Intro
Most states in the US requires that businesses carry a worker's compensation policy. Individual states enforce their requirements in unique ways, but nearly every small businessperson who employs others must choose a policy. Naturally you will want to maximize your coverage at the lowest premium rates. This page is here to help you navigate your way through the insurance jungle and protect your business with the best possible policy.
The MOD Factor
It's important to understand how your premiums are calculated. One key factor is Experience Modification, or MOD. This sort of experience is the type where less is more. That's because the MOD is calculated using your claims experience. Your work comp claims need to be lower than other comparable businesses.
Another aspect of MOD is that your experience will follow you. Insurers use the previous three years when calculating the MOD. That is, if you have a major claim it will negatively impact your premium payments for three years. While this may seem overly punitive, keep in mind that a strong record of safety, and minimal claims, will also follow you for three years.
How to Lower Your Experience MOD
You will want to take a proactive attitude towards your MOD factor so that you can move your premium payments downward. There are many things you can do that will ensure workplace safety. Not only will this pay off in terms of your insurance costs, but you may also see a happier workplace when your employees see that you are taking measures that ensure their safety. Happier employees often do better work and positively impact your bottom line. Here are a few things you can do:
- Talk with our agent. Talk to them about how they've calculated your MOD factor. Though the National Council on Compensation Insurance (NCCI) does the calculation, it might be based on outdated, or incomplete, data.
- Sweat the small stuff. Your employees might never make a major claim on your policy, but they might instead make many small claims. Consider a restaurant whose kitchen staff never has a major slip and fall injury, but which sends a worker to the Emergency Room on a monthly basis. Their workers frequently need stitches to treat minor, but significant, cuts. The owner's insurer will raise their MOD factor more than a comparable business who had a single claim for a serious burn injury.
- Thus, it's important to safeguard employees against such minor claims. The restaurateur might invest in safety gloves and do more safety training for her employees. Other ways to raise safety in this way might be to ensure that workers wear slip-resistant shoes, and wear safety glasses near things like the fryer.
- Review your wellness program. Workplace safety arises from best practices and a well-utilized wellness program can help lower your MOD. In an office environment, you might have a program that helps employees instill wrist-stretching exercises into their workday. Such stretching will help allay future claims for carpal tunnel syndrome.
- Discuss safety with your employees. After all, they are the ones on the front lines. They may see areas where there is potential for injury. Allow an open forum where they can voice concerns about tricky stairs, worn-out ladders, or other areas that you don't encounter from your office.
- Get back to work. When an employee goes home on disability leave, every day that your policy pays for will count against your MOD. That is why it's so imperative to have a comprehensive get-back-to-work program. You might figure out ways to help your employee work from home when she's able to get to the computer, but not yet ready for a commute and a full day in the workplace.
- A stitch in time saves on your MOD score. Make sure your employees are reporting injuries immediately. Whenever there is an incident, it must be reported. Whether that means exposure to a toxic chemical or a minor traffic accident, have your employees checked out so that they maintain optimum health. For instance, a minor rear-end collision might result in a neck injury which will only get worse without treatment. Address these things immediately so they don't get out of proportion.
- Hire the best candidates. This goes without saying, but you need to make sure that every employee is fit and ready for the physical challenges of your workplace. Do as much due diligence as the law allows. If you do hire an employee that has certain limitations, make sure that her supervisors are aware of them. While she may be an expert electrician, for instance, she might have an inner-ear condition that should prohibit her from climbing a ladder.
- Implement a drug-free workplace. The last thing you need is to have a claim refused because a worker has a problematic drug screen. Discuss this with your insurance agent to determine the best practice for your business. That is, a more physically-intensive workplace might require that you drug test your employees more often than a sedate office environment. When you take a proactive posture regarding drugs, your MOD score should go down, and your premium payments along with it.
Consider a PEO
Another approach to lowering your work compensation premiums is using a professional employer organization. While this might sound like the most generic sort of professional association, a PEO is a way to work with others to find savings through group rates. Even the smallest businesses can become a part of a PEO.
In fact, very small businesses are frequently unable to afford risk management and other resources that protect the health and safety of their employees. With a PEO, your business' dollars pool with similar enterprises to enable access for all.
In fact, a PEO does more than pool resources for insurance. A PEO can include all sorts of HR solutions including payroll, benefits management, tax administration, and even compliance. Your PEO will know, for instance, how your state implements its employment laws so that you are up to date and operating a fully legal business. You won't have to scrutinize new legislation to determine whether or not your business needs to implement new equipment or procedures. Your PEO team can handle all of that with a team of professionals who specialize in HR-related law and regulations.
Consider how much time and expense you can save when your PEO is able to handle the typical HR trainings such as for sexual harassment or workplace discrimination. PEOs also will have their own IT infrastructure so you won't need to purchase or maintain software services for your HR functions.
Your employees will love that you're in a PEO, too. Frequently workers sacrifice certain benefits for the sake of working in a more manageable environment, a smaller business where they feel they have an impact. When your small business has a PEO you can offer your employees access to 401(k) savings plans, a full array of health benefits, and plans that even cover their dependents.
How to Choose a PEO
There are many PEOs out there, so choose wisely. You will first need to do a full assessment of your needs. That is, take a look at your current HR picture and determine what you need to outsource or what you need to offer.
For instance, if you foresee a coming growth period and want to recruit the best employees, you will want to enhance your benefits package. With a PEO, you can offer more and better benefits, including top-notch health insurance and retirement-savings plans, while incurring less cost than trying to offer these things alone.
When you are researching PEOs, be diligent in your approach. Make sure their team has the experience you expect. Ask to talk with their current clients and determine what sort of service you can really expect in a real-world scenario. You can also investigate whether or not they are members of any national associations. If so, then they have some level of accountability to their industry.
You can also investigate the supervisors in the PEO. Look for seasoned industry professionals. If they offer recruiting and staffing services, make sure the people at the top have a long record of placing top talent. Ask to see credentials. You will want to see professional designations, a history of awards, and academic achievements.
Finally, discuss pricing with the PEO representative. Since you are paying them to simplify things, you want to have clear standards for their pricing. Some PEOs offer per-employee pricing, which will make it very simple for you to assess costs as your company grows.
Then, as you expand, you will want your PEO to be there for you. Look for organizations that offer higher and higher tiers of service so that you don't have to shop around again once your new product line catches fire. For instance, one day you may need a more comprehensive consultative service, or you may want to broaden your benefits offerings. A robust and mature PEO can be there for you and will help you through the growing pains.