Looking for cost-savings measures comes with the territory of running a small business. You may think you’ve maxed out your savings in different areas, but have you? With the right strategy, you may be able to reduce your company’s workers’ comp expenses.
Worker’s compensation is a cost nearly every business must bear, and it can be hard on the budget. In Georgia, any company with three or more employees, including part-time workers, must carry workers’ comp insurance coverage. Knowing that you must carry this expense, read on to find out how to best manage the cost.
Workers’ compensation insurance provides coverage to employees injured on the job. Employees receive benefits to cover their missed paychecks and medical expenses. But paying these benefits increases your company’s workers’ comp premiums.
Many factors contribute to the cost of maintaining workers’ compensation insurance. These include:
Each of these items plays a vital role in determining how much your company pays in workers’ comp premiums. Proactively working to reduce the number of claims can help bring down your costs. HR outsourcing can be a great way to reduce your workers' comp costs.
HR outsourcing gives you access to workers’ compensation experts who can help you attack the items above, reducing the amount you pay in workers’ comp premiums. These experts can work with you to help you create a strategy for cost reduction in several ways:
For each workers’ comp claim filed against your company, your premium goes up. Likewise, the more benefits paid out to an injured employee, the higher your rate. By creating a safety program, your HR outsourcing partner can help to reduce the frequency and severity of on-the-job injuries, lowering the average claim payout. This then reduces your overall burden.
When you develop a return-to-work program, injured employees come back to work sooner. They may not return to their same position, and they may return on a part-time basis until they fully recover. But getting employees back to work takes them off of workers’ comp benefits. Your HR outsourcing partner actively works to reduce the total amount paid out to employees under your workers’ comp plan, reducing the premium increase.
Companies have many HR outsourcing options, but only one type offers a comprehensive and cost-effective solution—Professional Employer Organizations (PEO). When you partner with a PEO, you get access to many benefits that help reduce costs. This includes joining the PEO’s workers’ comp plan.
Insurance companies use the experience modifier (e-mod) rate to determine your workers’ comp premium. The more claims you have, the higher your e-mod rate, the higher your premiums. If your business has historically had lots of employees file workers’ comp claims, your rates may be high. With a PEO, you get access to their e-mod rate which might be significantly lower than yours, providing you with cost savings.
This is one of the most overlooked ways to lower workers’ comp costs for your business. Each employee is classified under a specific code that generally describes the work they do. Insurance companies use these codes to determine premiums for workers’ comp coverage. Employees may legitimately fit within more than one code. So finding a different classification code for your employees could mean a lower workers’ comp rate. Your HR outsourcing partner can quickly evaluate your employees and their codes to reduce your costs.
While most employees have good intentions, some may try to get workers’ comp benefits fraudulently. When you deal with workers’ comp on your own, it’s easy to miss these fraudulent claims. However, with a PEO, HR experts review every claim made and work to ensure that only legitimate workers’ comp claims receive benefits. Your PEO will also send experts to represent your company’s best interests at hearings.
With the right partner, HR outsourcing can make sense for your business. While different types of HR outsourcing can achieve some of the cost reduction strategies above, you see the highest ROI by partnering with a PEO. Through these cost-saving initiatives, you can see a reduction in your workers’ comp premiums.
With a PEO, not only can reduce the frequency of on-the-job injuries and reduce the severity of each injury, but you can also reduce your company’s financial burden. Partnering with a PEO is the best way for your company to manage and control your workers’ compensation costs.