When considering workers compensation insurance for your construction business, it’s important to keep in mind the risks associated with the concrete industry. Some of the ways to protect your company from these risks include:
• Securing insurance coverage for all employees based on their job description or class code
• Ensuring that independent or subcontractors have their own workers comp coverage in place
• Understanding your policy limits and whether the policy completely covers your risk.
No matter how big or small the construction firm, if it has employees and works with the public, there are inherent liabilities each business owner faces. By gaining knowledge about workers comp insurance, you’ll find it much easier to make the right decisions about the insurance company and coverage you choose.
What You Need to Consider about Workers Comp…
Employee Classifications
Employers use assigned workers comp class codes for their employee payroll. These codes are based on the primary tasks the employee completes while on the job. Companies must pay close attention to proper categorization of their employees. If an employee’s payroll is reported under the wrong category, there may be either an over-payment or underpayment on the workers comp charges.
Although an employer may get away with reporting employee payroll inaccurately for a short time, a workers comp audit by the insurer will quickly find the incorrect classification. This, in turn, can ultimately result in a large bill at the end of the policy year if the business paid premiums in a class code with a lower rate.
In many states over the years, employers also found ways to reduce their payroll tax liability and insurance expenses by classifying workers as “independent contractors.” Again, an audit will reveal whether or not workers are actually employees or independent. The Workers Comp Boards in each state along with the IRS have developed a litmus test to determine how to classify workers as employees or independent contractors.
Recommendation: Make sure to report payroll in the right classification code for your employees. If you believe you may have a wrong class code assignment, call your broker or workers comp carrier for a review.
Workplace Safety
Insurers look favorably on employers who take an active role in mitigating their workers comp losses. Businesses with strong safety programs, practices and precautions are often eligible for additional discounts on their coverage depending on the state and specific carrier.
An example of a safety practice might be regularly scheduled, document safety meetings in compliance with State and Federal OSHA requirements. Another could be periodic employee drug testing for all workers that drive company vehicles.
Some larger construction companies may choose to outsource risk management services to an independent firm so as to reduce employee costs of running safety programs. This additional expense is usually offset by the savings to the employer’s annual insurance premiums for both workers comp and other commercial insurance coverage.
Recommendation: Take safety for your workers seriously. Implement a formal workers comp safety program with clear instructions and regular meetings to keep employees aware of your company’s safety policies. Preventing work site injuries will not only save your company on insurance costs, it will also keep your employees free from harm and reduce lost pay and time from work – a win, win for both the company and worker.
Experience Modification Factor (ex-mod)
If you’ve been insured for a while, you’ve probably reached the point where your company uses an experience modification factor when reporting payroll. This ex-mod ratio is a multiplier to calculate policy premiums. The ratio indicates your company’s claim experience over a 3-year time period, and it acts as either a debit or credit to your premiums.
For example, a decorative concrete contractor with zero claims over a three year period may be assigned an ex-mod factor of .90. That means the premiums for this business would be 10 percent less than the standard base workers compensation insurance rates.
Likewise, an ex-mod factor of 1.25 would mean that the contractor would pay 25 percent more on workers compensation premiums.
Because claims history directly affects your ex-mod ratio, it is vital to stay on top of your workers comp claims by taking steps to implement an active safety prevention program to reduce, limit and eliminate workplace injuries. Despite the best efforts of business owners and workers, on-the-job injuries are inevitable, but being prepared can often help to reduce the lost time and potential severity associated with many workers’ claims.
Recommendations: Prevention is always the best policy with proper employee training a close second. Ensure that employees understand how to report all work-related injuries as soon as possible and that they know how to handle claims. Proper safety equipment and workplace training of all employees will help them stay aware of potential safety issues before accidents happen.
If you’re a contractor in need of workers compensation insurance or would like assistance understanding your policy and assigned class codes, take time to speak with workers comp experts, Enforce Coverage Group. Located in New York City, these professional brokers specialize in commercial insurance coverage for construction companies.