Workers Compensation Cost Reduction Strategies
There are many aspects of running a business that employers enjoy handling. Workers Comp is usually not one of them. Even though managing workers comp can be tedious and time-consuming, it’s necessary for a safe and legal workspace. So since there’s no place for negotiation in having workers comp for your small/mid-size companies, let’s explore how to make it affordable as possible for your business.
Worker’s comp premiums are based on this formula:
RATE X (PAYROLL / 100) X Experience Modifier = PREMIUM
The rate and the experience modifier are the two variables that will determine the difference between what your company will pay vs. the company down the road. The rate is determined by which classification your business falls under. The rating is based on occupational risk, so the rate for construction work is higher than the rate for clerical work. The experience modifier is determined by calculating your business’ history of loss compared to the average in the industry. If yours is higher, your premiums will be higher.
Lowering your modifier is the key to lowering the cost of worker’s comp. You can do this is a few ways:
Focus on Safety
Being proactive is the best way to avoid workers comp claims. Focusing on workplace safety will prevent accidents and keep your loss history to a minimum. Some companies hire a team to come in and identify all of the potential hazards to eliminate them. The cost up front is well worth the money you’ll save by not having accidents in the workplace and having to deal with workers comp.
Create a Return To Work Program
The easier you make coming back to work, the shorter the worker's comp claim remains open and active. An active return to work program focused on getting employees back to work as soon as possible after a workers comp claim. Making modifications so that employees can return to work quickly after an accident helps reduce costs. This may mean allowing the employee to work fewer hours or less strenuous work. The longer the employee is out of work, the greater the chance they won’t return. By getting employees back to work, you increase your chances of employee retention.
Review Your Classifications
Classification errors could be the reason your worker's comp rates are so high. Double check to make sure everyone in your company is classified correctly. For example, a front office assistant at a construction company should not be classified as a constructor worker since his/her job is not as high risk as his/her coworkers. Talk to your insurance agent if you think there are classification errors that are costing you.
Outsource The HR Department
Small and mid-size companies can really benefit by outsourcing the HR responsibilities to an outside agency. An experienced agency such as Great Hire Staffing will stay on top of changing labor and workers comp laws and make sure you’re in compliance. They will be able to quickly and properly handle all workers comp claims so that you don’t waste time or money doing it yourself. When you let the professionals handle the paperwork and processes that come with accidents on the job, employers can spend more time focus on increasing productivity and profit
A smart business owner is always looking for ways increase productivity without raising costs. Since there’s no way to get around implementing a workers compensation program on the job, employers can implement these steps to save as much money as possible.
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