If you run a business that has a higher probability of incurring workplace accidents such as construction, manufacturing, transportation, heavy equipment work, and many others then you probably are keeping a close eye on your worker’s compensation costs.
Workers’ compensation rates have been on the rise over the past few years. Often times this single cost is for many businesses the largest expense. This expense in many instances surpasses health insurance costs for some industries.
If you have just one very large claim, your worker’s compensation costs can cripple your business. We have seen companies with under 100 employees with rates as high as $750,000 per year. There are three ways smart business owners have proactively done something about it.
According to the Executive Office of Labor and Workforce Development, “The best way to reduce injury and illness in the workplace is to establish a comprehensive safety and health education and training program”
These programs are designed to train you and your employees to recognize and prevent injuries in the workplace. Preventing injuries in the workplace is the best way to keep worker’s compensation claims from occurring and therefore mitigating rising costs for your business.
Safety programs should be written and you and your staff should be educated on them. If you are to implement a safety program on your own, you can find some guidelines on your State Department of Labor website.
For safety programs to be effective, meetings should be scheduled and your employees should be encouraged to voice their safety concerns so that the program can be amended for maximum injury prevention.
In addition, a strict disciplinary program should be established and communicated to the employees. The deterrent could be a 1-day suspension without pay for 1st violation and higher for others. This will help you maintain a culture of safety in your organization.
Finally, a random drug testing program should be put in place, especially for those operating heavy equipment or in jobs where room for error could be disastrous.
The moral of the story is fewer injuries will equal fewer worker’s compensation costs to your business. The goal is always to have none. We have seen many businesses with a clean record by keeping strong safety programs.
Another way to keep your worker’s compensation costs at a reasonable level is to shop around.
Perhaps the worker’s compensation carrier you are with is not the most competitive. A good P&C broker with multiple carrier relationships is a good way to start. We have seen clients switching carriers and saving 10 – 15%.
A good time to shop around is especially timely when your experience modification factor or MOD has improved.
Many companies find themselves stuck with coverage from their home State Fund not knowing they qualify for private coverage from other carriers. Often times the private carriers will be more competitive and always easier to deal with.
The State Fund is oftentimes the last resort for many businesses seeking worker’s compensation coverage. Many high-risk businesses such as those that deal with asbestos, high-contact sports, etc. fall into this category.
When you begin your search keep in mind your specific requirements. Many businesses are required to maintain an “A” rated worker’s compensation carrier in order to run their operations.
Partner With A PEO
There are many great reasons to partner with a PEO outside of worker’s compensation but we will not focus on those at this time to remain consistent with the theme of this article. You can read more about PEO benefits in this post.
PEOs or Professional Employer Organizations co-employ with companies of most industries and sizes hence legally offering them access to their umbrella worker’s compensation coverage.
Keep in mind that the PEOs handling of your payroll is a requirement for this partnership to begin. PEOs very frequently are more competitive with their worker’s compensation premiums than companies can get on their own.
We have seen many businesses partner with PEOs for this sole reason saving dozens or hundreds of thousands of dollars in annual premium costs. As an example a client in NY State we helped find a PEO was able to save 25% on premium rates. These savings in dollar figures amounted to $185,000.
In addition to saving money on premiums; PEOs will guide your business in implementing the safety programs we mentioned earlier. PEOs have great expertise in this area and they give you access to it in order to keep costs and workplace injuries down.
PEOs further minimize headaches by eliminating the year-end worker’s compensation audit you incur annually. PEOs handle the audit internally for all their client companies. You no longer worry about that. It simply disappears.
Lastly, PEOs will collect worker’s compensation premiums in a “pay as you go” manner. This means that with every payroll processed by the PEO whether it is weekly or semi-monthly you pay them the worker’s compensation premiums in increments.
This means you no longer have to incur a large deposit or pay for 1-3 months in advance. Businesses benefit from pay-as-you-go freeing up cash so they can increase their working capital.
PEOs vary greatly from one another and seeking an experienced PEO broker will yield the best results for your business.
The Huldisch Group will act as your advisor sourcing the services of dozens of PEOs helping you identify the best one and contrast them so that you can further maximize your savings in this area.