March 16, 2018
How to Keep Workers’ Compensation Costs Low
Posted by Britta Satterlund
Workers’ compensation insurance is a vital piece of company-owned insurance. As an employer, you are legally obliged to carry the insurance if you employ one or more workers, unless you have employees in a state that doesn’t require coverage (e.g. Texas). Rates are calculated based on two factors: your gross payroll, multiplied by a rate classification that is dependent on your sphere of business. Obviously, this means costs can vary from industry to industry and company to company, but no business ever wants to over-pay for this vital coverage. Here are some tips to help you keep your costs low:
- Try to limit claims.
The “no duh” to all insurance—try to avoid having to make a claim in the first place! While California doesn’t allow employers to pay out-of-pocket for first aid claims on the job, many states, including New York, do. So if your employee slices their hand making a bagel in the company kitchen and needs to go to urgent care for stitches, and you’re outside of California, check with your broker before filing a claim with your insurance company.
- Implement a safety plan.
To segue off point one, implementing a formal safety plan can benefit you by educating your employees. Make sure the plan includes checking the workplace quarterly for safety hazards. Many carriers will give you a small discount for doing so. Talk to the Armanino HR Solutions team for sample documents from prior plans we’ve implemented and helped administer, to find out ways to customize a plan for your needs.
- Talk to your broker!
Having a good relationship with your workers compensation broker is important, even if you only talk once or twice a year. Use them as a resource to help ensure you’re getting the best rates at renewals, and to do mid-year check-ins on your policy to verify that your payrolls are in line with your current coverage, so there’s no sticker shock at audit. They can also help you with any other questions about your policy and coverage.
- Exclude your owners and/or members.
In California, AB No. 2883 allows owners of corporations who own 15% or more stock to be excluded. LLC members who are managing members or a general partner also can be excluded. There are written waivers that you need to provide to the carrier. Your broker can help you procure one specific to your policy/carrier. Armanino’s HR Solutions team can also supply sample waivers from the state.
- Check your audit!
Workers compensation policies are renewed annually, and you will be sent a bill after the annual audit for any additional premium owed. Check it over carefully. If it doesn’t seem reasonable or odd things are added to your policy, like a location you don’t do business in or one you closed, reach out to your broker to have changes made or to dispute the audit. Unfortunately, many carriers now use auditors who receive additional commissions for additional premiums assessed and who can be overly zealous during audits. Our HR Solutions team can assist with these audits, as well as refer you to trusted brokers, if needed.
Learn more about the benefits of outsourcing your HR work from Armanino’s Outsourced Finance & Accounting HR team.
Britta Satterlund is a consultant in Armanino’s HR Solutions practice. She has an M.A. from King’s College London and a B.A. from UCLA, and she enjoys solving thorny compliance issues like workers compensation.