Workers compensation insurance is a requirement for doing business in most places. It’s not a suggestion, it’s a legal requirement. And while it’s just one of the many expenses of running a company, there are some simple things you can do to lower your workers compensation premiums.
Generally speaking, you should consider workers compensation insurance like car insurance. If you have no claims, your premiums are going to go down. If you’re involved in many accidents, it’s going to go up. Just as new drivers can opt to take a safety course in order to lower their car insurance, you need to be pro-active and work towards few or no accidents in the workplace.
While the exact equation may differ slightly from place to place, the general formula for determining your premium looks something like this:
Industry Rate x $100 payroll x Modifier (sometimes called an Experience Modifier, or MOD) = Premium.
Your industry rate is determined by a third-party organization (usually state or provincial) based on a number of variables and criteria. It essentially looks at the likelihood that someone in your industry is going to get hurt. Some industries have a high probability, while others have a very low or nonexistent one.
Your overall company payroll is used to calculate your premium (expressed as an amount per $100 of payroll). One of the easiest ways to lower your premium is to keep your payroll figure correct and up-to-date with the relevant organization. If you reduce your payroll for any reason (downsizing, layoffs, retirements), reduce that figure accordingly.
The MOD is determined by the same third-party organization that determines your industry rate. It looks at your claim history (among other things). Few or no claims, and your MOD will help to reduce your premium. Many or recent claims, will increase it. The MOD is there to reward positive and safe workplaces. So...take steps to make and keep your place of business safe for you and your employees. You have no control over the industry rate, but the MOD is a direct reflection of your safety procedures and implementation. Be pro-active.
Get Safe and Keep Safe
Be pro-active in the workplace when it comes to safety. The safety of your employees should not be a one-time thing. It’s not something you can check off a list and be done with it.
- Ongoing assessment on all work environments. Review the warehouse, office, supply room, washrooms, etc. for safety issues on a regular basis. When something is identified, address or fix it immediately.
- Provide appropriate employee safety training and frequently review those procedures and processes. Post reminders (posters, brochures, signs) in the appropriate areas.
- Provide all safety equipment and keep them certified and in excellent working order.
- Look at off-the-radar ways to increase safety, like ergonomic office furniture, secured carpets and mats (to avoid slips and tripping hazards), restricting stacks of anything that could topple over, back braces for anyone required to lift heavy objects, and anything else you can provide to either increase comfort or eliminate risk.
Involve Your Employees
Make workplace safety a top concern for everyone. Involve your employees in safety decisions and concerns. Ask for feedback from them - no one knows what safety concerns exist better than the people in the trenches. Make reducing the insurance premium a business goal, with a promise to invest the saved amount into something useful (and safe) for the entire company.
Find a good insurance broker that understands your company and industry. There’s not a lot of wiggle room, but a good broker can work on your behalf to help reduce your premium. They may have suggestions for you.
Many states and provinces have some sort of government initiative to lower premiums by increasing safety awareness and procedures. Much like the young driver taking an insurance-lowering course, these programs positively affect your MOD rating when completed. Check with your local government to see what, if anything, exists.
You can’t eliminate workers compensation premiums, but you can actively work towards reducing the premiums due. Running a business is expensive enough, so take advantage of every opportunity to lower costs in every way you can. Check out Reduce Your Workers Comp Costs for some industry-specific advice.
Photo Credit: Fernando de Sousa, via Flickr