Workers' compensation coverage is mandatory for most employers in Pennsylvania, and according to the PA Department of Labor & Industry, “Employers who do not have workers' compensation coverage may be subject to lawsuits by employees and to criminal prosecution by the commonwealth.”
Although it may be a necessity, there are ways to lower the cost of your Worker’s Comp Insurance premiums. To lower your WC costs, you need to understand how your premium is calculated.
How is Your Worker’s Compensation Premium Calculate?
A simple formula is used to calculate your Workers Comp premium for each employee:
RATE x (PAYROLL/100) x EXPERIENCE MODIFIER = PREMIUM
RATE:
The rate is determined by an employee’s classification code, which is based on how likely that worker is to be injured on the job. The same classification code is given to employees in the same industry who perform similar functions. It’s no surprise that pilots, drivers, and construction workers – considered among the most dangerous jobs – have a higher rating than an office worker.
PAYROLL:
This number is derived from a projection of your payroll for the current period of your Workers’ Compensation policy.
EXPERIENCE MODIFIER:
Your modifier is based on your company’s loss history – how many WC insurance claims you have submitted - compared to the average loss history in your industry. A company is issued an experience modifier of one if their loss history is average. If your company’s loss history is better than average, you will receive a lower modifier. If your company’s loss history is worse than average, you will receive a higher modifier. The lower your modifier, the lower your insurance premiums.
5 Tips to Lower Your Workers’ Compensation Costs
Review Your Classifications
A classification error can cost you a lot of money. For instance, if your administrative assistant has accidentally been assigned the classification of a roofer, you’re going to pay a higher WC premium for that employee than you need. A roofer is more likely to be seriously injured on the job; therefore, the classification code of a roofer will be significantly higher than that of an administrative assistant.
To make sure you aren’t making any costly classification mistakes, it’s a good idea to have your insurance agent review any classification codes you aren’t sure of.
Create a Safer Work Environment
Fewer insurance claims result in a lower experience modifier, which results in lower WC premiums. How can you make fewer claims? Create a safer work environment. Your business should have a documented safety program that is enforced and embraced by all of your employees.
A small reduction in your experience modifier can result in a significant reduction in your WC premiums.
Plus, in Pennsylvania, employers can receive a 5% Workers' Compensation premium discount by forming and maintaining a workplace safety committee that meets state-established requirements for certification.
Maintain a Substance-Free Workplace
An employee who uses drugs or alcohol while on the job can cause injuries to both themselves and their co-workers. Make it clear from the time you interview a potential employee that you have a zero-tolerance for substance abuse.
One way to do that is requiring a pre-employment drug test, and depending on how dangerous a work environment is, random drug testing for all employees.
Establish a Return-to-Work Program
The longer a claim remains open, and an injured employee is off the job, the more it costs the employer. A return-to-work program gets employees back to work once they are medically ready. That could mean reduced hours or reduced duties that are approved by the injured worker’s physician.
Find Out If You Can Join a Group
In some states, employers that have been in business for a while and have a better-than-average safety history can get a group rating by joining a recognized group, which results in lower WC premiums.
How to Save EVEN MORE on Your Workers’ Compensation Insurance!
American Insuring Group specializes in Workers Compensation Insurance, so we can guide you through the process and provide suggestions for additional ways to save on your Workers’ Comp Insurance. As independent agents, we have the advantage of working with lots of insurance companies, giving you more ways to compare and save! Give us a call at (800) 947-1270 or (610) 775-3848 or connect with us online.
