4 ways to reduce your workers’ compensation costs

Workers’ compensation costs seem to be growing year by year, and depending on which state you’re in, your costs could continue to rise. Recent legislation and modifications to workers’ compensation laws have affected many areas of the country, making workers’ comp costs a major concern for many employers.

According to the National Association of Insurance Commissioners, the average workers’ compensation claim in 2010 cost $12,607. Given that hundreds of thousands of claims are filed each year, companies are spending a significant amount on workers’ comp premiums and claims. Although workers’ compensation insurance is a legal requirement in most states (some allow companies to opt-out, or self insure), you do have some control over what you pay.


Take a look at these four ways to reduce your workers’ comp costs.

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  1. Establish a return-to-work program
    When an employee is injured, he or she may be off work anywhere from one day to several years. In the meantime, your business will keep moving and you’ll either need to hire someone to temporarily fill the employee’s position or slow down your operations.

    The New York Workers’ Compensation Board reports that an employee who is out for six or more months only has a 50 percent chance of returning to work. After two years, the likelihood is reduced to one percent. Couple that with the fact that hiring a new employee can cost upwards of $18,000 and it’s easy to see why getting your injured employee back to work as quickly as possible is the best possible solution for you and the employee. Even if an employee has limited capabilities during their recovery, modified or light-duty assignment can be an ideal solution.
  2. Lower your experience modification factor (e-mod)
    Workers’ compensation premiums are calculated based on your company’s e-mod and a few other factors. The lower your e-mod is, the lower your premium will be. You can lower your e-mod by reducing the frequency of claims your workers file. Changing this comes down to transforming the safety environment at your company. If safety is an afterthought, make it a priority.
  3. Utilize your insurance company’s safety services
    Part of the premium you pay entitles you to utilize their safety consulting services. Nearly every company has a safety department because when their policyholders have fewer claims, it helps them save money. Check with your insurance company to see what services they offer, whether they are all online or if they have a consultant to send to your facility for a safety evaluation.
  4. Verify your classification and payroll
    Double-checking your company’s industry classification and reported payroll could reduce your premium. While your e-mod is the multiplying factor in calculating your premium, your company’s classification code, as designated by the National Council on Compensation Insurance (NCCI), helps to set your rate based on average claims for that industry. Contact your workers’ comp insurance company to verify you are classified correctly.

    Additionally, your premium is calculated in part by the amount of your reported payroll. Most insurance companies perform annual audits to verify that your payroll is being reported correctly, whether the audit is in person or by submitting documentation. If they find that you have under-reported payroll, your company could be billed for the premium they should have collected if your payroll was accurately reported. On the other hand, if it’s determined that you’ve over-reported payroll, you could receive a rebate. Requesting an audit could save you from receiving a large bill or could even pay off in the form of a rebate.





Has your company made strides toward reducing your workers’ compensation costs? Let us know in the comments section below.

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