Companies, at times, outsource important business activities like payroll. The company's accounting department may not be able to handle a high volume of employees or complex payroll issues. In these cases, outsourcing can improve efficiency and save valuable time.
Payroll services can be provided by third-party companies that specialize in human resources and payroll management. These companies perform various tasks, like calculating wages and taxes, filing forms with the government, sending out W2s for employees, and more.
Given the nature of the services provided, these companies handle sensitive information of clients and their employees, making it important to purchase Professional Liability Insurance. This type of insurance will protect the business if it is sued for making an error in payroll calculations or for not paying an employee correctly. The high cost of claims or defending a lawsuit can end up putting the company out of business.
Risks and Liabilities Associated With Payroll Service Businesses
A large payroll service business could be a target for lawsuits. This is especially true if the company makes mistakes that cause employees to lose out on pay or benefits, such as health insurance.
- The company may also be liable if it fails to report wages correctly, which could result in tax issues for employers and employees.
- Slip and fall accidents can happen in the office. If an employee is injured, the payroll service company is liable to pay for the employee's medical care. If an injury results in lost wages, the business may also be liable for paying those wages.
- The company may also be responsible for injuries suffered by customers or visitors to the business, especially if there was a condition present that caused or contributed to the accident. For example, if a client falls and breaks an arm on a wet floor while visiting the company's office, the business may be liable for damages, which include the cost of medical bills, pain and suffering, and loss of income for the injured party.
- The company can also be liable for the negligence of its employees. If an employee driving a company car causes a car accident and results in injury and property damage, the business will be liable.
- Physical damage to owned property by things like fire, theft, windstorm, or vandalism causes damage to the company's property. If this happens, the business will want to be paid for the repair or replacement of the property.
Coverages Included Under Business Insurance for Payroll Service
Business Insurance for Payroll Services provides coverage for a variety of potential losses.
The most common types of coverage for Payroll Service Business Insurance include:
Professional Liability Insurance: The service of payroll processing and consulting involves high risk for the organization. The company is liable for any mistakes made in the payroll processing that causes a financial loss and can be sued and found at fault. Professional Liability Insurance helps protect the business from lawsuits and claims in case of negligence. This coverage includes professional errors and omissions, defamation, invasion of privacy, and more. The insurance also provides legal representation to defend the business owner. This coverage does not cover liability for physical bodily injury or property damage caused by the business.
General Liability Insurance: General Liability Insurance protects the business against bodily injury and property damage claims and lawsuits. For example, if a client is injured at the office due to a slip-and-fall accident and files a claim against the business, General Liability Insurance will provide a defense for the insured and pay the court-awarded damages and expenses associated with this claim.
Workers' Compensation Insurance: Workers' Compensation Insurance provides coverage for injuries to employees that occur on the job. The employer is responsible for paying the employee's medical bills, lost wages, and other expenses related to these injuries. Rather than meeting these obligations out of pocket, most businesses opt for a workers' compensation policy. In addition, this type of insurance will pay for any permanent disability suffered by an employee as a result of an injury sustained on the job.
Commercial auto insurance: Commercial Auto Insurance provides coverage for vehicles used in the course of business. This type of insurance protects against liability claims, physical damage to owned vehicles, and other coverage that the state may mandate. Commercial auto insurance coverage includes:
- Bodily injury liability, which pays for injuries to others in the event of an at-fault accident.
- Property damage liability, which covers damage caused by your vehicle to other people's property (such as cars) when at fault for the accident.
- Personal injury protection, in some states, this coverage may be referred to as "No-Fault," which covers medical expenses for the passengers resulting from an accident.
Note that a company employee injured while driving the company car would be covered by workers' compensation insurance as the primary coverage first.
Commercial property insurance: Commercial property insurance provides coverage for buildings, equipment, and other physical assets owned by the business. It protects against fire, theft, vandalism, windstorm, and other perils that could damage these items. Business interruption insurance can be included under the property policy. It helps reimburse for lost income when covered damage to the building causes the business to shut down.
Cost of Business Insurance Coverage for Payroll Service
The cost of business insurance coverage for payroll services is based on several factors, including the type of insurance, limits, revenue size of the company, and the values needed for property insurance. Location, age, and construction type of the building also play a part in total insurance costs. Generally, it costs more to insure larger businesses because they have more liability exposures and assets that could be damaged or stolen.
The cost of business insurance coverage for payroll service can also be higher if a company has a poor financial record. This could include late payments, unpaid debts, and other issues that indicate a lack of responsibility.
Payroll services insurance is important for businesses because it can help protect the company from the financial consequences of a loss. For a payroll service provider, it is important to understand what coverage is required and how much it costs. This way, one can make an informed decision about whether or not to purchase the insurance.
When deciding to buy coverage, one should ensure that their business details, such as payroll and revenue amounts, are correct so money won't be owed at audit. General Liability and Workers' Compensation policies are always audited to ensure the premium paid is adjusted for the year based on real numbers, not just projections. An audit can result in an additional premium owed and, sometimes, a return premium issued.
The most important thing to remember when it comes to insurance coverage is that it is there for a reason. The last thing anyone wants is for their business to be hit with a large loss due to negligence or an accident, but that can happen if one doesn't have the proper coverage in place. If you are looking for payroll services insurance, request a quote at www.insuranceadvisor.com