Construction Accounting Article -
6 Ways to Cut Workers’ Compensation Costs
Target Audience: General Contractors, Construction Industry Professionals, Workers Compensation Interest
For contractors, having an employee suffer a work-related injury is an all-too-common occurrence. In 2004, the nonfatal injuries and illnesses incidence rate in the construction business was 6.4 per 100 full-time workers compared to 4.8 in the rest of private industry, according to the U.S. Department of Labor.
For this reason, you’re probably always looking for ways to control your workers’ compensation insurance costs. Here are six to consider:
1. Re-evaluate your codes. Many times companies can save money by re-evaluating their classification codes. If you operate in a state that controls workers’ comp insurance through a state agency, contact this agency and schedule a re-evaluation appointment.
Most states, however, require contractors to buy their own workers’ comp insurance through a private insurer. An agent who understands your niche of the construction industry and can advise you on controlling your costs should also be in a position to help you re-evaluate your codes. If your agent isn’t doing this for you, it may be time to find a new agent.
2. Tighten your hiring process. A long-term strategy for managing workers’ comp claims begins with the hiring process. If you’re serious about controlling these costs, think about administering a pre-employment physical and/or medical questionnaire to help identify candidates suited for physically strenuous jobs. Just be sure to consult an attorney to ensure your testing isn’t inadvertently discriminatory.
3. Educate your staff. Employees need to know that safety is a top priority and you’ll take all incidents seriously. Establish (and regularly update) a comprehensive safety training system that teaches workers to both avoid mishaps and properly report any accidents that do occur, regardless of severity.
4. Discourage fraud. Fraudulent workers’ comp claims are, unfortunately, a fact of life. As part of your safety training system, explain to employees how you’ll investigate accidents, what the consequences are for fraudulent claims and how fraudulent claims can hurt the company (and, more specifically, their wages and future employment).
5. Follow up on all claims. Stay on top of claims that have already been processed. Follow up with injured workers frequently, and let them know how much you value them. Staying involved in their recovery can boost their morale, speed their return and, ultimately, improve employee retention. An additional benefit of this follow-up can be a further deterrence of fraudulent claims.
In addition, just as you might implement pre-employment physicals, you could also try postaccident physicals (again, after consulting your attorney). These could help ensure that a worker is ready to go back on the job.
6. Review your accident history periodically. If the review indicates there have been similar injuries, you’ll know when and how to focus your improvement efforts.
Because workers’ comp coverage is claims-based insurance, any time you reduce claims, you save money. More important, incurring fewer claims will give you a healthier, happier work force. Workers’ comp rates and rules vary from state to state, so be sure to consult your CPA and insurance agent on this subject.
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