CFOs, or chief financial officers, are responsible for the financial health of your company. As a CFO, you must monitor company expenditures, controls and systems; work with vendors to obtain favorable terms; develop a budget; and analyze the company’s future capital investment requirements if additional financing is needed.
Part of your job as CFO is to obtain favorable workers’ compensation insurance premiums as workers’ compensation is required for all businesses in California, regardless of its size. If you are the sole owner and employee, it is optional but you need to have it for any employee you do hire.
Are Rates Regulated?
Workers’ compensation premiums are not regulated so rates vary among carriers. California does recommend rates and carriers are required to file their rates with the Department of Insurance.
The cost of workers’ compensation depends on several factors including:
Past history of work-related injury claims
- Experience modification rating
Eligibility for special group or dividend programs
How to Suspect You are Paying Too Much
There are some signs that you, as the CFO, should be aware of to determine if your company is paying too much for workers’ compensation such as:
Being with the same company for years
It is easy to become complacent and to trust the people or vendors with whom you have done business for years. It is essential that you be competitive, though. Just like pro athletes who test the free agent market, you should do the same by comparing rates with at least 3 other companies. Just because you like the agent or adjuster does not mean you are getting the best rates.
Use of subcontractors
If you use subcontractors, be sure they have workers’ compensation coverage. If they carry their own, it is a sign that they are credible and viable independent contractors.
It may not be necessary to have workers’ compensation for people not engaged in physical labor such as officers of the company. This can save your company thousands of dollars per year, but you need to check with legal counsel regarding mandated coverage.
Your classification changed to a less expensive one
This may be sign that you paid too much in the past. If so, you may be able to recover the overcharges.
Other factors are recent changes in your business operation or an increase in your company’s experience modification factor after the policy begins. To be sure you are paying an amount that is consistent with what other similar companies may be paying, have an audit performed of your insurance coverages and premium payments.