On the job, we all want our employees to be healthy, happy, and safe. However, as responsible employers, we recognize that even on the most safety-conscious job site, accidents can and do occur.
To ensure employee safety, business owners must provide adequate workers’ compensation coverage to their staff. Having a good reputation for employee safety can also help you attract new personnel. However, the price of the coverage can become overbearing and a financial burden to most businesses.
Fortunately, there are several ways to cut down on workers’ comp costs.
How is Workers’ Comp Premium Determined?
Before we go over how to save on workers’ comp, it’s important to understand how coverage costs and premiums are calculated. The two key factors in determining your rate are your work state and what industry your company is a part of. This rate is then multiplied by the company’s total payroll and divided by 100. A workers’ comp rate is represented as the cost per $100 of payroll.
For example: A workers’ comp rate of $1.50 means that a company with $100,000 in payroll would pay $1,500 in annual work comp premiums.
The type of business you own also has a big impact on your rate. In comparison to a beauty supply store, a manufacturing plant will have a much greater rate. This is why it is critical that your company is correctly classified in order to pay a fair and acceptable rate.
The cost of your coverage is then multiplied by a modifier. Depending on your company specific modifier, it could affect your overall cost. So where does the modifier come from? The modifier is determined by your previous loss history. A modifier of 1.0 or even lower might be assigned if you have a favorable track record of claims reduction. If there have been multiple safety-related claims in the past, the modifier will be higher than 1.0 and result in a higher cost. Reduce your workers' compensation expenditures by achieving a modifier of 1.0 or less.
How to Save on Workers Comp
Make Sure You're Following Best Practices for Workers' Compensation Claims Management
The most important thing a company can do, is to make sure that its claims adjuster follows best practices. This can limit the amount of money you payout by up to 50%. This can result in thousands of dollars saved per claim. Some best practices include making in-person contact with the employee and medical personnel to address any difficulties that may surface. An adjuster can make the entire process run smoothly and save you money by ensuring that all documentation is filed on time, verifying coverage, and keeping a daily diary of all the work accomplished on the claim.
Create a Safety Program
The best way to keep workers safe and avoid claims is to stop injuries before they ever occur. Having a robust safety program in place helps you identify and eliminate workplace hazards, while saving you money. In fact, a study by Safety and Health Magazine shows that for every dollar invested in injury prevention, businesses see a $2 to $6 return. Some states, such as California, even require companies to have a written safety program. Focusing on safety will not only lower the number of accidents and injuries among your employees, but it will also demonstrate to them that you care about their well-being.
Have a Return to Work Program in Place
Accidents can happen even if you have a good safety protocol in place. When this happens, a return-to-work program can help save money on the claim.
The longer a workers' comp claim is open, usually the more expensive it becomes. For example, when wounded workers return to work later, for example, the claim must include additional replacement income.
A return-to-work program's purpose is to enable injured workers to return to work as soon as possible, even if it’s just on a limited basis while they recover. One example is allowing an employee to work part-time or light-duty hours, in coordination with the employee's medical provider.
Active return-to-work programs can also save money in the long run. It can help you maintain working relationships with wounded personnel and avoid alienation on during a longer absence. A return-to-work program also lowers the change that the employee will never return.
Partner with a PEO
Many small to medium sized businesses choose to join a Professional Employer Organization (PEO) to help manage workers’ comp costs and claims, while also helping with the safety challenges of running a business.
The video below shows a quick explanation of what a PEO is and how it operates.
PEOs actively help lower your modifier while handling the entire claims process on your behalf. Your experience modifier rate may be significantly high if your company operates in a risky industry. Workers' compensation premiums may rise because of this. When you join a PEO, you can enroll in their workers' compensation plan, which may have a lower experience modifier rate than what you could receive on your own. This lowers your workers' compensation premiums even further.
PEOs also have a vested interest in keeping your workplace safe while avoiding claims. When you enter into a PEO agreement, your employees fall under the PEO EIN, so all claims are against the PEO since they are the holders of the group plan. This means that PEOs are financially incentivized to keep your employees safe.
In the event of a claim, the PEO handles all aspects including documenting the injury, submitting the claim to the carrier, implementing a safety program, and helping the injured employee return to work. Not only does this save business owners time, but it ensures that best practices are being followed regarding claims management.
There are a variety of methods you may take to lower your workers' compensation costs. However, you may not have the time or resources to minimize your costs efficiently. By cooperating with a PEO, you can find cost-cutting benefits in this area.
The Cornerstone Advantage
It's clear that PEOs not only save businesses a tremendous amount of money with workers' compensation coverage, but also eliminates the entire implementation and claims process.
Like other PEOs, Cornerstone will help you save significantly on employee benefits, automate your payroll, lower your experience modifier, and help with certain employee related compliance. However, unlike other PEOs, our focus is on excellent customer service.
Other PEOs will just add you to their system and send you an invoice. At Cornerstone we assign a professional customer service rep to work with your account. This not only adds more of a human touch, but it also allows us to create custom solutions unique to your business. Got questions? We have a rep to help you answer them. A problem occurred? You have a rep who understands your business and can create an effective solution.
Contact us here for a FREE consultation.