What you don’t know about Workers’ Compensation coverage could be costing you money

Workers’ compensation insurance was created to protect employees and help employers cover the cost of workplace injuries. However, some business owners think it is just an extra, or even unnecessary, expense for their company.  This contention is based in party on the assumption that workplace injuries only happen in high-risk industries, like manufacturing and construction.  Of course, this isn’t always the case and employees can be injured in any line of work.  Although construction related work is generally higher risk than office work, even finance, insurance and professional services can also have major claims.  A real-world example is a staff member getting in a major automobile accident while out picking up lunch for the office and stopping by the post office on company business.

You might be asking yourself where you can go to get workers’ compensation insurance. Well, there are generally two options:

  • A private insurer. Typically, there are several coverage options available and an experienced agent can also help you understand and choose coverage that suits your company’s needs and budget.
  • State Workers’ Compensation Insurance Fund (State Fund). Depending on the state, coverage can be optional and rates tend to be “pooled”, instead of individually assessed, based on your classification codes.  There are over twenty-two states that have their own workers’ compensation fund.

Yet another alternative for obtaining cost effective coverage is to go through a Professional Employer Organization, (PEO).  Teaming up with a PEO creates a “co-employment” relationship, which along with a variety of other benefits, allows your company access to the PEO company’s workers’ compensation coverage.  The idea being that because of the economies of scale with respect to the number of employees under a plan, you can obtain more competitive rates by going through a PEO than you can get on your own.  Furthermore, when you do incur an injury, the PEO will handle the claims processing.   Of course, depending on your particular needs, there are other benefits to joining a PEO, such as HR support, employee benefits, payroll processing, and support with regulatory compliance.  

Trying to cut corners by treating workers as independent contractors (1099 workers) to avoid paying for workers’ compensation insurance can come back to haunt employers. Just because you treat workers as contractors doesn’t mean you can avoid having workers’ compensation coverage.   The IRS has very particular guidelines and requirements for classifying employees vs contactors and they aggressively enforce them.  If the state or IRS determines that workers are mis-classified, employers can face significant penalties and in some states the employer can be held criminally liable.

Occupational Safety and Health Administration (OSHA) also has regulations for workplace injuries. These regulations can have a big impact on your business.  OSHA ensures that your employees have access to all the workers compensation records and notices about workplace health and safety.  OSHA also has requirements with regard to Recordkeeping and Reporting Requirements.  They also define recordable injuries and illnesses for employer reporting.  The amount and severity of injuries in your workplace will impact your rates and possibly even your ability to get coverage.  Maintaining a safe workplace is the best bet to keep your costs low and your employees safe.

There are a number of ways for employers to help keep the workplace safe.

  • Establish and enforce workplace safety rules
  • Train employees and supervisors on safe work procedures.
  • Hold routine safety meetings
  • Provide protective equipment
  • Maintain a clean workplace
  • Praise safe work habits

For more information on Workers Compensation coverage please contact us at 844-305-1500 or visit our website at www.backofficeremedies.com. And don’t forget to check out the next blog to learn more about how a PEO can save you time and money!

Written by Erica Davis

Updated on February 22, 2018 18:44