A Look at Worker’s Compensation
Workers' Compensation Insurance works differently than conventional insurance marketing. A broker looks at your company, the nature of the work, and the claims experience. The broker then searches for a market and insurers willing to take on your business as a client.
If you have been in business for a while, you know this is a battle contract after contract - even if your business is low-risk.
This has so much to do with things well beyond your control. For example, the company that insures your workers secures re-insurance from others. And, all these markets fluctuate with the larger economy. So generally speaking, you may not lose coverage for a single claim - unless it is enormous. But, you may lose it nonetheless.
Each state has a Workers' Compensation Board. The respective Boards determine the base cost for each occupation in terms of the frequency and severity of injuries in the occupation. The insurance company can then increase or decrease the state rate based on employer history, the health insurance provided by the employer, and larger market factors.
A lose-lose for small employers?
Insurance is the spread of risk. Premiums provide the present value of future benefits. So, it is very much a matter of size.
- Small employers, say less than 100, may not bring enough to the table. In some states, the smallest employers may be exempt from the requirement to insure or may self-insure.
- Employers between 150-250 employees may not have the resources to fund A+++ safety training and equipment.
- Employers pushing to small business margins with 500 employees must weigh the impact of workers' comp premium, training, equipment, and personnel on overhead.
Explore all options!
As you shop for the workers' comp coverage required in your state, start with just what your state requires of businesses your size and the occupation categories you employ.
- Research what options the State Board accepts; for example, there may be insurance pools.
- Determine if self-insurance is permitted and at what cost.
- Ask your commercial liability broker to clarify how comprehensive your commercial insurance package is, and to what degree it would cover workplace injuries - if at all.
- Network with similar businesses and employers.
Rethink your organization!
Too often, small business owners grow in unplanned ways, adding one employee at a time and doing some cursory cost analysis to justify the hire. What they do not do is forecast the expense of the employee well into the future. If you take the time to foresee the impact of human capital over the years, you have to anticipate rolling out compensation and benefit plans. You have to understand these futures do not maintain the trajectory you originally set; the arcs jump incrementally and periodically over the years.
As often as not, facing these facts should make you want to re-think your organizational structure. Consider a business relationship called "co-employment." In a co-employment relationship, a Professional Employer Organization (PEO) takes on all the Human Resources administrative functions. You run the store, so to speak, controlling all the daily work of the employees but the PEO absorbs and shares employer-employee liabilities, including creating workplace policies and procedures and overseeing compliance issues. A PEO is not a temp agency, and it does not make your personnel decisions, such as performance and discipline.
Your PEO helps you retain good employees by offering or improving employee benefits. It will assure regulatory compliance, so you can focus on what drives your business. It will take on the risk of employee-related claims, and their buying power will negotiate your employee life, health, dental, and retirement benefits as well as workers' comp coverage. Logical, productive, and cost-effective, it may be your best option.
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