How Low Can Your Bid Go? Check Your Workers Compensation Premium.

If you are a contractor who bids for local or state jobs, you may have experienced losing a bid every now and then.  While I am sure you simply moved on to the next bidding process, did you stop to wonder how the winning bidder was able to bid so low and still maintain profitability? Obviously, the contractor that keeps his expenses the lowest will see the highest profits. What is not so obvious is how to keep one particular expense, which likely adds the most to your bottom line, the lowest it can be. The culprit expense is your Workers’ Compensation premium. If you haven’t reviewed your classification codes, your claims history or haven’t implemented back-to-work or safety programs, read on. We'll cover how to lower your Workers’ Compensation premium which will ultimately make your company more competitive when bidding for municipal or state contracts.

The first step to ensuring that your Workers’ Compensation is priced correctly is to review your classification codes.  Are your office personal classified as roofers or other field titles? If so, this can make your Workers’ Compensation much higher than it should be. Review the Workers’ Compensation policy to see what each of your employees is classified as and make changes if necessary.  Auditing and review of your current payroll for inaccuracies or deductions you can take, like overtime, Davis-Bacon Act wages, etc. can help lower your cost.  Confirming that subcontractors have valid certificates of insurance, and deducting valid business expenses like auto allowances can have the same effect. Your organization’s classification codes and payroll dollars are the foundation for the base premium.  An error on these numbers could cost severely.


The next factor in determining a Workers’ Compensation rate is the past three years of claims history, which contributes to your experience modifier.  The more claims against your Workers Compensation policy, the higher your experience modifier will be.  This, of course, increases your premiums. If you haven’t had an accident, ask your carrier for a loss run just to make sure there aren’t any accidents incorrectly reported. If you had an accident, unfortunately, this will show on your loss runs for the next three years. You can, however, control how much these claims will cost by implementing “back to work” programs.  The gist of these programs is that employers maintain communication with injured workers and, if possible and through permission of the physician, find work that can accommodate the worker’s injury.  By bringing the employee back to work, the claim will cost less by mitigating lost wage payments and ultimately will affect the claims reporting on your policy and shouldn’t hit your experience modifier as hard.


Various States have programs that can assist in lowering workers compensation costs, e.g. a certified safety committee credit, a contactors credit program, etc.  Utilize these whenever possible to lower your costs.


Finally, making sure safety procedures are developed and enforced will mitigate the risk of an injury. Depending on the type of work your organization does, you may want to institute a two-person rule when workers need to carry heavy objects over a certain weight limit; institute the use of safety harnesses for employees working in high areas or other procedures that would make sense for your individual organization.  After these policies are put into place, be sure to they are communicated to the employees and enforced.  


Keeping your Workers’ Compensation premiums low will take investigating your current policy and pre-planning when it comes to implementing procedures that keep your claims  low or non-existent.  While this takes effort, it will be worth it if you are able to keep your expenses low enough to be the lowest bidder in municipal and state bid processes.