Seven Ways to Control Workers' Compensation Costs

Accidents happen in the workplace, and construction companies are certainly no exception. Employees are generally protected under the applicable workers’ compensation laws for each state. But, as with many other expenses of doing business, the cost of workers’ compensation has been rising lately.

The exact amount that must be paid is based on the industry, the nature of the work being performed, the number of employees, the company’s safety record and various other factors. However, a construction company may take some preemptive action to reduce out-of-pocket costs. The following are seven ideas to consider:

1. Ensure proper classification of occupations. Workers’ compensation rates are higher for employees who have hazardous jobs. Therefore, if workers at a construction company are misclassified, rates may be higher than they rightfully should be. Double-check the records for accuracy.
2. Appoint a liaison to the company’s insurance carrier. It helps to have one person function as the go-between. Furthermore, building good relationships through personal contact might avoid minor hassles in the future.
3. Observe legal boundaries, but hire carefully. There are certain restrictions on the questions an employer may legally ask a job applicant. Nevertheless, it is acceptable to require a pre-employment physical for a strenuous position. Similarly, it is permissible to ask if the applicant has health problems that would prevent him or her from doing the work.
4. Do not count overtime for worker payments. In many states, workers’ compensation premiums reflect the size of the company’s payroll. Use the figure for the regular payroll, before any overtime is added, for this purpose. If any overcharges are found, the company can file a refund claim with the insurer.
5. Adhere to safety precautions. A safe workplace can save workers’ compensation costs in the long run. Make sure that the proper equipment is being used and that company procedures are being followed. Stress the importance of safety measures, and discipline workers who fail to cooperate.
6. Educate employees through training programs. The sessions do not have to be lengthy, but should provide the key aspects for workers to know. Focus mostly on health and safety issues. It is critical to make the training sessions mandatory so everyone attends.
7. Explain to employees how the workers’ compensation system works. If they have a better understanding of the rules, they can try to head off potential problems. Counsel employees about the legal avenues for reducing costs through legitimate means.

Of course, this is only a general overview of this important topic. Other factors may come into play. Nevertheless, with professional assistance, a construction company may be able to keep workers’ compensation costs under reasonable control.

May 2008