How to Reduce the Burden of Workers’ Comp Insurance

Having workers’ compensation coverage is necessary for staffing agencies, both to protect temporary employees in the event of an on-the-job injury or disability and to comply with regulatory requirements.

Compliance in this area, however, comes with significant costs. In addition to penalties for failure to provide coverage, the cost of workers’ comp can be driven up because of administrative and record-keeping mistakes, as well as flaws in or the absence of an adequate employee and claims screening process.

Common challenges
Staffing agencies that operate in multiple states must account for the variations in workers’ comp laws. Plus, coverage needs change based on the varying risk levels found in different industries. You must understand and comply with state regulations wherever your agency operates as well as know what to do if a claim is filed. Accurate and diligent record-keeping is essential to avoiding costly penalties.

Additionally, keep an eye out for the signs of fraud. False claims will drive up premiums, thereby increasing costs. While it’s prudent to have a process to accurately collect and record information from a workers’ comp claim, having a process to weed out potential fraudsters from the start is equally important.

Attorney/Risk Consultant Rebecca Shafer, an expert in workers’ comp cost containment and litigation management, explains that workers’ comp premiums were once such a big burden for staffing agencies that some were forced out of business, noting that these insurance premiums can be the second-largest expense to companies after payroll. The problem occurs when agencies either fail to control their workers’ comp losses or poorly screen potential employees.

Minimizing costs and risks
Workers’ comp coverage is a major expense for staffing agencies. The costs and risks associated with the coverage increase when agencies fail to have policies and processes in place specifically to manage workers’ comp.

To help agencies address these concerns, Shafer offers eight steps for reducing workers’ comp costs:

1. Vet and screen temporary employees properly with drug testing, background checks and prior injury history.
2. Refuse to place employees in hazardous or dangerous work environments.
3. Test and verify the skill sets of employees before they are placed with an employer. Improperly or inadequately trained employees are much more prone to injury.
4. Verify employees have proper safety equipment and protective gear, or that the client will provide the necessary gear to employees.
5. Train staff in each placement office on proper and timely reporting of workers’ comp claims.
6. Have a workers’ comp claims coordinator who actively and regularly follows up with any employee who is off work.
7. Have a return-to-work program to place employees who do get injured back to work with a different client who can accommodate work restrictions.
8. Have an insurance broker who is familiar with the staffing business and who can place your company with more than one workers’ comp insurance company.

Mitigating risks and errors while being diligent with claims will help your agency keep expenses manageable while maintaining this critical coverage for employees.