8 Ways To Know If You Are Overpaying For Your Workers’ Compensation Insurance
Commercial Construction & Renovation
There are many factors that determine the cost of your workers’ compensation insurance and, fortunately, changes to your business, your staff, or the way that you work can reduce the cost.
The easiest way to determine if you’re overpaying for your workers’ compensation insurance is to conduct a simple self-audit. Here’s a simple 8-part audit to help you determine if you could be saving money on your workers’ compensation policy.
1. The vast majority of businesses changed during the pandemic in some way, shape, or form. Did your business change the type of work it had been doing? Did your business stop doing certain jobs or tasks? Take a moment to review your job classifications on your workers’ compensation policy. Are all of those jobs still being done? Are they still being done at the same dollar level? Be sure to note any changes and be prepared to share them during your annual audit.
2. Do you have any people that were on paid furlough at any point during the pandemic? If you paid any of your employees but they did not perform any work for that payment, you’ll be able to save some money on your workers’ compensation policy. We’ve seen this happen to a number of employers that received PPP funding. The PPP loan allowed employers to keep employees on the payroll, but because the business was not fully operational, their workers’ compensation costs decreased.
3. Was there any overtime pay, holiday pay, or prevailing wage payment that should be credited against the payroll number? Do the owners and officers have a salary cap? It’s critical you know what credits are available to your business and exactly how those credits apply to your business. Be prepared to share the dollar amount of any of these credits with your auditor.
4. Did you use or work with any sub-contractors? If so, did you get a certificate of insurance from them so you are not responsible for paying for their workers’ compensation insurance? Now is the time to address this. Many companies are needlessly paying more in workers’ compensation insurance because they did not get the certificates of insurance from their sub-contractors. If you didn’t get a certificate of insurance from your subcontractors, request them now or request proof directly from their insurance agent. Your business should be shown as the certificate holder on the certificate. If you made the mistake of forgetting to get this certificate of insurance from any subcontractors you worked with, create a process internally so it doesn’t happen again.
5. Do you have a return-to-work program? A return-to-work program allows employees with less severe injuries to work in a way that is modified to accommodate their injury. Not only does a return-to-work program reduce the impact of a loss in future premiums, but it also allows your employees to continue getting paid their full pay and benefits. Every employer should create a job bank of different roles people could perform while adjusting back to their previous job. Think about ways to do things that are less physically demanding or less stressful. Studies show that once people are engaged, they are more likely going to try to be more and more useful on the job. There is no evidence that people will stay at work doing the less demanding job as long as possible. In fact, just the opposite is true.
6. Have you taken on new work, new employees, or new sub-contractors? It is crucial that you stay up to date with these changes. Many businesses have adapted to new opportunities and that has allowed them to survive and even thrive in a time where everything was up in the air. You need to make sure that you have updated your insurance broker or agent of the changes you have made so they can make sure you’re properly covered without overpaying. Take the time to understand the impact of these changes and speak to your workers’ compensation insurance broker or agent to determine the best way to mitigate any risk or unneeded additional cost.
7. Do you have a plan for helping injured employees beyond sending them to the emergency room? Instead of sending them directly to the emergency room, it’s often better to direct them to an urgent care clinic for less severe injuries. Emergency rooms are the perfect place for true emergencies, but they are often also used for non-emergencies. This ends up resulting in poorer care, longer wait times, and higher costs. There are countless urgent care facilities that are sometimes referred to as urgent care, occupational clinics, walk-in clinics, or ready clinics.
When it comes to costs, statistics show that the cost of medical services for your employees will be at least 30-40% less when you utilize an urgent care facility instead of an emergency room. This alone will reduce your workers’ compensation insurance costs by reducing the cost of claims that you can’t avoid. These urgent care and occupational clinics can do a better job with follow-up than an emergency room can. An occupational medicine provider at an urgent care center has experience with on-the-job injuries and will regularly prescribe treatment plans that are going to return your employee to work as soon as possible. This isn’t something that you’ll get when you send an employee with a minor injury to the emergency room.
8. Do you have a plan for being an advocate for wellness for all of your employees? Remember, if employees don’t see a continued interest in wellness and safety, they will lose interest themselves. A lack of communication from leadership can be perceived as a loss of interest and if you don’t care, they won’t care. Every company wants to lower their workers’ compensation costs, and developing a company-wide wellness and safety program is a very effective way to do this. The National Institute for Occupational Safety and Health (NIOSH) conducted a meta-analysis of 15 studies on the impact of workplace wellness and safety programs. They found that such programs produced a number of positive outcomes which benefited both employees and organizations, such as reduced absenteeism and sick days, positive ROI, increased productivity, and fewer accidents. In addition, the study saw companies considerably reduce their workers’ compensation costs. Workplace wellness and safety programs are a win-win for both your company’s bottom line and your employees.
Ara Derderian is a Commercial Lines Producer for Knight Dik Insurance Agency, Worcester MA. He specializes in all lines of commercial business for a variety of industries, helping cut costs and increasing coverages. Ara works with everyone from small businesses with 1-2 employees to large businesses with several employees. Ara brings in over 12 years of experience in business development and client management. He can be reached at ADerderian@knightdik.com.