Your immediate response to a Claim can dictate the impact it has on your business, here is a quick guide on steps to take to minimize the impact a claim has on your business.
The Importance of Return to Work Programs
As a risk management consultant, I have had the opportunity to work with many companies across several industries over the years, and one of the most critical aspects of risk management is ensuring that your employees return to work safely after an injury or illness. In this regard, I strongly recommend that all industrial companies implement a transitional return to work program.
Transitional return to work programs are designed to help injured employees get back to work safely and as soon as possible. These programs involve a series of steps that enable employees to transition back into their regular job duties gradually. They may involve modifications to work hours or duties, as well as ongoing monitoring of the employee's condition by a healthcare provider.
The benefits of these programs are numerous, both for the employer and the employee. For the employer, a transitional return to work program can help minimize the cost of workplace injuries by reducing the amount of time an employee spends away from work. This, in turn, can help reduce workers' compensation costs, which can be a significant expense for industrial companies.
Moreover, when an injured employee is able to return to work, even in a modified capacity, it can help improve workplace morale and productivity. It shows that the employer values its employees and is willing to invest in their well-being. This can result in increased employee loyalty and motivation, which can positively impact the company's bottom line.
From the employee's perspective, a transitional return to work program can also have numerous benefits. It can help ease the transition back into the workplace, which can be challenging after an injury or illness. It can also provide a sense of purpose and accomplishment, which can be essential for an employee's mental health and well-being.
Additionally, returning to work, even in a modified capacity, can help injured employees maintain their skills and prevent them from feeling isolated from their co-workers. This can help reduce the risk of depression and other mental health issues that can arise when an employee is away from work for an extended period.
Therefore, I urge you to take action and implement a transitional return to work program in your company. Doing so will not only protect your employees but also improve workplace morale and productivity, and reduce the cost of workplace injuries. This all, in turn, reduces your workers compensation premium.
If you're unsure where to start or need assistance in improving your current program, I would be more than happy to meet with you to discuss the implementation and improvement of your transitional return to work program. Please contact me to set up a meeting and start taking action to protect your employees and your business.
Workers Comp Premium Audit Mistakes and Issues
Workers compensation premium audits are an essential part of managing insurance costs for businesses and one of the many items that we help our insureds with. These audits determine the premium that a business owes based on their employee payroll. However, there are several common mistakes that are made during these audits, which lead to large additional premiums. It is then our job to find and correct the issues. Here are some of the common mistakes that we correct.
Incorrect Employee Classification
One of the most common mistakes made during workers compensation premium audits is incorrect employee classification. Every employer generally has at least three class codes per state; Governing class, Clerical, and Sales. The Governing Class is the classification that best encapsulates the type of work that your company does. Every employee is classified as the governing class unless there is an exception. The common exceptions are employees who only work in the office (clerical) or who are engaged in outside sales. Employees can also be classified outside of your governing class if they are engaged in a different type of work and there is a physical separation, like Drivers.
Manufacturers, distributors, and contractors can easily have 4 to 6 different class codes. For example, many manufacturing companies have different codes for employees who work in the facility and for those who install/service at customer locations. Each classification has a different rate, and many times those differences are substantial. The average wholesale distributor will have a Drivers code, Warehouse Code, Sales, and Clerical. The Driver code costs 78 times more than the Clerical code! Just misclassifying one or two employees can lead to significant overcharges.
Owners/officers
Another common source of audit mistakes is the auditor adding the full owner/officers payroll to the governing class. Depending on the state and business entity (LLC vs Corp), you can choose to include or exclude the owners/officers in coverage. When you choose to or are required to include the owner/officer, you are allowed to cap the wages that are included in your WC audit. Since owners/officers are typically the highest paid employees or may take a large distribution, this is another potential source for getting overcharged on your WC audit.
Subcontractors and Vendors
Another mistake that we often correct on audits is including payments made to subcontractors or vendors to your payroll. The Workers Comp policy provides coverage to uninsured subcontractors as ‘statutory employees.’ If your subcontractor does not have their own Workers Comp insurance, then you are getting charged for them on your audit. When you complete your audit, you need to highlight payments made to subs/vendors and provide proof of their Workers Comp coverage. Many auditors simply add up all payments made to third parties and include with payroll, unless you provide the WC proof up front. The auditor then assumes those payments are treated as uninsured subs and issues the audit with a large increase. This is another reason why it always important to get Certificates of Insurance from subs and vendors.
Overtime
Businesses that pay overtime have an extra step they need to take when completing their audit. The purpose of the WC audit is to accurately quantify your workplace injury exposure. Since payroll is used as the best metric to quantify work hours, it would not be fair to charge you based on paying overtime hours at higher hourly rate. The audit needs to factor in overtime work, but charge you based on regular rate, and not the overtime rate. Essentially, if you pay time and a half then you should be dividing your total overtime pay by 1.5 and adding that to your regular pay. If you are not breaking out overtime payments in the reports sent to the auditor, then you may be overpaying for your Workers Comp insurance.
COVID Pay
This is a new source of audit confusion but since 2020 most states adopted temporary audit rules to classify payroll you were required to pay an employee under the Families First Coronavirus Response Act as a separate “COVID/Telecommuter” class code at a minimal rate. During their audit, employers needed to specifically highlight these payments to their auditor in order for them to get reclassified. Employers who failed to do so were getting charged at a much higher rate than they should have bee.
Severance
Lastly, severance is one of the more rare audit issues we come across. Many companies that pay severance pay it out of payroll so these payments show up in the reports sent to the auditor. However severance should be excluded because it doesn’t quantify workplace exposure, since it is payment made to an employee who is no longer working there. Since severance is rare, it will always be up to the employer to highlight it on their payroll reports. Auditors will very rarely, if ever, ask an employer if the payroll reports include severance pay.