability. When you leave the PEO, you may not be able to transfer your claims history, which means starting with a 1.00 mod instead of the lower mod you earned.
Limited carrier choice. The PEO picks the carrier. You can't shop for a better rate.
Exit penalties. Some PEOs charge early termination fees or hold your claims data.

When to Leave a PEO

Consider moving to standalone WC if:

You have 5+ employees and a clean claims history
Your current PEO premium seems high relative to your class code rates
You want to build your own experience mod for long-term savings
You need carrier flexibility (e.g., to meet specific certificate requirements for contracts)

How to Get Standalone Coverage

Contact an independent agent — not a captive agent, not a PEO sales rep. Independent agents access dozens of WC carriers and can compare pricing.
Gather your data: 3 years of loss runs, current payroll by class code, employee count, and your FEIN.
Get quotes from 3+ carriers. Rates for the same class code can vary 25-40% between carriers.
Ask about pay-as-you-go billing even on standalone policies — many carriers now offer it directly, no payroll provider required.

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Sources: National Association of Professional Employer Organizations (NAPEO); NCCI Experience Rating Plan Manual — Mod Portability Rules; U.S. Small Business Administration — Workers' Comp Guide