Workers’ compensation insurance is required of all California businesses. As a necessary expense, you still want to get the most value out of any product and coverage for your employees in case of injury is no different.
Determining what premiums your company should pay is a complicated process. Many factors are involved included your payroll figures and the classifications provided to the carrier’s underwriters. One way to determine if you are getting the best value or may be paying too much based on erroneous information is to have an audit conducted.
Cost of Workers’ Compensation
The cost of worker’s compensation for your business is determined by a number of factors:
Type of work
The type of work done is given a manual classification. Employers with workers who perform physical labor or more injury-prone work or have a large payroll will have higher insurance rates.
History of coverage
If your company has a long history of coverage, it is likely you are eligible for discounts if you have a sound safety record for workers within a specific manual classification and manage your own claims. For new or small employers, the base rate of insurance typically applies to them.
Benefits of an Audit
Having your workers’ compensation insurance audited periodically by an a third-party administrator can help ensure you are remaining competitive as well as possibly saving you thousands of dollars in premium payments
If you have employees in other states or workers who cross state lines, such as truckers, having the appropriate insurance is essential or certain defenses may not be available or your company may have to shoulder the claim and all of its costs.
An audit could suggest reclassifying certain employees though you should check with your legal counsel to make sure you are legally doing so or you could face legal problems. If you are working with subcontractors, ensuring they carry their own workers’ compensation insurance can result in substantial savings.
An audit can uncover claims for potential discounts or reimbursements. If you are having a high claim rate, an audit could reveal fraud or explore ways to make your working environment safer and workers less prone to injuries. There are also cost-saving programs that your current insurer may not have disclosed to you or which your present insurer may not have available. Further, an audit could reveal that you are not following the correct state formula for discounting overtime pay, if at all, and to see if you are providing accurate payroll records.
Also, your workers’ compensation coverage could be overlapping the Family and Medical Leave Act or Americans with Disabilities Act resulting in your paying more than you should for coverage already available.