Column: Are your workers' compensation costs on the rise?
Nick Oates is a work comp specialist with Knight-Dik Insurance in Worcester. Reach him at noates@knightdik.com.
When your workers' compensation costs skyrocket, it can be both stressful and worrisome, but there are ways to control of the situation.
Step 1: Discovery
Losses are a very common reason. Examine the frequency versus the severity of your reported losses. Do you have frequent losses on a minor scale? Do you have one or two major losses? Both can impact your premium.
Hiring new employees automatically raises your payroll, which is what workers' compensation insurance premiums are based upon. Determine if all of your employees are properly classified, as misclassification can cost big money.
It's also possible an audit caused a large premium jump. Before the auditor arrives for the next audit, make sure you designate a primary contact person for him or her, someone familiar with the work done by all departments and all employees, as well as all payroll records.
Have all documents available, including tax forms 941 and 944, and your federal tax return (quarterly and annual), payments for contractor services, W-2 and 1099s, payroll records and the company's experience rating worksheet.
Step 2: Game plan
If you found losses are the main cause of this increase, order a loss history report to determine frequency versus severity, identify open claims and losses, and any losses can be subrogated against someone else. You should check to make sure your payroll numbers are accurate. Any mistake in these numbers can drive your premium sky-high.
If an audit was the culprit, prepare to self-audit your business by verifying both payroll and employee classifications are correct. You'll also need to delete overtime and holiday pay as well as capping the owner's pay.
Step 3: Execute
The most important part of this process is taking the correct action steps.
First, look at how you are handling loss issues. If you find you're having frequent issues, how can you mitigate those losses? If you find large losses are to blame, could they have been avoided? Is there a large loss reserve unpaid? If there are large reserves, be sure someone on your team is following up on the claim at least once a month. A reserve has the same impact as a loss until it is reduced. Align yourself with an occupational clinic for treating injured employees, which can reduce a medical bill by 30 percent on average compared to emergency room visits.
Implement a back-to-work program. That way you'll continue to pay them and require they do tasks that are manageable for them and are not impeded by their injury.
If you have split job functions within your company, speak to your insurer about classification options to make sure that these employees are properly classified.
Be prepared to handle any audit issue. Prep yourself, your team, and your company for an audit so that you receive all credits on payroll available to you.
By putting proper planning in place, you will be able to control your workers' compensation costs, before they control you.
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