If you own a small business and have employees, you will need to deal with workers' compensation insurance. Workers' compensation insurance protects employees who are injured on the job, and is required by state law for companies with employees. How can you keep the costs of workers' compensation insurance and claims in your small business to a minimum? Key factors that insurance companies consider when calculating workers' compensation premiums include:
- Level of employee health insurance offered by the employer
- Performance of regular safety checks
- Encouragement and reinforcement of safe working behavior
- Emphasis on the use of safety procedures and proper equipment
- Instruction manuals that detail safety procedures
- Promotion of effective new-hire selection processes
- Employee education and training
- Management accountability
- Elimination of employee risk taking
- Employer's safety record
- Elimination of hazards that cause injuries
- Consistent internal policies and medical referral procedures
- Return-to-work programs
Here are three simple ways to lower the cost of your workers' compensation insurance premiums and claims.
1. Classify employees correctly. Job classification is the main factor determining the cost of your premiums. Roofers and construction people, who work around heavy equipment, have higher risks than office workers. The basic rates for each job classification are set by each individual state.
You can keep your workers' compensation costs down by double-checking that you are using the correct job classification codes for each employee. For instance, one common error that can raise your insurance costs is to assign all your administrative employees the code of office clerk. Not all administrative personnel perform the same job duties, and different classifications have different levels of risk. A file clerk, for example, typically doesn't use a keyboard, while a data entry clerk who sits in front of a computer all day runs a much higher risk of carpal tunnel injury. To be certain you're classifying employees correctly, use the most up-to-date classification code book for your state and thoroughly familiarize yourself with the appropriate codes for your employees.
2. Reduce claims. Look for a pattern to claims that have occurred in your business. Do some departments or areas in your business have fewer claims than others? Determine the reason why. Reducing the number of workers' compensation claims gives your business a better safety record. This makes you a better risk for an insurance company, and makes them more likely to offer you lower rates in the long run. Overall, reducing claims is the best way to reduce your risk management expenses.
3. Bring employees back to work. Keep the costs of workers' compensation claims down by implementing programs that bring injured workers back into the workforce faster, even if it means bringing them back part time or in a limited capacity so that they have time to recover from the injury while still earning wages. The more time an employee spends on disability, the more wage replacement and medical services will cost.
Work with your insurance carrier to develop programs that reduce your workers' compensation costs overall.