Typically, a PEO will provide workers’ compensation coverage and claims administration for its client’s employees, often referred to as “worksite employees.”

Businesses with more than one employee need to carry workers’ compensation insurance. Workers' comp insurance covers medical expenses and a portion of lost wages for employees who become injured or ill on the job. Coverage also includes employee rehabilitation and death benefits. In return, employers receive protection from lawsuits by injured employees.

Workers’ comp is state-regulated. You can check requirements with the U.S. Department of Labor. States vary on whether policies are issued by private companies, the state, or both. Make sure that a PEO has coverage in all states in which you operate.