Your workers’ compensation policy is only one part of the complex responsibilities you must master to survive in today’s ever changing business world. Whether you run a small home based business or a multi-national publicly traded corporation, getting workers’ compensation coverage properly placed is crucial to your survival in business.
Start With Your Agent
This isn’t automobile insurance. Workers’ Compensation coverage is complex. It requires a knowledgeable staff that knows the ins and outs of your state requirements, payroll issues, and possibly multi-state exposure. Choosing an agent that understands the requirements and the many decisions that must be made to place your coverage properly is crucial. Are your employees classified properly? Are you getting the credits and discounts you deserve? Is overtime and other additional pay being accounted for properly?
The importance of classification codes.
Ensuring your policy accurately reflects your operations is critical. Using improper classification codes can have negative financial consequences. Improperly classified workers can result in undue hardship if and when your policy is audited by your insurance carrier. Pay too much and you’ve reduced your own working capital. Pay too little and you could be faced with an unfavorable year end audit that could cost you thousands unexpectedly. The importance of getting classifications right up front is probably the most important step in obtaining cost effective coverage.
Your payroll information is a close second.
Often, premiums are based on the previous year’s payroll information. At the minimum you should manually monitor your payroll quarterly to review the accuracy of your initial estimates. How do your payroll figures compare to last year? Are they higher? Lower? Approximately the same? If you add or lose employees, increase or decrease pay rates, or change anything else in your operations that are notable, contact your agent immediately to determine the best course of action. Alternatively you can contact us regarding our Pay-As-You-Go billing option that utilizes your actual payroll to calculate your premium. Payroll data can be entered into our billing system in many formats allowing actual payroll figures including detailed wage information like overtime, tips and bonuses which may or may not be subject to workers’ compensation premiums. No more guesswork. No more surprises. Premiums are billed directly and correspond to your pay cycles. Another advantage is the possibility of lower down payments and improved cash flow.
To endorse…..or not to endorse.
To put it simply, an endorsement is your insurance carrier’s acknowledgment of a change to your policy. Operating in another state? Adding job duties or new services? Adding employees or increasing payroll? Any of these may trigger the need for an endorsement. When in doubt, call your agent. By acceptance of the terms of your policy you are acknowledging that you will manage these changes. Failure to obtain the proper endorsements to your policy can result in fines, non-renewal, unfavorable audit results, denial of coverage, and in extreme cases cancellation. Changes to your operations will require changes to your policy. It’s that simple. Don’t put off the duties of managing these changes as the consequences to your business can be devastating.
Don’t fear the audit.
Most policies require a final premium audit. That doesn’t mean you have to be nervous about it. If you’ve followed these simple guidelines and heeded this advice, YOU’RE READY! The avoidance or non-compliance with an audit can and will have detrimental consequences. Have your payroll records in order, your certificates of insurance for your payees (if required), and any other related documentation your auditor requests. Overall, be neat and organized, answer audit questions accurately and directly, and do your “homework” and preparation. If you have classified your employees properly, reported your payroll accurately, and obtained any necessary endorsements, a favorable audit is practically guaranteed.
Pay As You Go
A Pay-As-You-Go solution enables businesses to pay their premiums each pay period, based on actual payroll rather than upfront generated estimates. Pay-As-You-Go requires minimal or eliminated deposits, takes the guesswork out of the year-end audit and offers a much smarter alternative than traditional payment programs.
The primary reason why Pay-As-You-Go is difficult to implement is because it requires real-time access to payroll data in order to process accurate premiums. Once payroll data is made available to process premiums, Insurance providers can eliminate the guess work of estimating premiums.