It’s not really until you are hit with a few unexpected workers’ compensation mistakes that you start to think about how to improve them. When it’s out of sight, it’s out of mind for most businesses. Most employers look at workers’ compensation as an unavoidable cost of doing business. However, it works to protect your business when the worst happens, and even simple mistakes can cost your company.
1. Underestimating or overestimating payroll
There are two common workers’ compensation payroll mistakes an employer may make. The first is underestimating the projected annual payroll. As a workers’ compensation premium is directly related to the estimated payroll, any underestimating at the beginning of the policy period will result in a premium charge when it’s time for the audit. Often, this large amount due comes as a surprise to the employer, and it is due and payable immediately upon audit.
The second mistake is overestimating the policy period payroll. When workers’ compensation payroll is overestimated, the employer will end up overpaying for their coverage. Although this sounds positive, the additional premium paid remained in the insurer’s possession during the year, and the employer lost the use of the funds and potential investment income. Additionally, the insurer may not cut you a check for the overpayment, but instead apply it to future premiums, which ties up the funds for an even longer period.
IIt’s important to be as accurate as possible when projecting payroll and to let the insurer know as soon as possible when changes to operations occur. It also may be possible to report payroll through your payroll provider. This up to date payroll notification with the insurer on a weekly or monthly basis provides for accurate premium calculation, and foregoes the need for an annual payroll audit.
2. Not checking subcontractors have coverage
If a business uses independent contractors or subcontractors, they need to obtain their workers’ compensation insurance before beginning any work. Each subcontractor is responsible for providing insurance for their workers. Without proof of their insurance coverage, the business may be charged for this exposure.
If a subcontractor’s worker is injured without being covered by an insurance policy, the contractor becomes responsible for the payment of benefits.
3. Poor workers’ compensation claims management
Poor claims management may result in an increase in premiums. Generally, you should do the following to avoid costs rising:
• Report claims to the insurance company as soon as possible
• Thoroughly investigate the cause of injuries and illnesses
• Monitor all open claims
• Keep backups of documents relating to a claim
• Work towards the goal of closing claims as soon as possible
• Stay in touch with your insurance company adjuster
• Do all you can as an employer to get the injured employee back to work as soon as possible
Workers’ compensation is a necessary coverage when operating as a business, but it’s also one that has your back. Work with your policy to prevent hikes in premiums. A business can manage their workers compensation costs effectively, when they update their insurer as changes in staffing and payroll happen, when employee are hurt or return to work, when they require proof of insurance from all subcontractors, and handle workers’ compensation claims effectively.
Do you have the workers’ compensation policy you need to protect your staff? The team at Lou Aggetta Insurance Services can help you to secure reliable commercial insurance to safeguard your organization. Contact us today in Pleasant Hill, California to get started.