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Keeping a Lid on Your Workers Compensation Costs

by Jon Morgan 1. June 2012 16:10

Influence Your Workers Compensation Rates!!

For contractors in the construction trades, getting workers compensation coverage is usually a very expensive proposition. And keeping your workers compensation costs as low as possible will help your bottom line profitability. Too many contractors have a laissez-faire attitude regards to their workers compensation insurance.

What determines your workers comp rate?

  The rates are determined by the type of work that you and your company do. The workers comp rate is a percentage of your payroll cost subjet to a minimum premium and higher risk work equals higher workers compensation expense.  If you are doing  janitorial work, your rates are much less than contractors doing roofing work. The state that you do your work in also determines the cost of your workers compensation insurance. As an example, the workers comp rates in the state of Illinois are about double the cost of it’s next door neighbor, Indiana. When comes to the rates generally the workers compensation bureau of your state sets the rates. For established companies, the amount & size of any claims that your company has had will also affect your workers compensation costs. None or very few claims equals lower workers comp costs.

How to keep your workers comp rates as low as possible

It all starts with having a plan. A plan to keep your workers compensation insurance will consist of 2 primary areas.

  1. The first one is being organized and keeping track of your payroll records. Many contractors sign up for a workers compensation policy and then don’t pay attention to payroll & project details.
  2. You need to have a written safety plan in place. This should include regular meetings to go over required safety procedures that you expect your workers to follow.

Keeping Track of Your Projects

For many small contractor companiess, they do more than one type of project or work type.  For example assume you are an interior remodeling firm. On Monday and Tuesday you may be doing an interior painting job and then Wednesday-Friday you could be doing deck or fence job. Keeping track of the projects your contractor company does will help you keep your costs down. In the above example, 2 days were spent on painting and 3 days were spent doing interior carpentry.  Depending on your state, this could be quite costly. As an example in the state of Illinois, the workers comp painting class is approximately 14% of payroll. The workers comp carpentry noc class  costs around 24% of payroll. many insurance companies will put 100% of the workers comp payroll into the carpentry noc class. If you’re not keeping track of your projects and payroll, you could end up paying way more in workers compensation costs than you have too. If your company is growing , you could also end up with a big workers comp insurance bill due at your insurance policy expiration. So keep accurate records so that you don’t pay any more than what you absolutely have too.

Staying as safe as Possible

Staying as safe as possible at the worksite is just plain smart and also the caring/concerned thing to. First of all, in most small businesses you spend more time with your coworker than you do your own family.  And the last thing that you want to see is a coworker going home in a body bag or a wheelchair because of a preventable accident. In addition to affecting human lives, an accident also affects your companys productivity. The expense associated with finding & traning a new hire is very costly. In additon, the claims that you ultimately have or don’t have affects your workers compensation rates. Your workers comp claims records ultimately affects your rate.  So the bottom line is that the more that you build safety into the everyday work life, things are better all around.

OSHA is a great free resource for contractors. They have all kinds of brochures and safety tips for the taking.  The two big items of concern for the construction industry are falls and working around heavy machinery.  Please check out the OSHA site at soon as possible for your company & employees benefit.

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