Keeping Worker's Compensation Costs Down
The cost of workers' compensation insurance is within your control. If you take some time to understand how the system works, how your premiums are calculated, and what options are available, you will be able to keep your payments low. Here are 8 cost-saving moves to investigate with your workers' compensation insurance agent.
1. Make sure your classification is correct
Check that your company and employees are properly classified. Misclassification is one of the most common reasons for overpaying on workers' comp. Non-hazardous jobs have much lower rates than those for hazardous ones. If you misclassify even one worker into a high hazard job, your total premium can increase significantly.
To do independent research on classifications and rates, look for a copy of "The Scopes of Basic Manual Classifications" published by the National Council on Compensation Insurance, Boca Raton, FL. This manual gives descriptions of what operations are handled by the more than 700 different classifications.
2. Conduct a payroll audit
Your workers' comp premiums are usually based on your regular payroll figures, excluding overtime. Most states allow you to deduct overtime pay to straight time for the purpose of figuring your payroll.
3. Use a deductible
Using a deductible can lower your premiums by as much as 25%. 27 states permit employers to reduce their workers' comp premiums by paying a deductible - usually somewhere between $100 and $1,000. Contact your state insurance office or your insurance broker to find out if you can use this money-saver.
4. Make sure your experience rating is correct
If you pay more than $5,000 per year in workers' comp premiums, then your company receives an experience rating. This rating compares your company's claims history to that of other firms in your industry. The higher your claims, the more risky you are to insure, and the higher your premiums.
Make sure your insurance company is calculating your experience rating correctly. You can analyze your rating using worksheets available from the National Council on Compensation Insurance (NCCI), Boca Raton, FL.
5. Use managed care to reduce your medical costs
Talk with your insurance agent about finding a workers' comp insurance plan that uses managed medical care to treat injured workers. Over half the states now allow HMOs, PPOs and other managed-care providers to handle workers' comp claims.
6. Institute safety programs
A company-wide safety program that reduces the number of workers' comp claims will pay off in lower premiums. Make sure our employees have and use appropriate safety equipment like goggles and hard-hats. Inspect your facilities for safety hazards, and look for other ways to stop accidents before they happen. Train people in the correct way to lift (back injuries are a common workers' comp claim) and the right way to use their computers (to reduce claims for repetitive stress injuries).
7.Get injured workers back to work
The quicker an injured worker returns to work, the lower your disability claims costs will be. You may need to modify the injured worker's assignment, or put him or her on light duty. But that's a small price to pay for returning to work. early-return-to-work programs can also be big morale boosters - injured workers are often afraid of being displaced or forgotten.