As a business owner, there are so many details that need to be addressed. Paying the bills, ordering the supplies, prepping the product, organizing inventory, the list goes on and on! One coverage that falls under the "must be taken care of" category is Workers' Compensation. Workers' Compensation is a coverage which kicks in when one of your employees is injured on the job. This could be a cut hand, a sprained ankle, a bumped head, or even worse. Workers' Compensation gives business owners the peace of mind knowing that if one of their valued employees is hurt, they will be taken care of, and the business will not have to pay medical bills out of pocket. Since the early days of the 20th Century, the courts have determined that it is the responsibility of the business owner to maintain a safe working environment, as well as to take care of any injuries that an employee may incur while working. Before that time, many workers labored under horrific conditions, and many of them lost limbs with absolutely no compensation whatsoever. Since that time, the Workers' Compensation insurance product was developed. Now, employers can shift the risk of paying for injuries to an insurance company instead of paying medical bills out of pocket. A whole new industry related to workers' injuries sprang up with a multitude of attorneys, doctors, and therapists setting up shop to take care and service this emerging societal phenomenon. All of this economic activity resulted in an increase in premiums for business owners. Instead of being something that an employer would gladly pay to take care of their employees has become a larger and larger bill for many businesses. Naturally, employers have looked for ways to cut costs. One way that some employers tried to cut costs was by paying their employees on a 1099 form, thus removing them from payroll and avoiding the Social Security tax. While this may seem like a good idea, the law does not allow this except in very specific circumstances. The IRS has a checklist to assist employers in deciding whether the people they hire are employees or independent contractors. You can find the link here: https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee. Many business owners have found to their detriment that their attempt to shift the responsibility for taking care of their workers wasn't legal and ended up costing them big time. While there's no way of getting around providing Workers' Compensation (short of getting rid of employees!), there are ways to keep the costs down. First of all, make sure that the employees are classified correctly on your policy. Workers' Compensation rates are based on wages paid to different classes of employees. A clerical employee who works in an office setting is much less at risk than someone operating sharp blades. Ask your agent about how best to determine these classifications. Secondly, make sure that the payroll amounts your premiums are based on are accurate. If you've cut hours to save money, make sure that your insurance companies knows this and makes adjustments accordingly. Thirdly, make up (and enforce!) a safety program in your business. The very best way to keep premiums down is to avoid accidents in the first place. Also, a safety plan does no good if it's not used, so make sure your employees are regularly educated and informed about safety. Fourth, keep an eye on your open claims. Oftentimes, old claims remain open, even if they've been settled. By being proactive, you can contact your insurance company to make sure that they close out any old claims. This helps keep what's known as an Experience Modification Factor low. Last, see if you are eligible for a deductible. Many companies offer deductibles for their Workers' Compensation policy. This enables you to take care of the small "first aid" types of claims. Once again, this keeps your claims frequency down and your premiums lower. As always, if you should have questions, please feel free to contact our office at (661) 946-4224. We'll be happy to review your policy and assist you with your questions.
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AuthorDave Owens, Owner/Agent. I have proudly served in the Insurance Industry for over 20 years. Archives
October 2019
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